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Is Ireland losing from Apple etc deals?

Friday, July 11 16:02:05

Allowing the likes of Apple to use Ireland as a sort of advanced tax haven has brought little benefit to Ireland itself, and in fact might even be generating a net loss for the Irish State.

That's according to an article in the Wall Street Journal that cites a global tax and corporate law consultancy and which argues that these haven-seeking companies boosts Ireland's GDP, which, in turn, by EU law, compels us to make ever-larger cash contributions to the EU's overall budget.

These budgetary contributions are rising at a slightly faster rate than the GDP gains, indicating that acting as Apple's buffer against international tax law may be damaging Ireland's economy.

This, in turn, calls the exact motives of the Irish government into question.

One possibility is that the Irish State made the deals with an overly rosy assessment of how much Ireland would benefit from the process.

Now that the reverse has proven true, we may simply be unable to quickly extricate ourselves from the deals made, and we must suffer through the consequences of excessive optimism.

Another possible cause is that the Irish government is pressing forward in the hope that providing a tax haven will eventually start producing excess revenue, benefiting the nation in the long run.

So, what is Ireland getting out of it?

Less than you might think. In fact, the country may be on the losing end of M and A deals known as "inversions," according to a new analysis by law firm Cadwalader, Wickersham and Taft LLP.

Its advice to US companies could, however, mean that real revenues do start to flow from tax inversion schemes by Us multivationals.

The law firm said: "It is important that U.S. and other multinational corporations seeking to re-incorporate in Ireland do so with an eye towards making meaningful connections with the country. Although not a requirement, corporations should consider tangible investments beyond the requisite minimum of board meetings, including the establishment of accounting and treasury, legal, intellectual property and business development functions; the appointment of an Irish advisory board or resident Irish directors; and the establishment of regional trading or intellectual property hubs. Among other things, an inversion with these features has the potential dual benefit of driving a positive market reaction around the company's strategic goals in the EU and elsewhere, as well as protecting the deal from being singled out as an example of a "brass-plate" inversion. The rollout materials related to any inversion transaction should emphasize these investments. Taking steps such as these are key not only to navigating transactional, regulatory and reputational risk, but also to realizing the full strategic benefits conferred by an Irish domicile."