Ireland as a Tax Haven for US ICT companies and patent businesses
Some background information about Ireland, their Tax haven and the relation with Microsoft
"Ireland offers flexibility, tax transparency and cost competitiveness and is fast becoming the preferred location for the establishment of corporate entities."
"A full tax exemption is available in respect of patent royalties from registered patents where the design and testing of the patented product was carried out in Ireland. The patents may be registered in any country but it is also advisable to have them registered in Ireland. Royalties must be charged on an arms length basis and be in respect of a manufacturing activity if the owner and user of the patent are connected."
"Almost 35% of Ireland's registered companies totalling 150,000 are non-resident."
"Signature of New Tax Convention between Ireland and the US"
"The Minister for Finance, Mr Charlie McCreevy TD, and Ms Jean Kennedy Smith, the United States Ambassador to Ireland, today (28 July, 1997) signed in Dublin a new Double Taxation Convention between Ireland and the United States for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains."
"In 1996, US investment accounted for almost 70% of new jobs in IDA assisted companies."
- Five of the top six US PC manufacturers have plants in Ireland - Apple, Dell, Compaq, Gateway 2000 and AST;
- Intel Group - the most significant investment in the history of the States - employs about 3,000 people;
- Over 40% of all PC package software and 60% of business applications software sold in Europe is produced in Ireland. US companies such as Microsoft, Lotus, Claris, Digital, Oracle, IBM and Novell contribute significantly to this growth;
The pharmaceutical/healthcare sector in Ireland includes some of the best known US companies - American Home Products, Abbott, Schering Plough, Merck, Johnson & Johnson, Boston Scientific and CR Bard.
- Recent major re-investment in Ireland by US companies include IBM, HP, Intel, Motorola, Digital, Oracle and Gateway 2000.
EU Newcomers Anger France, Germany With Tax Cuts (Update1)
"Ireland, the third-smallest economy in the EU before the May expansion, won $34.3 billion of foreign investment in 2003, compared with $36.1 billion in Germany, according to the United Nations Conference on Trade and Development."
"Judging from the Irish experience, lower taxes don't have to lead to lower tax receipts -- the main concern in Germany and France about cutting corporate taxes. Ireland's corporate tax revenue last year climbed to 5.2 billion euros, or 16 percent of the total amount of taxes collected, from 425 million euros, or 4.6 percent in 1988."
"IBM to invest ô¥ò2 million in its Dublin R&D Software Laboratory"
"Intellectual Property (IP) Licensing"
"A company licensing its IP out of Ireland qualifies for the 12.5 % rate of corporate tax, providing there is relevant substance, management and control in the Irish operation and the royalty income relates to Irish activity."
Microsoft at a glance
- Established: 1975
- Global Workforce: 55,000
- Revenues 2003: $32.2 billion
- Net income 2003: $10 billion
Ireland is home to Microsofts operations and development centres for the EMEA region. It employs 1,600 and is Microsofts fiduciary, tax and legal hub for this region. It also services internal and external customers in 70 different EMEA countries.
Ireland, once agrarian and poor, and short on natural resources, is now enjoying a software boom with a $2.4 billion industry employing more than 15,000 people. "Some 40% of all software and 60% of all business-application software sold in Europe comes from Ireland. Only the U.S. exports more. "
"Over 40% of all PC package software and 60% of business applications software sold in Europe is produced in Ireland. US companies such as Microsoft, Lotus, Claris, Digital, Oracle, IBM and Novell contribute significantly to this growth;"
"In 2001 the approximately 1,200 multinationals contributed EUR1.9 billion in corporation tax - over 44% of the total. One company, Microsoft contributed around 10% of this total."
"An exemption from corporate tax in Ireland in respect of income from patents (royalties) where the research and subject of the patent was developed in Ireland and an Irish resident owns the patent rights."
From 1991-1998, foreign-owned firms accounted for 95 percent of the growth in Irish industrial exports, and by 1999 foreign-owned industry accounted for an estimated 38 billion euro, or almost three-quarters of total Irish exports.
Foreign direct investment flows into Ireland in the 1990s originated mostly from export-oriented United States multinationals. By 1998, U.S.-owned companies in Ireland were responsible for 70 percent of Irish industrial exports. Among the small EU economies, Ireland was by the greatest beneficiary of the large and rising levels of U.S. FDI into Europe over the course of the 1990s.
While well-thought out government policies were the main driving force behind Ireland's "Celtic Tiger Phase" (1986-2001), a number of quirky factors are also said to have contributed to the country's remarkable development.
One of them is that over 40 million Irish-Americans live in the United States. Though probably difficult to prove, both professional economists and general commentators have opined that many Irish-American businessmen invested in Ireland because of their shared Irish heritage, even though it was generations removed.
Forfas, policy advisor to the Irish government, estimates that 77 percent of the value of total sales by Irish-based manufacturing multinationals in 1998 subsequently leaked out of the Irish economy through profit repatriations and imported goods and services, including payment of foreign royalties and licenses.
"This means less than one-third of multinationals' turnover went into Irish economy expenditures, in the form of wages and salaries, purchases of raw materials and Irish services, and profit distributions," notes a February 2002 review of the Irish economy in local economic journal, Business Plus.
- Microsoft spends some IRò67m in the Irish economy on labour compensation, materials and services.
- Exports in 1999 amounted to 5.5 per cent of the total Irish exports of goods and services
- Has generated direct income in the Irish economy in the year ending 2000 estimated to amount to just over 2 per cent of GNP.
- With 1,592 on-site employees, Microsoft thus accounts directly for almost 7 per cent of total employment in the software industry
- Has contributed an estimated at 5 per cent of all Corporation Tax payments to the Exchequer in the year 2000.
With 1,592 on-site employees, Microsoft thus accounts directly for almost 7 per cent of total employment in the software industry Has contributed an estimated at 5 per cent of all Corporation Tax payments to the Exchequer in the year 2000.
With the links from my previous post it should be obvious that Ireland is a IP tax haven for multinationnals. Their interest is not to defend European SMEs. The Irish presidency sponsorship is not significant in itself but does represent real ties between IR and software multinationals.
"Many U.S. companies, such as Intel and Microsoft, are increasing their participation in the European markets by making significant investments in Ireland. In the absence of significant trade barriers, in 1997, trade between Ireland and the United States was worth around $12.0 billion, a 19% increase over 1996. U.S. exports to Ireland were valued at $5.9 billion, an increase of about 6% over 1996, and represent 15% of Ireland's total imports. The stock of U.S. investment in Ireland at the end of -1996 was valued at $11.7 billion and has continued to grow strongly since There are more than 500 U.S. subsidiaries, employing almost 70,000 people and spanning activities from manufacturing of high-tech electronics, computer products, medical supplies, and pharmaceuticals to retailing, banking and finance and other services. As a result, the recent transition from a primarily agricultural economy is in many ways extraordinary. Ireland, once agrarian and poor, and short on natural resources, is now experiencing a software boom with a $2.4 billion industry employing more than 15,000 people. Some 40% of all software and 60% of all business-application software sold in Europe comes from Ireland."
Might be interesting to read:
http://www.cato.org/research/articles/rugy-020604.html Bolkenstein has been trying to stop tax evasion from Europe to US.
http://www.socialistdemocracy.org/News&AnalysisIreland/News&AnalysisIreMcCreevey'sSecretMemoPartOne.htm http://www.socialistdemocracy.org/News&AnalysisIreland/News&AnalysisIreMcCreevey'sSecretMemoPartTwo.htm McCreevys secret memo reveals plan for warfare on working class.
http://www.theregister.co.uk/2004/12/13/ms_loopy_fair_trade_claim/ Ethical fair trade - you knew it made sense until MS embraced it
http://www.economist.com/displayStory.cfm?Story_ID=276995 SURVEY: GLOBALISATION AND TAX Is tax competition among countries a good or a bad thing?