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Michael Probst

Ireland second to Bermuda as 'conduit' for taxable income of US multinationals - IMF staff paper

Corporate tax avoidance is bad for the global economy, paper reports.

A new IMF staff paper criticising the global economic impact of tax avoidance identifies Ireland in the top ten of US outward foreign direct investment.

Corporate tax avoidance has a negative impact on all economies, particularly those of developing countries, the paper reports.

According to GDP-weighted averages, Ireland comes second to Bermuda as a conduit for the relocation of taxable income from alternative factors for US multinational enterprises.

Prepared by staff from the IMF’s Fiscal Affairs Department, the paper criticises tax avoidance practices, saying that identifying the source of income or the residence of companies complicate taxation procedure, as do disparities between global and domestic tax issues:

There is a distinction between worldwide tax systems, under which a country taxes the income of companies resident there wherever that income arises, but gives a credit for taxes paid abroad, and territorial systems, under which the residence country exempts business income of resident companies arising abroad—but, in practice, there is a spectrum between these extremes.

It warns that tax arrangements “that are felt to result in unfair allocation of the tax base” could, if not addressed, increasingly “undermine the coherence of the international system”.

The paper says that the spread of tax incentives in developing countries which undermine revenue to those countries “may to a large extent be a spillover reaction to policies pursued in other countries: a clear instance of tax competition”. Because developing countries typically derive a large proportion of their income from FDI, allowing tax breaks and incentives on such revenue is particularly harmful to their economies.

The staff paper suggests redefining ‘immovable property’ to cover mining and petroleum rights and then ensuring that the direct or indirect disposal of such property is taxable under domestic capital gains tax systems. “Such provisions would appropriately cover only significant changes of ownership (of, say, at least 10 percent), to avoid having to identify small transactions,” it adds.

It also calls for challenges surrounding the discovery of offshore transactions and tax collection to be addressed by ensuring that the relevant regulatory authority be advised of indirect ownership changes. This information should also be shared with the revenue authority.

Read: US economy suffers sharpest contraction in five years >

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30 Comments
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    Mute Donal Costello
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    Jun 25th 2014, 5:10 PM

    Reduce the corporate tax rate to 0 just to piss the EU and IMF off.

    177
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    Mute Jeremy Usborne
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    Jun 25th 2014, 5:16 PM

    Its already practically zero.

    102
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    Mute Mr Phil Officer
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    Jun 25th 2014, 5:25 PM

    They should investigate the Swiss banks if they want money, every tax dodging crook on the planet have their I’ll gotten gains hidden away there.

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    Mute Darren Lehane
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    Jun 25th 2014, 7:02 PM

    Yeah! That’ll show those rich snobs who couldn’t care less about our country…

    oh wait that’s the corporations too

    27
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    Mute fergusOB
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    Jun 25th 2014, 7:36 PM

    F them let them sort out corporate tax in America.

    28
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    Mute Sean O'Keeffe
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    Jun 25th 2014, 10:24 PM

    US firms will continue to flee the nation that administers the highest corporate tax rate in the west. If not to Ireland then elsewhere.

    http://www.economist.com/news/business/21604555-rush-firms-fleeing-america-tax-reasons-set-continue-inverse-logic

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    Mute Dee4
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    Jun 25th 2014, 5:10 PM

    ah boo hoo!, in all honesty Google or Microsoft and rest make better use of their profits and reserves if the only other option is giving it to the US government to p1ss away on their forever wars!

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    Mute Thors Big Hammer
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    Jun 25th 2014, 5:23 PM

    The eye of the World is focused on our tax rate more than ever. Eventually Ireland will buckle and the flood gates will open with a mass exodus of money and company’s. Ireland will be like a ghost land.

    All the signs of what is to come are here but as usual we will ignore it but this focus will not go away.

    A good example of this is the 9 out of 10 who thought there was no property bubble.

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    Mute Stan Smith
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    Jun 25th 2014, 5:27 PM

    Makes sense considering that about 90% of people are either ignorant or idiotic

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    Mute Mr Phil Officer
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    Jun 25th 2014, 5:29 PM

    It will be worse than the 80′s if the big companies leave.

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    Mute Ken Mitchell
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    Jun 25th 2014, 5:32 PM

    Thought it already was

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    Mute Kerry Blake
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    Jun 25th 2014, 5:33 PM

    What I thought Enda was on record as saying this isn’t happening?

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    Mute Dermot O'Reilly
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    Jun 25th 2014, 6:25 PM

    Ireland is sadly gaining a very bad reputation internationally!

    Low Corporation Tax -max 12.5% many Companies pay a lot less!. It’s a disgrace!

    While individuals pay up to 8o% – Vat at 23%,Income Tax, PRSI, Levies, Local Property Tax and now Water Rates!

    The Government should change the Law on Corporation Tax so that Companies pay a minimum of 12.5% of their declared profits!

    54
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    Mute Padriag O'Traged
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    Jun 25th 2014, 6:33 PM

    There are a lot of exclamation marks in that comment. Must be true.

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    Mute N O'C
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    Jun 25th 2014, 7:36 PM

    I think he borrowed the exclamation marks from Clare Daly…

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    Mute Stan Smith
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    Jun 25th 2014, 5:14 PM

    Oh sh!t, the IMF don’t like our tax. Wait to see our pols brought to heel like the b!tches they are.

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    Mute rachel walsh
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    Jun 25th 2014, 5:12 PM

    Great for jobs and the local economy though.

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    Mute Ken Mitchell
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    Jun 25th 2014, 5:31 PM

    Some of them dont employ very many in ireland, one in particular just halved its irish workforce to a couple of hundred and pays 2 %tax

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    Mute rachel walsh
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    Jun 25th 2014, 6:01 PM

    In the majority of cases Irish are hired such as apple, emc, boston scientific……. and the list goes on.

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    Mute Emily Elephant
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    Jun 25th 2014, 5:52 PM

    The world according to the IMF:

    Competition between companies to provide lower prices to consumers = Good
    Competition between countries to provide lower expenses to companies = Bad

    38
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    Mute Sean O'Keeffe
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    Jun 25th 2014, 7:01 PM

    Seems fairly contrived.
    There is no such thing as a “worldwide taxation system”, but national taxation systems.
    Anyone could be lead to believe that the IMF is a creature of US foreign policy.

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    Mute New Property
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    Jun 25th 2014, 5:45 PM

    What sickn me how stupid some people are the other reason why our government dosen tax these companies is they all ready make to much from our hard earned wage tax n other taxes, if they just taxed these companies just a little more we all as citizens could live in a tax free Ireland or very low tax rate Ireland. We could be one of the greatest countries to live and work in if we just changed a little and stud up more.

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    Mute N O'C
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    Jun 25th 2014, 7:40 PM

    I read your comment a couple of times to be sure. I’m certain that the first line of it refers to yourself.

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    Mute JustMade Ireland
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    Jun 25th 2014, 7:58 PM

    Meaning??

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    Mute Dan Boyle
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    Jun 25th 2014, 6:39 PM

    We should be so proud.

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    Mute Sean O'Keeffe
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    Jun 25th 2014, 10:43 PM

    Why should we be proud Dan?
    Because we lay down to Geithner and the bondholder losses?
    Or because we have not yet complied with US/EU bullying regarding our corporate tax rates?
    It seems the Irish taxpayer is more firmly in the sights of the Obama administration than ISIS and Syria’s despotic regime.

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    Mute Richie Aprile
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    Jun 25th 2014, 8:47 PM

    It’s only a matter of time before these companies leave here. It’s going to be a disaster , thousands upon thousands of job losses year after year.

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    Mute Ger Ryan
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    Jun 25th 2014, 10:30 PM

    Cop on. only a complete twit thinks the bug american corpos are here cos they only pay a small tax on their profits. They are here cos they make huge profits, politically safe and well educated workers.

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