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Corporate Tax - Explained by Prime Time

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why is 13 billion euro of our tax income

sitting in a bank account in London

why is Ireland challenging the European

Commission's insistence that this is

money the Apple corporation should have

paid us in tax and do you know about the

changes happening in the global tax

world which could see Ireland lose

billions of euro in income

Islands corporation tax rate is 12 and a

half percent that decision was made over

20 years ago so when the company

declares a profit it must pay tax of

twelve and a half percent on that amount

governments down through the years have

defended this as part of a wider

economic policy it all goes back to a

decision which fundamentally changed the

Irish economy in the early 1960s clearly

life would always be frugal in this

state of something drastic wasn't done

to capitalize creative industry along

model lines he shocked Sean lamaze

looked to move us from an internally

focused largely agricultural economy

this is a malting barley growing area oh

yes very definitely yes there are gmod

house into a more towards one which

would attract foreign companies in that

decision changed Ireland forever by 1970

there were more men working in the

factories than in the fields the effort

to make Ireland a base for outside

investment has in terms of jobs and tax

take been a huge success others insist

that these men may be doing more harm

than good to the values and cultural

waves of the old are foreign companies

employ over a quarter of a million

people here and generates 190 billion

euro in exports another fight that the

growing out will release time it's over

half the total income or GDP of the

country

we continue the long term expansion of

Apple Computer in court since the crash

ten years ago the amount collected in

corporation tax here has more than

doubled last year rolled in at almost

ten point four billion euro which was

1.9 billion euro more than the

government had expected

critics say the low rate lets big

business off the hook and the unexpected

windfall proves Ireland is a tax haven

we shelter for the multinationals to

avoid tax but no shelter for people to

grab no homes others say no our tax rate

is clear and creates thousands of jobs

and the windfall just shows that changes

in international tax rules have

benefited Ireland because many of the

companies have real operations here

employing thousands so what's really

happening why are we collecting so much

in corporate tax so much more than the

government even forecast in the

aftermath of the financial crash

governments across the world began to

look at profits accumulated by

multinational companies obscure tax

arrangements with odd names like the

double Irish in the Dutch sandwich were

examined Apple which had employed a

different tax strategy also came under

scrutiny a US Senate committee found in

2013 that the company had built up 102

billion dollars in offshore cash

holdings Apple disputed this description

u.s. senators said Apple had exploited a

difference between Irish and US tax

residency rules Apple had subsidiary

companies registered in Ireland the

companies in Ireland pay tax on their

operations here but the companies in

Ireland were also used to record a large

portion of Apple's worldwide sales

because of the way the companies were

set up this money wasn't taxable in

Ireland which also meant a lot of income

was never taxed apples three primary

Irish entities hold 60 percent of the

company's profits but claimed to be tax

residents nowhere in the world Apple's

response was the u.s. needed to change

its tax laws eliminate all corporate tax

expenditures

lower corporate income tax rates and

implement a reasonable tax on foreign

earnings that allows the free flow of

capital back to the United States so the

US did eventually change their laws we

will reduce the corporate tax rate to no

higher than 20% and so did Ireland the

so called double Irish which allowed

companies to be registered here but pay

taxes elsewhere is gone companies have

had to either pay more taxes in places

where they have operations abroad like

Ireland are faced paying more tax back

in the US so some US companies with

operations here I've chosen to pay more

of their taxes here and that is your 1.9

billion euro windfall that was really

good news for us but those changes are

part of a much wider effort to alter how

international companies pay their taxes

there's been an ongoing battle between

the European Commission and the OECD a

kind of Club of rich nations over who

sets the agenda on tax reform the

European Commission wants to introduce

wait for it a common consolidated

corporate tax base that's a system where

a company is taxed in relation to the

places where its products are most

widely bought or used not where the

companies declare the profit for example

more may be spent on buying advertising

on Facebook in France than in Ireland so

that company should pay more tax there

rather than here meanwhile the OECD says

it's looking at a slightly tweaked

version of all that and it wants to set

a minimum tax rate for companies

worldwide either way it will be bad for

Ireland's tax income and good for bigger

countries the reason why we now need to

be part of the global process in

relation to future of international

taxation is to try to preserve the

principle that tax should be levied

whereas substance is

created and kept all this and in the

meantime a raft of new rules are being

continually introduced to crack down on

what's called tax avoidance or if you

prefer aggressive tax planning

in other words exploiting the incredibly

complicated international tax code to

avoid paying tax the fallout from the

changes put in place so far are best

seen in the Apple tax case thirteen

billion euro is sitting in an account at

the London branch of the Bank of New

York Mellon waiting for the result of a

legal challenge taken by Ireland against

the European Commission the Commission

claims the computer giant was given a

special deal on its taxes in Ireland

making it illegal state aid to tax

rulings granted by Ireland have

artificially reduced apples tax burden

Ireland argues that the tax breaks given

to Apple were available to any company

locating here so it wasn't a special

deal the outcome of the case is the

potential to upend everything we thought

we knew about corporate taxation

it'll be watched closely from every

corner of Europe and be honest

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