It has been revealed that an Irish subsidiary of US medical products group Boston Scientific paid the meagre sum of $60 million (€40 million) on profits of €1.4 billion in 2011 – an effective tax rate of 4%.
While Ireland’s corporate tax rate stands at 12.5%, the sum paid by Boston Scientific represents an effective tax rate of only 4%, according to The Irish Times. If the company had paid their full tax dues, they would have owed $177 million in tax. However, the group says that it did in fact pay the legal amount it was required to, with their accounts claiming that their tax liability was reduced due to ‘different tax rates on overseas earnings’, among other reasons.
The past few months has seen various other multinationals come under the spotlight for their questionable tax dealings. Companies such as Google and Starbucks have also reportedly paid well under the 12.5% corporate tax rate for their Irish subsidiaries, due to being a non-resident for tax purposes in Ireland. Apple has even admitted that it paid only 2% tax on its tens of billions of dollars in profits, claiming it was legal for them to do so due to being non residents for tax purposes in Ireland.
All of this is of course technically legal. However, the issue arises whenever it is revealed that these multinational companies have extra, non-Irish market-related operations operating within their Irish subsidiaries, allowing them to direct masses of profit through Ireland to other offshore havens and protect them from the higher tax rates in their home country. This practice is becoming well known as an increasingly popular global tax structure called the ‘double Irish’.
Known multinationals who use the ‘double Irish’ tax strategy to protect their profits include US software company Novell, French telecommunications equipment firm Alcatel Lucent, US drugs firm Abbott Laboratories, BMC Software Europe and Microsoft; all of whom paid 0% tax on their profits at different times between 2007 and 2012.
Irish government ministers have rebuked the allegation that Ireland is a tax haven for US multinationals stating that ‘Irish authorities don’t cut special deals for any company’. At a hearing over the high US corporate tax rate in the Senate, acting US trade representative Miriam Sapiro asserted that even if Ireland is not directly ‘cutting deals’ on tax, ‘there is no doubt that some companies are taking advantage of the global legal and tax arrangements in a variety of jurisdictions’. As of yet no solution has been offered for the problem, as Sapiro pointed out that part of the solution would have to be the restructuring of the US corporate tax rate – ‘something the coalition is never going to get involved in’.