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 Post subject: France and Germany Plans for EU Common Tax
PostPosted: Tue May 26, 2015 9:56 pm 
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The real 'black swan' that would dramatically affect all Irish property.

http://www.telegraph.co.uk/news/worldnews/europe/eu/11630468/France-and-Germany-behind-plans-for-common-EU-corporation-tax.html

Three are two parts to this:

1. Ireland's tax rate is not really the issue. France has an equally low effective rate of tax for US multinationals etc. The issue is that the Irish Revenue allow multinationals to pay 0% tax by allowing their revenues stay in the Irish system (and thus artificially inflate Irish GDP) while the cash goes the Cayman Islands etc. U.S. Multinationals are using Ireland to pay 0% tax on all European revenues. That is what France and Germany have realised and want stopped.

2. Dublin commercial real estate pricing is dependent of U.S. Multinationals. Over 80-85% of the true net take up of Dublin office (take out the lease rollovers Irish agents deliberately mix in) are dot.com firms, locating to pay 0% tax. They pay high rents at c. 50 per sq ft (the tax savings are 1000x the rent costs so they don't care). At 50 per sq ft that equates to 1,000 sq ft in capital value. That is 5x the all in cost of build. Almost no cities (capital or otherwise) in EMEA outside of London, Paris and Zurich, sell for much over 3x cost of build (600-700 sq ft). That is why when Irish office weakens, it collapses.

The Euro Project is remarkably open and liberal (as the UK is discovering re immigration). The sense check, from a financial side, was that regardless of tax strategy, the net benefit would stay in Europe. Ireland, Lux and Holland however are "backdoors" for U.S. multinationals to extract revenues gross out of the EU system. There are no programmers (or many real scientists in Ireland). The jobs needed to fulfil the "backdoor" tax plans created by KPMG and PWC etc are cheaper - call centre / lower marketing and sales roles. Europe is loosing the taxation and higher quality jobs.

France and Germany know this however changing tax rules are very tricky under EU rules. The U.K.s desire to resolve some of its immigration problems could see a "grand bargain" where compromises are made to close these "backdoors". It is one of those "slow burn" background things - but, we could wake up one day to find U.S. Multinationals gone.

Our GDP would fall by about c 20% (that is how artificial their effect on our GDP and even GNP is), and Dublin Office would fall by at minimum 50% (and more given most U.S. Multinationals have 3/5 year breaks on their leases and would dump).


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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Tue May 26, 2015 10:15 pm 
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Too Big to Fail

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The Common Consolidated Corporate Tax Base (CCCTB) suggestion has been around for years. Ireland's headline Corporate Tax rate of 12.5% is pretty much what ends up being paid by (erm .. most) companies operating within the State. For most businesses, the Corporate Tax/Profit Tax is only one factor in the Total Tax Rate (TTR) they face in any given country.

Back in 2011, PwC working with The World Bank put out a report called "Paying Taxes 2011, The Global Picture", comparing the tax burden on companies operating in different countries. It found that Ireland's effective Profit Tax rate (i.e. was is actually paid in any specific country after the headline rate is reduced by allowances) was around the European average level and higher than that of other EU countries including France, the Czech Republic, Cyprus & Luxembourg. It also claimed Ireland's TTR, i.e. the overall burden including profit, labour and other levies on a corporation operating within the country, at 26.5% stood at the third lowest in the E.U.

Unlike some countries, such as German, organisations operating in Ireland don't have regional taxes to pay as well as State/Federal ones.

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"Housing traditionally is not viewed as a great investment. It takes maintenance, it depreciates, it goes out of style". "So, why was it considered an investment? That was a fad. That was an idea that took hold in the early 2000's. And I don't expect it to come back. Not with the same force. So people might just decide, "I'll live in a rental." That is a very sensible thing for many people to do". Prof. Robert J.Shiller, Nobel Laureate in Economics, Feb 2013.


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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Tue May 26, 2015 10:18 pm 
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Neo Landlord

Joined: Jan 4, 2011
Posts: 270
This would be a massive problem for Ireland

It's not so much a common base its a common CONSOLIDITED base

Big countries where consumers are win - ire lux Belgium Malta etc lose


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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Wed May 27, 2015 2:22 pm 
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Neo Landlord

Joined: May 10, 2009
Posts: 224
observer35 wrote:
The real 'black swan' that would dramatically affect all Irish property.

http://www.telegraph.co.uk/news/worldnews/europe/eu/11630468/France-and-Germany-behind-plans-for-common-EU-corporation-tax.html

Three are two parts to this:

1. Ireland's tax rate is not really the issue. France has an equally low effective rate of tax for US multinationals etc. The issue is that the Irish Revenue allow multinationals to pay 0% tax by allowing their revenues stay in the Irish system (and thus artificially inflate Irish GDP) while the cash goes the Cayman Islands etc. U.S. Multinationals are using Ireland to pay 0% tax on all European revenues. That is what France and Germany have realised and want stopped.

2. Dublin commercial real estate pricing is dependent of U.S. Multinationals. Over 80-85% of the true net take up of Dublin office (take out the lease rollovers Irish agents deliberately mix in) are dot.com firms, locating to pay 0% tax. They pay high rents at c. 50 per sq ft (the tax savings are 1000x the rent costs so they don't care). At 50 per sq ft that equates to 1,000 sq ft in capital value. That is 5x the all in cost of build. Almost no cities (capital or otherwise) in EMEA outside of London, Paris and Zurich, sell for much over 3x cost of build (600-700 sq ft). That is why when Irish office weakens, it collapses.

The Euro Project is remarkably open and liberal (as the UK is discovering re immigration). The sense check, from a financial side, was that regardless of tax strategy, the net benefit would stay in Europe. Ireland, Lux and Holland however are "backdoors" for U.S. multinationals to extract revenues gross out of the EU system. There are no programmers (or many real scientists in Ireland). The jobs needed to fulfil the "backdoor" tax plans created by KPMG and PWC etc are cheaper - call centre / lower marketing and sales roles. Europe is loosing the taxation and higher quality jobs.

France and Germany know this however changing tax rules are very tricky under EU rules. The U.K.s desire to resolve some of its immigration problems could see a "grand bargain" where compromises are made to close these "backdoors". It is one of those "slow burn" background things - but, we could wake up one day to find U.S. Multinationals gone.

Our GDP would fall by about c 20% (that is how artificial their effect on our GDP and even GNP is), and Dublin Office would fall by at minimum 50% (and more given most U.S. Multinationals have 3/5 year breaks on their leases and would dump).

interesting thesis but you are missing two points

1. you're assuming the multinationals will roll over once the rules come into place and start moving to some other jurisdiction.

much more likely they are moving ahead of any legislation and helping the gov create new policy (knowledge box etc) and re-configuring their business (building data centres etc)

2. there are lots of reasons tech companies are here, for any new company (5 yr old of less) they are unlikely to make significant profits regardless so tax isn't a consideration.

* dublin is cheap relative to the total cost of hiring in the US - function of salaries, rents, EUR weakness, ability to get visas for foreign nationals etc
* the regulatory environment is benign
* politically stable and very US centric

the black swan for tech in IRL is a pull-back in the US tech economy

-nb


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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Wed May 27, 2015 2:29 pm 
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Joined: Sep 13, 2012
Posts: 4754
observer35 wrote:
There are no programmers (or many real scientists in Ireland).

Perhaps you are exaggerating for effect, but there definitely are programmers in Ireland. In my circle of Dublin friends (which was developed non-professionally) you can't swing a cat 6 cable without hitting a geek.

It may be the case that they don't form a significant proportion of US multinational employees based here but there is more to the Irish economy than tax avoidance, though perhaps not as much as we'd like.

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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Wed May 27, 2015 2:50 pm 
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Joined: Apr 30, 2013
Posts: 1648
Eschatologist wrote:
observer35 wrote:
There are no programmers (or many real scientists in Ireland).

Perhaps you are exaggerating for effect, but there definitely are programmers in Ireland. In my circle of Dublin friends (which was developed non-professionally) you can't swing a cat 6 cable without hitting a geek.

It may be the case that they don't form a significant proportion of US multinational employees based here but there is more to the Irish economy than tax avoidance, though perhaps not as much as we'd like.


Yes Eschatologist. I know one of the big software firms here really well. Their senior guys would describe themselves as not having programmers. What they mean by that is that they do not build source code and programs in Ireland. Even where they contract out this work globally, they prefer locations like Poland (bigger pool of higher quality programmers). Of course there are people in Ireland doing bits of programming around localisation etc. It is bit like the same way that there are almost (there are two exceptions) no real traders / trading desks in the IFSC (most are finance admin). Sorry for the abbreviation but it was pretty sobering to hear such senior execs in a poster-child IDA operation describe themselves as such.


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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Wed May 27, 2015 3:06 pm 
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Joined: Apr 30, 2013
Posts: 1648
NorvilleBarnes wrote:
1. you're assuming the multinationals will roll over once the rules come into place and start moving to some other jurisdiction.

much more likely they are moving ahead of any legislation and helping the gov create new policy (knowledge box etc) and re-configuring their business (building data centres etc)

2. there are lots of reasons tech companies are here, for any new company (5 yr old of less) they are unlikely to make significant profits regardless so tax isn't a consideration.

* dublin is cheap relative to the total cost of hiring in the US - function of salaries, rents, EUR weakness, ability to get visas for foreign nationals etc
* the regulatory environment is benign
* politically stable and very US centric

the black swan for tech in IRL is a pull-back in the US tech economy

-nb


Thanks NB - couple of observations I offer in response:

1. If you read the documents that Germany and France (and others) have published, they are well wise to the web of structures and techniques that KPMG / PWC have created around this area. At the core of the German suggestions is that U.S. Multinationals pay gross taxes on German revenues less ACTUAL costs incurred in Germany (they would ignore all royalty / knowledge box / patent types etc.). This would incentivise U.S. Multinationals to re-locate costs to Germany to get the offsets.

2. Tech firms are (almost) unique in that in loss making firms (at a corporate level) can still make considerable gross profits that can attract tax. When Dropbox get 10m in revenues from Germany, there can - in some cases - be little additional marginal costs behind selling it (i.e. like recording artists selling songs on iTunes). Irish tax law enables Dropbox to re-state their c. 50m development costs to say c. 1bn through localisation (i.e. the act of converting Dropbox into German and other languages is what made it valuable). EU tax law then allows Dropbox to offset this 1bn against all EU Revenues. Dropbox can keep in dipping into this well to continuously offset EU tax. That is why software firms that make little / no profits on a GAAP basis still need the Irish tax platform. Also, as KPMG / PWC will tell you, it is far more credible to set the structure up early, then try and back-fit later into a more successful business.

I do agree that a US tech downturn could have the same effect - another black-swan (now we have a flock !)


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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Wed May 27, 2015 3:25 pm 
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Too Big to Fail

Joined: Sep 13, 2012
Posts: 4754
observer35 wrote:
Yes Eschatologist. I know one of the big software firms here really well. Their senior guys would describe themselves as not having programmers. What they mean by that is that they do not build source code and programs in Ireland. Even where they contract out this work globally, they prefer locations like Poland (bigger pool of higher quality programmers). Of course there are people in Ireland doing bits of programming around localisation etc. It is bit like the same way that there are almost (there are two exceptions) no real traders / trading desks in the IFSC (most are finance admin). Sorry for the abbreviation but it was pretty sobering to hear such senior execs in a poster-child IDA operation describe themselves as such.

Yeah, but don't the IDA deal with US multinationals? My point is that there is an economy outside of US multinationals, and in that economy there are real programmers writing real code, not tweaking i8n messages.

_________________
"It's easy to confuse what is with what ought to be, especially when what is has worked out in your favour"
Tyrion Lannister


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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Wed May 27, 2015 3:28 pm 
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Property Magnate

Joined: Dec 3, 2008
Posts: 553
observer35 wrote:
The real 'black swan' that would dramatically affect all Irish property.

http://www.telegraph.co.uk/news/worldnews/europe/eu/11630468/France-and-Germany-behind-plans-for-common-EU-corporation-tax.html

Three are two parts to this:

1. Ireland's tax rate is not really the issue. France has an equally low effective rate of tax for US multinationals etc. The issue is that the Irish Revenue allow multinationals to pay 0% tax by allowing their revenues stay in the Irish system (and thus artificially inflate Irish GDP) while the cash goes the Cayman Islands etc. U.S. Multinationals are using Ireland to pay 0% tax on all European revenues. That is what France and Germany have realised and want stopped.

2. Dublin commercial real estate pricing is dependent of U.S. Multinationals. Over 80-85% of the true net take up of Dublin office (take out the lease rollovers Irish agents deliberately mix in) are dot.com firms, locating to pay 0% tax. They pay high rents at c. 50 per sq ft (the tax savings are 1000x the rent costs so they don't care). At 50 per sq ft that equates to 1,000 sq ft in capital value. That is 5x the all in cost of build. Almost no cities (capital or otherwise) in EMEA outside of London, Paris and Zurich, sell for much over 3x cost of build (600-700 sq ft). That is why when Irish office weakens, it collapses.

The Euro Project is remarkably open and liberal (as the UK is discovering re immigration). The sense check, from a financial side, was that regardless of tax strategy, the net benefit would stay in Europe. Ireland, Lux and Holland however are "backdoors" for U.S. multinationals to extract revenues gross out of the EU system. There are no programmers (or many real scientists in Ireland). The jobs needed to fulfil the "backdoor" tax plans created by KPMG and PWC etc are cheaper - call centre / lower marketing and sales roles. Europe is loosing the taxation and higher quality jobs.

France and Germany know this however changing tax rules are very tricky under EU rules. The U.K.s desire to resolve some of its immigration problems could see a "grand bargain" where compromises are made to close these "backdoors". It is one of those "slow burn" background things - but, we could wake up one day to find U.S. Multinationals gone.

Our GDP would fall by about c 20% (that is how artificial their effect on our GDP and even GNP is), and Dublin Office would fall by at minimum 50% (and more given most U.S. Multinationals have 3/5 year breaks on their leases and would dump).


Your post is a huge generalisation and parts are quite inaccurate.

"There are no programmers (or many real scientists in Ireland)". Really? There are thousands of IT developers/data scientists/ researchers/IT managers/testers/analysts/IT support people etc. working in Ireland for US companies such as IBM, Oracle, HP, Intel, Facebook, Microsoft, Dell etc. etc. As well as thousands more working in IT for native Irish companies and non-US companies (for instance there are probably more than 1,000 people working in IT in Ireland for Accenture and Deloitte alone, doing real IT consulting and development, IT support or IT infrastructure work for real clients here). Some IT staff for the multinationals work on product development (some of which may be localisation but not all by any means) and many work on development and support for local as well as international customers. Developers travel here from all over Europe, from India and recently from South America because there are better career opportunites in IT here than in many larger countries like Spain, Italy or Brazil.

I used to work in IT and I know this directly. If you don't take my word for this all you have to do is buy a premium account on Linkedin and do a search by location, company and function. Or look at job ads. For instance almost 3000 job ads in IT in Ireland are currently advertised on one job site IrishJobs.ie

Some of the newer company arrivals to Ireland may pull out if corporation tax changes here but some leave anyway as their business model changes or as their fortunes wax and wane. And others take their place over time as long as other attractions here remain which have made Ireland a centre for IT development (by the way well done IDA and other parties responsible for this down the years - credit where credit's due).


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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Wed May 27, 2015 3:30 pm 
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Real Estate Developer

Joined: Oct 7, 2014
Posts: 995
observer35 wrote:
Eschatologist wrote:
observer35 wrote:
There are no programmers (or many real scientists in Ireland).

Perhaps you are exaggerating for effect, but there definitely are programmers in Ireland. In my circle of Dublin friends (which was developed non-professionally) you can't swing a cat 6 cable without hitting a geek.

It may be the case that they don't form a significant proportion of US multinational employees based here but there is more to the Irish economy than tax avoidance, though perhaps not as much as we'd like.


Yes Eschatologist. I know one of the big software firms here really well. Their senior guys would describe themselves as not having programmers. What they mean by that is that they do not build source code and programs in Ireland. Even where they contract out this work globally, they prefer locations like Poland (bigger pool of higher quality programmers). Of course there are people in Ireland doing bits of programming around localisation etc. It is bit like the same way that there are almost (there are two exceptions) no real traders / trading desks in the IFSC (most are finance admin). Sorry for the abbreviation but it was pretty sobering to hear such senior execs in a poster-child IDA operation describe themselves as such.


I'm not really sure how relevant that is though - fact is that there is far more demand for programmers in Ireland than there is supply, and even with significant overseas recruitment pretty much every company is struggling to meet their recruitment targets. If that's what "no programmers" looks like, I'd love to see the opposite!


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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Wed May 27, 2015 3:52 pm 
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Property Magnate

Joined: Dec 3, 2008
Posts: 553
observer35 wrote:

Yes Eschatologist. I know one of the big software firms here really well. Their senior guys would describe themselves as not having programmers. What they mean by that is that they do not build source code and programs in Ireland. Even where they contract out this work globally, they prefer locations like Poland (bigger pool of higher quality programmers). Of course there are people in Ireland doing bits of programming around localisation etc. It is bit like the same way that there are almost (there are two exceptions) no real traders / trading desks in the IFSC (most are finance admin). Sorry for the abbreviation but it was pretty sobering to hear such senior execs in a poster-child IDA operation describe themselves as such.


This is bs. You extrapolated for the entire Irish software industry from a chat with execs from one company (possibly not even from the IT function) who typically have no clue about the software industry here if that is what they actually think.

For example next time you log onto ROS to do your tax or use the facilities of a bank such as BOI just ask someone who actually knows who is it that designs, codes, tests and supports those applications supporting all those complex tax or banking systems? The answer is teams of IT staff working here for these companies themseleves, augmented by teams of developers and contractors working in Ireland for companies like IBM, Accenture, Deloitte or the plethora of smaller IT services companies here. Stating that there are few programmers working in Ireland is just stupid.


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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Wed May 27, 2015 4:04 pm 
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Neo Landlord

Joined: May 10, 2009
Posts: 224
observer35 wrote:
1. If you read the documents that Germany and France (and others) have published, they are well wise to the web of structures and techniques that KPMG / PWC have created around this area. At the core of the German suggestions is that U.S. Multinationals pay gross taxes on German revenues less ACTUAL costs incurred in Germany (they would ignore all royalty / knowledge box / patent types etc.). This would incentivise U.S. Multinationals to re-locate costs to Germany to get the offsets.

My general point is that I expect the tax-planning and operational-planning depts of IRL based multinationals to predict and move with/ahead of EU's ability to regulate - this is unlikely to catch them out in black-swan fashion.

As to how the game might change, whereas now you might have a brass-plate in Lux funnelling revenue to avail of low tax rates, the current spate of Data Centre projects in Ireland suggest perhaps that the future calculation will see the Labour & Capital costs incurred in IRL increase considerably?

observer35 wrote:
2. Tech firms are (almost) unique in that in loss making firms (at a corporate level) can still make considerable gross profits that can attract tax. When Dropbox get 10m in revenues from Germany, there can - in some cases - be little additional marginal costs behind selling it (i.e. like recording artists selling songs on iTunes). Irish tax law enables Dropbox to re-state their c. 50m development costs to say c. 1bn through localisation (i.e. the act of converting Dropbox into German and other languages is what made it valuable). EU tax law then allows Dropbox to offset this 1bn against all EU Revenues. Dropbox can keep in dipping into this well to continuously offset EU tax. That is why software firms that make little / no profits on a GAAP basis still need the Irish tax platform. Also, as KPMG / PWC will tell you, it is far more credible to set the structure up early, then try and back-fit later into a more successful business.

Dropbox probably isn't the best example, but the German office will presumably only make a profit on the user subscription minus the high-cost of storing the data at their european data-centre in Tuam? Don't forget the cost-of-goods-sold for -as-a-service-based companies is much higher then old school shrink-wrapped software dev / localisation.

BTW I'm not an accountant, but I don't think there is enough of a technical justification for the current rash of building data-centres in IRL - perhaps this is exactly the kind of early tax planning you mention?

-nb


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 Post subject: Re: France and Germany Plans for EU Common Tax
PostPosted: Sat Jun 06, 2015 11:53 am 
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Erasmus to Tobin tax: A French vision for Europe - -> http://www.thelocal.fr/20150604/teenage ... or-eurzone

Quote:
The radical Franco-German plan for a deeper, more united and more robust eurozone has been described in some quarters as a “quantum leap” for Europe. Here’s a closer look at what Paris and Berlin plan.
German and French ministers revealed their plans on Thursday for “Europe’s biggest reform” saying we cannot wait any longer.
They laid out a list of ideas to foster a more united and a stronger eurozone and EU, for which France's super economist and firm critic of the eurozone Thomas Piketty told The Local will "fail to respond to Europe's main challenge".
<snip>
This is a move that would be backed by France’s celebrated economist Thomas Piketty.

“We may have a common currency for 19 countries, but each of these countries has a different tax system, and fiscal policy was never harmonized in Europe. It can't work. In creating the euro zone, we have created a monster,” said Piketty in a recent interview.

Germany and France are now proposing that “consistent though not necessarily equal minimum wages” should be imposed across the eurozone and corporate tax policy be harmonised.

“This would strengthen our individual economies, establish a truly level playing field across the eurozone and ensure that tax competition and social dumping don’t create races to the bottom” said Macron and Gabriel.

there is more


Amazon to stop funneling Europe sales via tax haven - -> http://www.taipeitimes.com/News/biz/arc ... 2003619166

Quote:
Yet, despite the growing clampdown on tax structures used by US tech companies and others, analysts say that European nation are still vying to attract international companies through low-tax policies.
Britain, Ireland and the Netherlands have created new policies that allow companies to apply for a lower tax rate on profits that result from certain patents that are held locally.
However, the European Commission is reviewing the legality of these so-called “patent boxes.”

there is more


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