It has been recently announced that Switzerland has lost one of its most lucrative multinationals, Yahoo! Yahoo!’s European Head Office has been based in the Alpine nation since 2008 and has decided to move operations to Ireland. Although they claim it has nothing to do with the new changes in the Swiss taxation rules it is hard to believe that this statement is particularly accurate.
The introduction of Base Erosion Profit Shifting (BEPS) into the EU was firstly met with obscurity and objection; EU countries whose revenue thrives from FDI were opposed to the idea. BEPS seeks to eliminate any type of “dodgy” tax practice and make the whole network transparent and all baring.
According to Aidan Byrne, International Tax Partner with Baker Tilly Ryan Glennon “The project, BEPS, addresses anomalies that have developed whereby multinational businesses use planning techniques, which although completely legal, have the effect of reducing their global effective tax rate”. What has happened in Switzerland is the start of changes coming down the tracks; this will hopefully be a very positive change for Ireland as companies seek to move operations to jurisdictions with a transparent and low tax rate, together with a pro-business environment.”
Switzerland has been a victim of BEPS as it is the likely that the changes the Alpine nation is expected to make to its tax rules are following European Union pressure. This may have a domino effect in Switzerland with more of its multinationals leaving, some of which include EBay, Expedia Inc and Autodesk Inc. EU rules require countries not to discriminate between domestic and foreign firms in taxation, Brussels has told Switzerland that if it wants to enjoy unfettered access to the bloc’s market, it needs to scrap their practice. Switzerland currently offers tax rates to companies which make their profits outside Switzerland that are less than half the rates imposed on companies that operate locally, this results in a vast range from 22% -13% for corporation tax. It will therefore entice companies to select a country with a clearly defined corporation tax rate, such as Ireland. A recent non-tax development for Switzerland has been the passing of a referendum for the limitation on foreigners been allowed into the country. This will further diminish Switzerland’s attractiveness as a place to do business and this result has been heavily criticised by EU leaders.
“Ireland as of late has been a central talking point for many countries envious of our corporation rate and attractiveness to FDI multinationals. We have been tarnished as a “tax haven” by many who cannot see that in fact we are one of the most transparent countries in the EU. Enda Kenny has recently described our nation as “a statute-based system which levies a 12.5 per cent rate which complies fully global norms and EU laws”. We have also received very public support from Pascal Saint-Amans, Director of Taxation and Policy in the OECD, whereby he reiterated the right of Ireland’s Government to set its own corporate tax rate and where he debunked the myth that Ireland was a tax haven. This all helps to put some clear water between us and tax havens” continued Aidan.
Further to the developments above, documents have also been published recently by the OECD, the body leading the G20 tax avoidance drive; have said that in future companies should be forced to report profits and revenues where the economic activity which generates the profit takes place. This may also lead to more companies abandoning their previous home and immigrating to Ireland.