Have you read the latest report by Oxfam on Ireland? They claim they’ve found a “strong evidence” that the country applies tax avoidance strategies to reduce costs for European banks. Statistics also shows that only Cayman Islands showed better profitability rate in 2015. What is the reason? How is it possible? Is a bank industry the only one that benefits from these techniques?
We decided to conduct our own research on this issue, and here are the results.
What Is The Reason?
The reason is quite obvious – all the entrepreneurs want to save money, and world-known banks or IT corporations are not the exception. When we talk about the USA with its corporate rates amounting to 40%, the idea to move business to Ireland looks rather reasonable since the tax here is equal to 12,5%.
How Is It Possible?
The very Cayman Islands, Bermuda, Cyprus as well as Ireland… All these places are known as tax havens as they allow implementing tax avoidance methods. Mind that avoiding tax burden legal unlike tax evasion which means that a company declares less profit than it gets in fact. So, the strategy Ireland is famous for is called “Double Irish and a Dutch Sandwich”. To put it in a nutshell, a corporation transfers their profits to an Irish company, then through a Dutch company, and finally to another Irish company. And here it is, a favorite dish of tax avoiders – 2 slices of Irish bread with a slice of Dutch cheese.
Who Benefits From Moving To Ireland?
If you take a look at the infographic below you’ll find out that Ireland is packed with US Fortune 500 companies. 90% of them located their headquarters there, including Facebook, Google, Yahoo, Oracle, Microsoft etc. As you can see, not only European banks but also IT giants are attracted by Irish tax facilitating policy.
P.S. In fact, “Double Irish and a Dutch Sandwich” isn’t the only way to reduce costs. One more method widely practiced all over the world is outsourcing. Generally speaking, a company deals only with its core functions while extra tasks (they can vary from content writing to software development) are delegated to other companies that specialize in this niche. Despite being blamed for unfair tax payment and stealing work places from locals outsourcing still remains popular among both large and small businesses. Check out the infographic to learn more.