*Note — The Capital Allowances for 2022 are a slightly better measure of the overall intangible assets deduction than previous years as the methodology has been tweaked to exclude more of the nonintangible assets that are part of the deductions for the earlier years.
The CAIA scheme is better for Ireland and better for its corporate partners. It dispenses with the obvious fiction of allowing companies to incorporate in Ireland while paying taxes in a foreign country. It also gives corporations almost limitless ways to write down their taxes against costs for IP produced anywhere in the world.
Capital allowances for intangible assets have jumped 700 percent since 2011 while the Irish state’s tax take has increased by 442 percent over the same period. Apple and Ireland may have lost the battle, but they have continued to win the war against legitimate taxation. In the neoliberal era, the ability of elites to use tax competition to drive down the burdens placed on capital has proved to be more important than stamping out the tax avoidance that inevitably goes along with this competition.
Ireland responded to the ECJ ruling in typical fashion. Understanding the need to accept the ruling without antagonizing either the European courts or the corporations that benefit from Ireland’s tax regime, the Department of Finance said that it would “respect the judgement” and move to recover the unpaid taxes, even while it rejected the ultimate claims upon which the case had been won.
These were carefully chosen words. The Irish elites never wanted to collect taxes they had helped Apple to shelter. However, faced with a ruling from the highest court in the European Union, their strategy has been to accept the money with as little fanfare as possible; to downplay any sense that Ireland has benefited from the judgement; and to forcefully claim — in an obviously contradictory manner — that the state has already changed the law to stop the tax avoidance at the center of the case.
“Nothing to see” and “don’t expect much” were the key elements of the Irish state’s messaging around the issue, as the government’s official statement reveals:
The Apple case involved an issue that is now of historical relevance only; the Revenue opinions date back to 1991 and 2007 and are no longer in force; and Ireland has already introduced changes to the law regarding corporate residence rules and the attribution of profits to branches of non-resident companies operating in the State.
This statement is necessarily deceitful, but it could only have been written with the connivance of ruling classes well beyond Ireland itself. Having suffered reputational damage through the ECJ decision, the Department of Finance is desperate to convey the impression that any tax avoidance that may have occurred was inadvertent from its perspective and has not been happening since 2015.
The Department of Finance is desperate to convey the impression that any tax avoidance that may have occurred was inadvertent from its perspective and has not been happening since 2015.
It also wants to put across the message that the state has moved decisively to close down loopholes that it had no part in creating. In reality, as we have seen, the Revenue Commissioners have exchanged a less effective BEPS tool based on its bogus residency rules for a more effective one based on capital allowances.
The European Commission knows this, as does every serious analyst of the Irish taxation system. But it will not take effective action against the CAIA scheme without the active involvement of the US authorities. The problem is that the scheme rewards the world’s most powerful corporations — corporations that have their political centers in the US and can use innovations in technology and digitization to strategically place their intellectual property in low-tax jurisdictions.
Faced with this reality, it seems that the European establishment is torn. The major states (particularly Germany and France) are losing substantial revenues to US shareholders through offshore economies within the EU. European decision-makers also recognize that US corporations have benefited disproportionately from the current system of international taxation.
This helps explain why the EU initially wanted a 3 percent tax on the entire global sales of major technology corporations, before the Organisation for Economic Co-operation and Development (OECD) BEPS initiative effectively torpedoed this proposal. The “Twin Pillars” of the BEPS agreement are meant to tackle the new reality of transfer pricing and intellectual property by linking the taxes of the world’s biggest corporations more closely to where they perform their economic activity (Pillar One) and by imposing a minimum global tax rate of 15 percent on companies with annual revenue in excess of €750 million (Pillar Two).
Joe Biden has been a vocal supporter of these ideas, but his position often feels more of a rhetorical strategy to differentiate the Democrats from Donald Trump than a genuine move to reduce the advantages enjoyed by US corporations. Both Biden and Kamala Harris have promised that they will stop the global race to the bottom on corporate taxation, and the US system has become marginally less favorable to corporations through the 2017 Global Intangible Low Tax Income (GILTI) measures and the Inflation Reduction Act of 2022. However, the US has yet to sign up to either pillar of the BEPS proposal, even though the agreement is nearly a decade old.
Any change to the law would require a majority in the House of Representatives as well as the Senate. This means the Democrats can promise change in the run-up to November’s presidential election, secure in the knowledge that their ability to deliver on such pledges will not be tested until after the election is over. At that stage, no matter who comes out on top, neither Harris nor Trump seems likely to have an outright majority in both Houses. With the Republicans implacably opposed to any changes that would disadvantage US corporations, the chances of US lawmakers giving the green light for BEPS are slim.
Irish policymakers have made roughly the same calculation. While they have signed up to a 15 percent tax as the least bad option for Pillar Two, compared with an EU proposal for a digital tax on sales, they are more confident that Pillar One (which would threaten Ireland’s status as a tax haven) will never see the light of day. This is why they continue hiding in plain sight, offering tax advantages to global corporations as part of their wider strategy to compete for mobile investment and high-paying jobs.
Apple and Ireland have been compelled to accept that they jointly constructed a tax haven to avoid taxes that should have been paid until 2015. But they have not yet been forced to stop their ongoing practice of tax avoidance in any meaningful way. For that to happen, it will require more than a few tweaks in international corporate law — we will need a far more militant working class that puts our rulers under pressure in Ireland and elsewhere.
Source link : https://jacobin.com/2024/10/apple-ireland-tax-avoidance-ecj
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Publish date : 2024-10-02 19:55:19
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