THE IRISH TIMES (Ireland), LA STAMPA (Italy), THE NEW YORK TIMES (U.S.A.)
DUBLIN - It's such a simple system. You buy something and it is sent to you. What you don't know is that the transaction is done through a company in Luxembourg that pays very little to the Grand Duchy and almost nothing to the Ministries of Finance.
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Photo: Balajimuthazhagan via Wikipedia
"It's a question that we will deal with" assures Joe Costello, Irish Minister for Trade and Development, in an interview with Italian daily La Stampa.
He is angry with online trading companies that willfully look to pay less tax than they should, like Amazon, by passing their revenues through low-tax havens like Luxembourg, the Channel Islands and Ireland itself.
"It's legal" admits Costello "but I don't think that it's ethical".
The European Parliament has raised the issue and even the more free-market oriented British have too. This is not only a practice that represents a loss of revenue to the governments, but is a potentially unfair competition against other retailers. "If we do not act, there will be people to force us to" insists Costello. In Ireland there is a corporate tax of just 12.5%.
The Irish Times reported in November that France had made a $252 million tax claim against Amazon, signalling a widening crackdown by Paris on multinational companies that channel profits through low-tax countries. France has long protested against Ireland’s low tax rate and hopes EU discussions on a common consolidated corporate tax base will lead to a more harmonized system.
Minister Costello told La Stampa Ireland also has a serious problem with Google, which winds up paying an estimated 2% in taxes after deductions are accounted for. "They tell us that they create jobs and pay taxes, but we don't think it's enough," says Costello.
The issue has not yet been defined by the Irish government, which presides over the EU for the next six months; Costello believes that it might be more effective to raise the debate in Brussels.
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Google's Dublin HQ at the Grand Canal Docklands. Photo: infomatique via Flickr
According to The New York Times, though Google employees across Europe advise clients on the use of the company’s services, advertisers sign contracts with the company’s subsidiary in Ireland. This has shielded Google from tax liability in France, Britain and other European countries, at least so far. French fiscal authorities are now seeking back taxes and penalties from Google, amounting to 1.7 billion euros.
“Google is saying, ‘We just float around freely above this useful aircraft carrier, Ireland,” said Richard Murphy, founder of the Tax Justice Network, an independent organization that campaigns against what it calls tax “loopholes and distortions.” “What France is saying is, ‘We don’t think you float around over Ireland, we think you are in France.’”