Closing the “Double Irish” tax loophole was “more than overdue” and must be followed by further actions, one of the US Congress’s most vocal critics of tax avoidance by American multinationals has said.
Congressman Sandy Levin, a Democrat, said ending corporate inversions, another loophole under which companies change legal addresses through takeovers to avail of a lower tax rate overseas, may need to be tackled jointly by the US and the European Union.
Mr Levin was speaking at the US Capitol after high-ranking Democrats introduced a bill to curb corporate tax inversions that they say will save almost $34 billion (€29 billion) over the next 10 years.
Corporate deserters
President
Barack Obama
last year joined fellow Democrats in accusing US companies who use crossborder mergers to escapes taxes of being “corporate deserters.” He singled out
Ireland
for criticism, saying some US firms had “magically” become Irish through takeovers.
The low Irish corporate tax rate of 12.5 per cent makes firms in Ireland popular targets for American multinationals seeking to protect income from the US corporate rate of 35 per cent, the highest in the developed world.
In response to criticism about Irish tax loopholes, the Government announced in October’s budget that it would end the Double Irish system that allows multinationals with Irish subsidiaries avoid paying tax in Ireland by funnelling cash through offshore tax havens.
"The Irish needed to take action. They are going to have to take more," Mr Levin told The Irish Times.
His brother Carl, a Democratic senator who recently retired, led a congressional investigation two years ago into the use of Irish companies by technology company Apple to avoid paying US taxes.
The European Commission is investigating Apple's tax arrangements in Ireland along with the European subsidiaries of other US companies such as coffee shop chain Starbucks and online retailer Amazon.
“This issue of inversions is really part of the larger issue that now is being addressed in the European community and needs to be addressed here,” said congressman Levin.
Anti-inversion legislation
Dick Durbin
, the Democratic whip in the
Senate
, has stepped in to Carl Levin’s place to renew the push for the anti-inversion legislation. He rejected the suggestion that inversions were a consequence of the US tax code failing to keep pace with international competition.
“If the goal is to create a corporate tax rate in America lower than any other country on Earth like Ireland, then I am afraid we are going to find ourselves in an impossible situation unable to raise the revenue that we need to sustain our government,” he said.
Companies should accept the responsibility of living in the US with the benefits it produces and pay their fair share of taxes, he said. “If it is a race to the bottom on tax rates, it is not something that I want to be part of,” he said.
Republicans who won control of Congress in November's elections are likely to oppose the legislation strongly.
