From Socialist Voice, April 2007

Tax-dodging Ireland

In previous issues of Socialist Voice we have drawn attention to the abuse of Ireland’s low corporation tax by such companies as Microsoft and other transnational corporations that set up office in the Republic and then declare earnings from across the world in order to avail of the lower rate of corporation tax.
     Pepsi Bottling and Pepsico Ireland are the latest to avail of this lower corporation tax. These two companies have come together to form an Irish-registered company called Pepsi Bottling Group. PBG is listed separately from Pepsico, which was an offshoot of the company in 1999.
     PBG is transferring all its assets in Russia to the new Irish company. The assets of the Russian company will include a bottling operation in St Petersburg (Leningrad) as well as Moscow and Ekaterinburg (Sverdlovsk). Russian tax can be as high as 24 per cent, which is nearly twice the Irish corporation tax. What Pepsi will be doing is routing its Russian sales through Ireland. In 2006 PBG claimed to have a 23 per cent share of all carbonated drinks sold in Russia. Much of this income will no doubt be channelled through Ireland so as to avail of the lower rate of tax.
     Another company that has availed of lower tax rates is the American firm Sandisk. This company made a profit of almost $106 million on a gross income of $955 million from an Irish subsidiary that has only a handful of employees.
     All this false accounting benefits the Irish exchequer and presents a false picture of the strength of the economy. Companies will channel and declare their profits here in Ireland as long as we maintain the current low tax rate.
     The European Union is now looking at harmonised taxation, and the US government has been making noises about cutting off this loophole whereby American corporations can declare profits in Ireland that were earned elsewhere and so pay minimum tax.
     The tax revenue that the Irish government is able to gather is not a true reflection of the state of the economy but is just another example of how our economic future is overexposed to and completely dependent on the vagaries of transnational corporations.

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