Definition of double Irish

The double Irish, exploited by Google, Microsoft and Facebook, is the most controversial tax loophole. It allows multinationals that use Ireland as a foreign operating base to avoid its modest 12.5 per cent corporation tax. Profits are instead routed to a subsidiary in Bermuda.

It depends on Ireland’s permissive view that an Irish-registered business should be taxed where it is managed, even if that is an island where shorts are business attire.

This irritates the US government, which would like its cut of the $1tn US companies have parked offshore, and the EU member states where the likes of Google make substantial sales booked in Ireland. But the double Irish has been a covert competitive advantage for the erstwhile Celtic tiger.

 

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To appease EU competition regulators, Ireland capitulated in its October budget and announced a phasing out of the loophole by 2020.

This gives tax advisers time to dream up replacement schemes. Tax ruses come and go — the double Irish, for example, was once accompanied by a manoeuvre known as the “Dutch sandwich”.

What never changes is the opportunity for avoidance that is created by the differences between national systems.

The willingness of governments to lure footloose businesses with tax breaks is another constant. The Faustian element is that governments will collectively lose more revenue than they gain from such competition. [1]

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