Global companies which make arrangements under Irish law to shield some of their most sensitive financial data from public scrutiny will be compelled to divulge their affairs under a new EU plan to increase tax transparency.
Large tech firms such as Google, Apple, Dell and Microsoft rank among hundreds of international groups with big Irish operations. Many of them funnel huge revenues and profits throughout Europe into their Irish units, with only minimal public disclosure in respect of their performance in individual EU markets and beyond.
Under a new European Commission plan to curtail tax avoidance, they will be obliged for the first time to publish their revenue, profit and tax payments on a country-by-country basis in each member state. The same information will be required in respect of any operations in tax havens.
Scepticism
The initiative, which has been greeted with considerable scepticism at high levels in Ireland’s multinational community, follows controversy over a huge leak of secret offshore data from a Panama law firm.
The plan, which is rooted in company law, is subject to the approval of EU governments and the the European Parliament. Unlike tax initiatives, however, unanimity among member states is not required. The move can go ahead with the support of a qualified majority of EU countries.
“At a macro level certainly, these proposals would be viewed as quite far-reaching and controversial,” said Lorraine Griffin, head of tax at Deloitte in Dublin. “There’s a number of things that would concern business. They’ll want the time to digest the proposal in detail.”
Echoing other observers in the business community, she cited anxiety about the disclosure of market-sensitive data to competitors and an increased regulatory burden for companies which would oblige them to change how they account for their activities.
“Business will be concerned about the time and effort required. There will be a concern in some businesses around the risk of trial by public scrutiny. You’ve got a risk of misinterpretation.”
The impact on individual firms remains unclear. Still, an examination of filings by some of the biggest US groups in Ireland points to the likelihood of significant change if the plan goes ahead.
Google’s main Irish unit is known to have handled transactions worth €28.7 billion over three years as part of an international tax avoidance scheme, but the true scale of its operations in Dublin was obscured for years by an unlimited company structure for which financial information was not publicly available.
Apple, similarly, has been under scrutiny by regulators in Brussels over an Irish structure that helped it curtail tax payments as the business recorded huge growth after the invention of the iPhone. Both the company and the Government deny it ever received preferential tax treatment.
While Apple’s non-US operations are managed from its large Irish operations, the company is currently under no obligation to publish details about its performance in individual EU markets or any other individual market. Dell’s main Irish unit – Dell Products – recently reported $12.2 billion in annual revenues through “commissionaire” agents located in the Europe, Middle East and Africa business region. The after-tax profit was $1.6 million for the year to January 2015.
