Everybody's a winner, right? Well, emm, no. The US government is the loser here and is now looking to crack down on this sort of thing. The focus of the Journal's article and this Sunday Business Post follow-up is Microsoft's use of an Irish-based subsidiary to license the rights to its software.
While there is nothing illegal in what Microsoft is doing, Richard Murphy, an accountant and tax expert with the Tax Justice Network, said that arrangements by some multinationals may contravene the spirit of the law, even if they obey its letter.No laws are being broken, but laws can change.
Despite all the nonsense about our "well-educated work force", what really drove the Celtic Tiger was that it was cheaper to do business in Ireland than any other EU country. This is why Ireland's EU partners despise the low Irish corporate tax rate. And, now it seems the US government is an enemy too.
An editorial in today's NY Times means that rather than going away quietly, this story is growing. It could become a real problem. I suspect that once the IRS gets through checking on intellectual property registrations, they'll turn their attention to large fund transfers among financial institutions (IFSC) and other nifty accounting practices used by Irish-based operations of large multinationals. Next thing you'll know, Congress will be holding hearings on Ireland's status as a 'tax haven'.
The economy could quickly collapse if the US and EU decide to bring the Tiger to heel. Might be a good time to sell that investment property. On the upside, an economic collapse would end all discussion of immigration problems.
