Bermuda and Ireland are being swept up in a “vigilante approach” to corporate taxes by bigger nations seeking to curb deficits, Bermuda’s Finance Minister Bob Richards said, vowing to keep the country’s zero tax rate.
“We have never had corporate income tax and we’re not going to,” Richards said in a telephone interview yesterday. “Ireland is swept up into this as well but it is just important for us to state our case and not be overwhelmed by the kind of global politics and rhetoric that we have seen.”
Corporate tax codes in Ireland and Bermuda have drawn criticism in recent weeks as U.S. and U.K. lawmakers investigated structures used by some of the world’s largest companies including Apple Inc. and Google Inc. to cut their tax bill. U.S. Senators Carl Levin and John McCain said on May 31 that Ireland “meets a common sense definition of a tax haven” after the nation disputed some of the findings in a senate investigation into Apple’s affairs.
Apple has $102 billion in offshore accounts and shifted billions in profits away from the U.S. into affiliates based in Ireland, where it negotiated a tax rate of less than 2 percent, according to a report by a senate panel last month.
Companies can avoid paying levies in Ireland almost completely by setting up units that don’t fall in any tax jurisdiction, according to the panel report.
Google and Apple executives say they have done nothing wrong and are paying all taxes. Google avoided about $2 billion in worldwide income taxes in 2011 by shifting $9.8 billion in revenues into a Bermuda shell company, filings show.
By legally funneling profits from overseas subsidiaries into Bermuda, Google cut its overall tax rate almost in half. The amount moved to Bermuda is equivalent to about 80 percent of Google’s total pretax profit in 2011.
“Let’s avoid getting moralistic about taxes,” Richards said. “Just because another country has its tax system doesn’t make ours right or wrong, there is no such thing as right and wrong in taxes, there is only what is practical.”
Ireland provides no special tax concessions for individual companies, Michael Collins, Ireland’s ambassador to the U.S. said in a letter to Levin and McCain released by the country’s Finance Ministry last week.
Collins said the companies at the center of the controversy aren’t tax resident in Ireland, and the bailed-out nation meets none of the criteria set out by the Organization for Economic Cooperation and Development to be defined as a tax haven.
“We have a difficult world situation here with countries looking for revenues and trying to blame other countries instead of looking at their own situation,” Richards said, urging his Irish counterparts to combat criticism. “It is easy to scapegoat a small country.”
Bermuda is a British overseas territory with its own parliament and government.