Ireland as tax haven for intellectual property
The Wall Street Journal ran an excellent article yesterday on the practice of multinational companies using operations in Ireland to shield income earned on intellectual property from taxation by the United States and other countries. The article is quite extensive, and is easily one of the most interesting intellectual property pieces I've read in the last several months.
•NOTE: The Journal's online edition is a pay service. A subscription is required to view this article.
The article portrays Microsoft and its Ireland-based intellectual property licensing subsidiary, Round Island One Ltd. It gives a nice introduction to the taxation of intellectual property for multinational corporations, and strategies for reducing tax burdens on IP-based revenue streams (research centers in Ireland are a popular setup because "...a company must be able to argue plausibly that its offshore unit is at least partly responsible for the innovations.").
The article is an interesting portrayal of Ireland as well. The country has focused several of its policies on growth and has clearly identified intellectual property as a means to achieve growth.
"Ireland sees intellectual property as the key to its future. Irish labor is now growing scarce, and costs higher. The development authority adopted a new strategy in 2000 of becoming "the foremost knowledge-based society in Europe." Last year, Ireland enacted a new R&D tax credit and abolished a 9% tax on sale or transfer of intellectual property." (emphasis added)
The movement of intellectual property and the associated revenue streams to Ireland and other countries is a growing trend (no wonder, Microsoft apparently reduced its effective worldwide tax burden from 33% to 26% last year). U.S. law permits the practice but is rife with gray areas. According to the article, the IRS is fighting some migrations of intellectual property in court and the Treasury Department has issued a draft set of new rules designed to limit the practice.
U.S. policy on the issue is likely to change over the coming years:
"A Washington panel advising the White House on tax policy is now floating a possible new strategy: simply eliminate the taxes on overseas corporate income that motivate firms to move their intellectual property and other assets offshore. Most major U.S. trading partners have already taken this step, giving their firms a competitive edge against American companies.” (emphasis added)
Learn more about Ireland in the CIA World FactBook.
•NOTE: The Journal's online edition is a pay service. A subscription is required to view this article.
The article portrays Microsoft and its Ireland-based intellectual property licensing subsidiary, Round Island One Ltd. It gives a nice introduction to the taxation of intellectual property for multinational corporations, and strategies for reducing tax burdens on IP-based revenue streams (research centers in Ireland are a popular setup because "...a company must be able to argue plausibly that its offshore unit is at least partly responsible for the innovations.").
The article is an interesting portrayal of Ireland as well. The country has focused several of its policies on growth and has clearly identified intellectual property as a means to achieve growth.
"Ireland sees intellectual property as the key to its future. Irish labor is now growing scarce, and costs higher. The development authority adopted a new strategy in 2000 of becoming "the foremost knowledge-based society in Europe." Last year, Ireland enacted a new R&D tax credit and abolished a 9% tax on sale or transfer of intellectual property." (emphasis added)
The movement of intellectual property and the associated revenue streams to Ireland and other countries is a growing trend (no wonder, Microsoft apparently reduced its effective worldwide tax burden from 33% to 26% last year). U.S. law permits the practice but is rife with gray areas. According to the article, the IRS is fighting some migrations of intellectual property in court and the Treasury Department has issued a draft set of new rules designed to limit the practice.
U.S. policy on the issue is likely to change over the coming years:
"A Washington panel advising the White House on tax policy is now floating a possible new strategy: simply eliminate the taxes on overseas corporate income that motivate firms to move their intellectual property and other assets offshore. Most major U.S. trading partners have already taken this step, giving their firms a competitive edge against American companies.” (emphasis added)
Learn more about Ireland in the CIA World FactBook.