Editing Corporate haven (section)

==Intellectual-property–based BEPS tools{{anchor|IP-based BEPS tools}}==
{{see also|Base erosion and profit shifting|Double Irish arrangement}}
[[File:John Oliver November 2016.jpg|thumb|[[John Oliver]], who made an HBO program on IP-based BEPS tools]]

===Raw materials of tax avoidance===

Whereas traditional corporate tax havens facilitated avoiding domestic taxes (e.g. U.S. corporate [[tax inversion]]), modern corporate tax havens provide [[base erosion and profit shifting]] (or BEPS) tools,<ref name="zew"/> which facilitate avoiding taxes in all global jurisdictions in which the corporation operates.<ref name="tilburg">{{cite web| url=http://arno.uvt.nl/show.cgi?fid=143915| title=Intellectual Property Tax Planning in the light of Base Erosion and Profit Shifting| publisher=University of Tilburg| date=June 2017| access-date=2018-05-18| archive-url=https://web.archive.org/web/20180519032352/http://arno.uvt.nl/show.cgi?fid=143915| archive-date=2018-05-19| url-status=dead}}</ref>  This is as long as the corporate tax haven has tax-treaties with the jurisdictions that accept "[[royalty payment]]" schemes (i.e. how the IP is charged out), as a deduction against tax.<ref name="bbbg">{{Cite news|url=https://www.bloomberg.com/graphics/infographics/u-s-profits-in-ireland-pile-up.html|title=Ireland: Where Profits Pile Up, Helping Multinationals Keep Taxes Low|newspaper=Bloomberg.com|publisher=Bloomberg News|quote=Meanwhile, the tax rate reported by those Irish subsidiaries of U.S. companies plummeted to 3% from 9% by 2010|date=October 2013|access-date=2018-05-13|archive-url=https://web.archive.org/web/20180516033549/https://www.bloomberg.com/graphics/infographics/u-s-profits-in-ireland-pile-up.html|archive-date=2018-05-16|url-status=live}}</ref>  A crude indicator of a corporate tax haven is the amount of full bilateral tax treaties that it has signed.  The U.K. is the leader with over 122, followed by the Netherlands with over 100.<ref name="ukx">{{Cite web|title=The Tax Treaty Network of the United Kingdom|url=http://www.fieldtax.com/wp-content/uploads/2015/08/2013-9-ILT-247-The-Tax-Treaty-Network-of-the-United-Kingdom1.pdf|publisher=International Taxation (Volume 9)|date=September 2013|access-date=2018-05-15|archive-url=https://web.archive.org/web/20170709092511/http://www.fieldtax.com/wp-content/uploads/2015/08/2013-9-ILT-247-The-Tax-Treaty-Network-of-the-United-Kingdom1.pdf|archive-date=2017-07-09|url-status=dead}}</ref><ref name="dut2"/><ref name="ukx1">{{cite news|title=UK tops global table of damaging tax deals with developing countries|url=https://www.theguardian.com/business/2016/feb/23/uk-tops-global-table-of-damaging-tax-deals-with-developing-countries|newspaper=The Guardian|date=23 February 2016|access-date=17 May 2018|archive-url=https://web.archive.org/web/20180517223424/https://www.theguardian.com/business/2016/feb/23/uk-tops-global-table-of-damaging-tax-deals-with-developing-countries|archive-date=17 May 2018|url-status=live|df=dmy-all}}</ref>

BEPS tools abuse [[intellectual property]] (or IP), GAAP accounting techniques, to create artificial internal [[intangible asset]]s, which facilitate BEPS actions, via:<ref name="zew"/><ref name="caid"/>
{{ordered list|type=lower-roman
|[[Royalty payment]] schemes, used to route untaxed funds to the haven, by charging-out the IP as a tax-deductible expense to the higher-tax jurisdictions; and/or
|[[Capital allowance]] for [[intangible asset]]s schemes, used to avoid corporate taxes within the haven, by allowing corporates write-off their IP against tax.  
}}
IP is described as the "raw material" of tax planning.<ref name="fordam">{{cite web | url=http://www.fordhamiplj.org/2016/08/30/ip-tax-avoidance-ireland/ | title=Intellectual Property and Tax Avoidance in Ireland | publisher=Fordham Intellectual Property, Media & Entertainment Law Journal | date=30 August 2016 | access-date=18 May 2018 | archive-url=https://web.archive.org/web/20190502112434/http://www.fordhamiplj.org/2016/08/30/ip-tax-avoidance-ireland/ | archive-date=2 May 2019 | url-status=dead | df=dmy-all }}</ref><ref name="ucla">{{cite web | url=https://www.uclalawreview.org/pdf/62-1-1.pdf | title=Intellectual Property Law Solutions to Tax Avoidance | publisher=UCLA Law Review |first=Andrew |last=Blair-Stanek| page=4 | date=2015 | access-date=2018-05-18 | archive-url=https://web.archive.org/web/20150316232500/http://www.uclalawreview.org/pdf/62-1-1.pdf | archive-date=2015-03-16 | url-status=dead }}</ref><ref name="raw">{{cite web| url=https://www.bnrbeurs.nl/2017/02/22/the-corporate-tax-avoidance-toolbox/| title=Intellectual Property and the Corporate Tax Avoidance Toolbox| publisher=B&R Beurs| date=2018| access-date=2018-05-13| archive-url=https://web.archive.org/web/20180616180418/https://www.bnrbeurs.nl/2017/02/22/the-corporate-tax-avoidance-toolbox/| archive-date=2018-06-16| url-status=dead}}</ref>  Modern corporate tax havens have IP-based BEPS tools,<ref>{{cite news|url=https://www.ft.com/content/c7dc2092-cfb7-11e3-a2b7-00144feabdc0|title=U.K. Patent Box holds key to Pfizer-AstraZeneca deal's attraction|newspaper=Financial Times|date=April 2014|access-date=2018-05-13|archive-url=https://web.archive.org/web/20180513223912/https://www.ft.com/content/c7dc2092-cfb7-11e3-a2b7-00144feabdc0|archive-date=2018-05-13|url-status=live}}</ref><ref name="lx"/>  and are in all their bilateral tax-treaties.<ref>{{Cite web|url=https://www.somo.nl/new-tax-treaty-policy-prejudices-developing-countries/|title=New Dutch Tax Treaties Harms Developing Countries|publisher=somo.nl|date=20 April 2011|access-date=14 May 2018|archive-url=https://web.archive.org/web/20180515112210/https://www.somo.nl/new-tax-treaty-policy-prejudices-developing-countries/|archive-date=15 May 2018|url-status=dead|df=dmy-all}}</ref>  IP is a powerful tax management and BEPS tool, with almost no other equal, for four reasons:<ref name="zew"/><ref name="tilburg"/>

{{ordered list|type=lower-roman
|Hard to value.  IP made in a U.S. R&D laboratory, can be sold to the group's Caribbean subsidiary for a small sum (and a tiny U.S. taxable gain is realised), but then repackaged and revalued upwards by billions after an expensive valuation audit by a major accounting firm (from a corporate tax haven);<ref>{{cite web| url=http://www.ey.com/gl/en/services/tax/international-tax/alert--oecd-releases-implementation-guidance-on-hard-to-value-intangibles| title=OECD releases implementation guidance on hard-to-value intangibles| publisher=Ernst & Young| date=23 May 2017| access-date=18 May 2018| archive-url=https://web.archive.org/web/20180519121954/http://www.ey.com/gl/en/services/tax/international-tax/alert--oecd-releases-implementation-guidance-on-hard-to-value-intangibles| archive-date=19 May 2018| url-status=live| df=dmy-all}}</ref>
|Perpetually replenishable.  The firms that have IP (i.e. Google, Apple, Facebook), have "product cycles" where new versions/new ideas emerge.  This product cycle thus creates new IP which can replace older IP that has been used up and/or written-off against taxes;<ref>{{cite web| url=https://www.ipos.gov.sg/growing-your-business-with-ip| title=Growing your business with IP cycle| publisher=Intellectual Property Office of Singapore| date=2018| access-date=2018-05-21| archive-url=https://web.archive.org/web/20180522112133/https://www.ipos.gov.sg/growing-your-business-with-ip| archive-date=2018-05-22| url-status=live}}</ref>
|Very mobile.  Because IP is a virtual asset which only exists in contracts (i.e. on paper), it is easy to move/relocate around the world; it can be restructured into vehicles that provide secrecy and confidentiality around the scale, ownership, and location, of the IP;<ref name="amzn"/>
|Accepted as an intergroup charge.  Many jurisdictions accept IP [[royalty payments]] as a deductible against tax, even intergroup charges; Google Germany is unprofitable because of intergroup IP royalties it pays Google Bermuda (via Google Ireland), which is profitable.<ref name="conv">{{cite news|title=OECD's new tax proposals won't stop companies shifting profits to tax havens|url=https://theconversation.com/oecds-new-tax-proposals-wont-stop-companies-shifting-profits-to-tax-havens-48466|work=The Conversation|date=6 October 2016|access-date=19 May 2018|archive-url=https://web.archive.org/web/20180520053757/https://theconversation.com/oecds-new-tax-proposals-wont-stop-companies-shifting-profits-to-tax-havens-48466|archive-date=20 May 2018|url-status=live|df=dmy-all}}</ref>
}}

When corporate tax havens quote "effective rates of tax", they exclude large amounts of income not considered taxable due to the IP-based tools.  Thus, in a self-fulfilling manner, their "effective" tax rates equal their "headline" tax rates.  As discussed earlier ({{slink||Denials of status}}), Ireland claims an "effective" tax rate of circa 12.5%, while the IP-based BEPS tools used by Ireland's largest companies, mostly U.S. multinationals, are marketed with [[Corporation tax in the Republic of Ireland#Effective tax rate (ETR)|effective tax rates]] of <0-3%.<ref name="maples"/><ref name="matheson1">{{cite web|url=http://www.matheson.com/images/uploads/documents/China_Article_-_March_2013.pdf|title=Ireland as a European gateway jurisdiction for China – outbound and inbound investments|quote=The tax deduction can be used to achieve an effective tax rate of 2.5% on profits from the exploitation of the IP purchased. Provided the IP is held for five years, a subsequent disposal of the IP will not result in a clawback.|publisher=[[Matheson (law firm)|Matheson]]|date=March 2013|access-date=2018-06-16|archive-url=https://web.archive.org/web/20180712182634/http://www.matheson.com/images/uploads/documents/China_Article_-_March_2013.pdf|archive-date=2018-07-12|url-status=live}}</ref>  These 0-3% rates have been verified in the EU Commission's investigation of Apple (see above), and other sources.<ref name="face1">{{cite news|url=https://www.ft.com/content/ca64f938-5dc0-11e3-95bd-00144feabdc0|title='Double Irish' limits Facebook's tax bill to €1.9m in Ireland|newspaper=Financial Times|date=5 December 2013|access-date=17 May 2018|archive-url=https://web.archive.org/web/20180519085405/https://www.ft.com/content/ca64f938-5dc0-11e3-95bd-00144feabdc0|archive-date=19 May 2018|url-status=live|df=dmy-all}}</ref><ref name="face3">{{cite news|url=https://www.irishexaminer.com/breakingnews/business/facebook-ireland-pays-tax-of-just-30m-on-126bn-816238.html|title=Facebook Ireland pays tax of just €30m on €12.6bn|newspaper=Irish Examiner|date=29 November 2017|access-date=17 May 2018|archive-url=https://web.archive.org/web/20180612142137/https://www.irishexaminer.com/breakingnews/business/facebook-ireland-pays-tax-of-just-30m-on-126bn-816238.html|archive-date=12 June 2018|url-status=live|df=dmy-all}}</ref><ref name="google1"/><ref name="Bloomberg"/><ref name="apple">{{cite web|url=https://www.nytimes.com/2017/11/06/world/apple-taxes-jersey.html|title=After a Tax Crackdown, Apple Found a New Shelter for Its Profits|work=The New York Times|date=6 November 2017|access-date=17 May 2018|archive-url=https://web.archive.org/web/20171106192019/https://www.nytimes.com/2017/11/06/world/apple-taxes-jersey.html|archive-date=6 November 2017|url-status=live|df=dmy-all}}</ref>

{{quote| It is hard to imagine any business, under the current [Irish] IP regime, which could not generate substantial intangible assets under Irish GAAP that would be eligible for relief under [the Irish] capital allowances [for intangible assets scheme].&nbsp;... This puts the attractive 2.5% Irish IP-tax rate within reach of almost any global business that relocates to Ireland.|author=[[KPMG]], "Intellectual Property Tax", 4 December 2017<ref name="kpmg">{{Cite web|title=Intellectual Property Tax|url=https://www.kpmgpublications.ie/publication/intellectual-property-tax/|publisher=KPMG|date=4 December 2017|access-date=11 May 2018|archive-url=https://web.archive.org/web/20180502070128/https://www.kpmgpublications.ie/publication/intellectual-property-tax/|archive-date=2 May 2018|url-status=live|df=dmy-all}}</ref>}}

===Encoding IP–based BEPS tools===
{{see also|Ireland as a tax haven#Captured state}}
The creation of IP-based BEPS tools requires advanced legal and tax structuring capabilities, as well as a regulatory regime willing to carefully encode the complex legislation into the jurisdiction's statute books (note that BEPS tools bring increased risks of tax abuse by the domestic tax base in corporate tax haven's own jurisdiction, see {{slink||Irish Section 110 SPV}} for an example).<ref name="oxf">{{cite web| url=https://maketaxfair.net/decorrespondent-reveals-netherlands-became-tax-haven/| title=De Correspondent Reveals How the Netherlands Became Tax Haven| publisher=Oxfam |work=De Correspondent| date=May 2017| access-date=2018-05-21| archive-url=https://web.archive.org/web/20190430203208/https://maketaxfair.net/decorrespondent-reveals-netherlands-became-tax-haven/| archive-date=2019-04-30| url-status=live}}</ref><ref name="dut"/><ref name="dut5">{{Cite web|title=The Professionals: Dealing with the enablers of tax avoidance and financial crime|url=https://www.taxjustice.net/wp-content/uploads/2017/11/The-Enablers-of-Tax-Avoidance-TJN-Briefing.pdf|publisher=[[Tax Justice Network]]|date=November 2017|author=George Turner|access-date=2018-05-13|archive-url=https://web.archive.org/web/20180514141354/https://www.taxjustice.net/wp-content/uploads/2017/11/The-Enablers-of-Tax-Avoidance-TJN-Briefing.pdf|archive-date=2018-05-14|url-status=dead}}</ref>  Modern corporate tax havens, therefore, tend to have large global legal and accounting professional service firms in-situ (many classical tax havens lack this) who work with the government to build the legislation.<ref name="econ"/>  In this regard, havens are accused of being '''captured states''' by their professional services firms.<ref>{{cite news|url=https://www.theguardian.com/business/2011/jan/09/explainer-what-is-tax-haven|quote=This political capture produces one of the great offshore paradoxes: these zones of ultra-freedom are often highly repressive places, wary of scrutiny and intolerant of criticism.|title=Explainer: what is a tax haven? The most important feature of a secrecy jurisdiction is that local politics is captured by financial services interests|newspaper=The Guardian|date=9 January 2011}}</ref><ref>{{cite web|url=https://www.taxjustice.net/tag/captured-state/|title=Tax Justice Network: Captured State|publisher=Tax Justice Network|date=November 2015|access-date=2018-06-20|archive-url=https://web.archive.org/web/20180620154719/https://www.taxjustice.net/tag/captured-state/|archive-date=2018-06-20|url-status=dead}}</ref><ref name="amzn">{{cite news|title=Revealed: Project Goldcrest, how Amazon worked with the Luxembourg Government to avoid huge sumes in tax with IP|url=https://www.theguardian.com/technology/2016/feb/18/revealed-project-goldcrest-amazon-avoid-huge-sums-tax|newspaper=The Guardian|date=18 February 2016|access-date=21 May 2018|archive-url=https://web.archive.org/web/20190430202123/https://www.theguardian.com/technology/2016/feb/18/revealed-project-goldcrest-amazon-avoid-huge-sums-tax|archive-date=30 April 2019|url-status=live|df=dmy-all}}</ref><ref name="caid"/>  The close relationship between Ireland's [[International Financial Services Centre, Dublin|International Financial Services Centre]] professional service firms and the State in Ireland, is often described as the "[[Put on the green jersey|green jersey agenda]]".  The speed at which Ireland was able to replace its [[double Irish]] IP-based BEPS tool, is a noted example.<ref name="xx">{{cite news|title = Multinationals replacing 'Double Irish' with new tax avoidance scheme|url = https://www.independent.ie/business/irish/new-loophole-to-replace-the-double-irish-tax-strategy-30728951.html|newspaper = The Irish Independent|date = 9 November 2014|access-date = 13 May 2018|archive-url = https://web.archive.org/web/20180612142530/https://www.independent.ie/business/irish/new-loophole-to-replace-the-double-irish-tax-strategy-30728951.html|archive-date = 12 June 2018|url-status = live|df = dmy-all}}</ref><ref>{{cite news|title = Three years of silence on 'Single Malt' tax loophole raises questions|url = https://www.irishtimes.com/business/economy/three-years-of-silence-on-single-malt-tax-loophole-raises-questions-1.3293313?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Feconomy%2Fthree-years-of-silence-on-single-malt-tax-loophole-raises-questions-1.3293313|newspaper = The Irish Times|date = 16 November 2017|access-date = 13 May 2018|archive-url = https://web.archive.org/web/20180612135949/https://www.irishtimes.com/business/economy/three-years-of-silence-on-single-malt-tax-loophole-raises-questions-1.3293313?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Feconomy%2Fthree-years-of-silence-on-single-malt-tax-loophole-raises-questions-1.3293313|archive-date = 12 June 2018|url-status = live|df = dmy-all}}</ref><ref>{{Cite web|title = The Double Irish is dead, long live the 'knowledge-development box'|url = http://www.thejournal.ie/double-irish-dead-1723096-Oct2014/|publisher = journal.ie|date = 14 October 2014|access-date = 13 May 2018|archive-url = https://web.archive.org/web/20180514064844/http://www.thejournal.ie/double-irish-dead-1723096-Oct2014/|archive-date = 14 May 2018|url-status = live|df = dmy-all}}</ref>

{{quote| It was interesting that when [Member of European Parliament, MEP] Matt Carthy put that to the [Finance] Minister's predecessor ([[Michael Noonan (Fine Gael politician)|Michael Noonan]]), his response was that this was very unpatriotic and he should wear the "green jersey". That was the former Minister's response to the fact there is a major [[loophole]], whether intentional or unintentional, in our tax code that has allowed large companies to continue to use the double Irish [the "single malt"].|author=[[Pearse Doherty]] TD, [[Sinn Féin]] Deputy Leader, "[[Dáil Éireann]] Debate, 23 November 2017".<ref name="pearse">{{cite web|url=https://www.oireachtas.ie/en/debates/debate/dail/2017-11-23/18/|title=Dáil Éireann debate - Thursday, 23 Nov 2017|publisher=House of the Oireachtas|date=23 November 2017|access-date=4 June 2018|archive-url=https://web.archive.org/web/20190416113155/https://www.oireachtas.ie/en/debates/debate/dail/2017-11-23/18/|archive-date=16 April 2019|url-status=live|df=dmy-all}}</ref>}}

[[File:Enda Kenny Feargal O'Rourke Taken at IBEC 2014 Conference Flickr.jpg|thumb|260px|Irish [[Taoiseach]] [[Enda Kenny]] and PwC (Ireland) Managing Partner [[Feargal O'Rourke]]]]

It is considered that this type of legal and tax work is beyond the normal trust-structuring of [[offshore magic circle]]-type firms.<ref name="appley">{{cite news|title=Appleby, the offshore law firm with a record of compliance failures|url=https://www.irishtimes.com/business/appleby-the-offshore-law-firm-with-a-record-of-compliance-failures-1.3280860|newspaper=The Irish Times|date=November 2017|access-date=2018-05-13|archive-url=https://web.archive.org/web/20180829210210/https://www.irishtimes.com/business/appleby-the-offshore-law-firm-with-a-record-of-compliance-failures-1.3280860|archive-date=2018-08-29|url-status=live}}</ref>  This is substantive and complex legislation that needs to integrate with tax treaties that involve G20 jurisdictions, as well as advanced accounting concepts that will meet U.S. GAAP, SEC and IRS regulations (U.S. multinationals are leading users of IP-based BEPS tools).<ref>{{cite web|title=Tax haven networks and the role of the Big 4 accountancy firms|author1=Alex Cobham|author2=Chris Jones|author3=Yama Temouri|url=https://www.taxjustice.net/wp-content/uploads/2017/11/JWB-Big-4-Jones-Temouri-Cobham-2017.pdf|publisher=Journal of Business|quote=Our key findings demonstrate that there is a strong correlation and causal link between the size of an MNE's tax haven network and their use of the Big 4|date=2017|access-date=2018-06-28|archive-url=https://web.archive.org/web/20180628153026/https://www.taxjustice.net/wp-content/uploads/2017/11/JWB-Big-4-Jones-Temouri-Cobham-2017.pdf|archive-date=2018-06-28|url-status=dead}}</ref><ref name="ukipo">{{Cite web|title = Hidden Value: A study of the UK IP Valuation Market|url = https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/647086/IP-Valuation-Market.pdf|publisher = The UK Intellectual Property Office|date = February 2017|access-date = 2018-05-18|archive-url = https://web.archive.org/web/20180519041315/https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/647086/IP-Valuation-Market.pdf|archive-date = 2018-05-19|url-status = live}}</ref>  It is also why most modern corporate tax havens started as [[financial centres]], where a critical mass of advanced professional services firms develop around complex financial structuring (almost half of the main 10 corporate tax havens are in the 2017 top 10 [[Global Financial Centres Index]], see {{slink||Corporate tax haven lists}}).<ref name="dut3">{{Cite web|title=Richard Brooks on how accountants got away with murder in the U.K.|url=https://www.tcij.org/events/2018-01-16/logancij-richard-brooks-how-accountants-got-away-murder|author=Richard Brooks|publisher=[[Centre for Investigative Journalism]]|date=January 2018|access-date=2018-05-16|archive-url=https://web.archive.org/web/20180517005207/https://www.tcij.org/events/2018-01-16/logancij-richard-brooks-how-accountants-got-away-murder|archive-date=2018-05-17|url-status=dead|author-link=Richard Brooks (journalist)}}</ref><ref>{{cite news|title=Ireland actively facilitates firms in avoiding tax, report finds|url=https://www.irishtimes.com/business/economy/ireland-actively-facilitates-firms-in-avoiding-tax-report-finds-1.3314401|newspaper=The Irish Times|date=4 December 2017|access-date=16 May 2018|archive-url=https://web.archive.org/web/20180612141437/https://www.irishtimes.com/business/economy/ireland-actively-facilitates-firms-in-avoiding-tax-report-finds-1.3314401|archive-date=12 June 2018|url-status=live|df=dmy-all}}</ref><ref name="dut4">{{Cite web|title=How Ireland became an offshore financial centre|url=https://www.taxjustice.net/2015/11/11/how-ireland-became-an-offshore-financial-centre/|author=Nicholas Shaxson|publisher=[[Tax Justice Network]]|date=November 2015|access-date=2018-05-16|archive-url=https://web.archive.org/web/20180612141245/https://www.taxjustice.net/2015/11/11/how-ireland-became-an-offshore-financial-centre/|archive-date=2018-06-12|url-status=dead|author-link=Nicholas Shaxson}}</ref>

{{quote|"Why should Ireland be the policeman for the US?" he asks. "They can change the law like that!" He snaps his fingers. "I could draft a bill for them in an hour." "Under no circumstances is Ireland a tax haven. I'm a player in this game and we play by the rules." said PwC Ireland [[International Financial Services Centre, Dublin|International Financial Services Centre]] Managing Partner, [[Feargal O'Rourke]]|author=Jesse Drucker, Bloomberg, "Man Making Ireland Tax Avoidance Hub Proves Local Hero", 28 October 2013<ref name="for0"/>}}

{{quote|That is until the former venture-capital executive at ABN Amro Holding NV [[Joop Wijn]] becomes [Dutch] State Secretary of Economic Affairs in May 2003. It's not long before the Wall Street Journal reports about his tour of the US, during which he pitches the new Netherlands tax policy to dozens of American tax lawyers, accountants and corporate tax directors. In July 2005, he decides to abolish the provision that was meant to prevent tax dodging by American companies [the [[Dutch Sandwich]]], in order to meet criticism from tax consultants.|source=[[Oxfam]]/''[[De Correspondent]]'', "How the Netherlands became a Tax Haven", 31 May 2017.<ref name="oxf"/><ref name="dec">{{cite web| url=https://decorrespondent.nl/6825/zo-werd-nederland-het-grootste-belastingparadijs-voor-amerikaanse-multinationals/410600865675-af3e00af| title=Zo werd Nederland het grootste belastingparadijs voor Amerikaanse multinationals| work=De Correspondent| date=1 June 2017| access-date=21 May 2018| archive-url=https://web.archive.org/web/20190430203157/https://decorrespondent.nl/6825/zo-werd-nederland-het-grootste-belastingparadijs-voor-amerikaanse-multinationals/410600865675-af3e00af| archive-date=30 April 2019| url-status=live| df=dmy-all| last1=Frederik| first1=Jesse}}</ref>}}

The EU Commission has been trying to break the close relationship in the main EU corporate tax havens (i.e. Ireland, the Netherlands, Luxembourg, Malta and Cyprus; the main [[Conduit and Sink OFCs]] in the EU-28, post [[Brexit]]), between law and accounting advisory firms, and their regulatory authorities (including taxing and statistical authorities) from a number of approaches:
{{ordered list|type=lower-roman
| EU Commission State aid cases, such as the [[EU illegal State aid case against Apple in Ireland|€13 billion fine on Apple in Ireland]] for Irish taxes avoided, despite protests from the Irish Government and the Irish [[Revenue Commissioners]];<ref name="revv">{{cite news|url=https://www.irishtimes.com/business/technology/revenue-insists-it-collected-all-taxes-apple-owed-1.2772934?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ftechnology%2Frevenue-insists-it-collected-all-taxes-apple-owed-1.2772934|title=Irish Revenue insists it collected all taxes Apple owed in Ireland|newspaper=The Irish Times|date=30 August 2016|access-date=15 May 2018|archive-url=https://web.archive.org/web/20180427184357/https://www.irishtimes.com/business/technology/revenue-insists-it-collected-all-taxes-apple-owed-1.2772934?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ftechnology%2Frevenue-insists-it-collected-all-taxes-apple-owed-1.2772934|archive-date=27 April 2018|url-status=live|df=dmy-all}}</ref>
| EU Commission regulations on advisory firms, the most recent example being of the new disclosure rules on regarding "potentially aggressive" tax schemes from 2020 onwards.<ref>{{cite news|url=https://www.ft.com/content/d9289174-26c4-11e8-b27e-cc62a39d57a0|title=Advisers face tighter EU rules on tax schemes|newspaper=Financial Times|date=13 March 2018|access-date=13 May 2018|archive-url=https://web.archive.org/web/20180514065623/https://www.ft.com/content/d9289174-26c4-11e8-b27e-cc62a39d57a0|archive-date=14 May 2018|url-status=live|df=dmy-all}}</ref>
}}

===The "Knowledge Economy"===

Modern corporate havens present IP-based BEPS tools as "innovation economy", "new economy" or "knowledge economy" business activities<ref name="sing">{{Cite web|title=Singapore's government says it's not a tax haven, it's a value-adding IP hub|url=https://www.smh.com.au/business/singapores-government-says-its-not-a-tax-haven-its-a-valueadding-hub-20150430-1mwvdu.html|work=Sydney Morning Hearald|date=30 April 2015|access-date=21 May 2018|archive-url=https://web.archive.org/web/20180522041846/https://www.smh.com.au/business/singapores-government-says-its-not-a-tax-haven-its-a-valueadding-hub-20150430-1mwvdu.html|archive-date=22 May 2018|url-status=live|df=dmy-all}}</ref><ref>{{Cite web|title=Intellectual Property (IP) regime in Ireland|url=https://www.grantthornton.ie/globalassets/1.-member-firms/ireland/insights/factsheets/grant-thornton-intellectual-property-regime-in-ireland-2015-final.pdf|publisher=Grant Thornton|date=August 2015|access-date=2018-05-18|archive-url=https://web.archive.org/web/20180519204449/https://www.grantthornton.ie/globalassets/1.-member-firms/ireland/insights/factsheets/grant-thornton-intellectual-property-regime-in-ireland-2015-final.pdf|archive-date=2018-05-19|url-status=live}}</ref> (e.g. some use the term "[[Corporation tax in the Republic of Ireland#Knowledge Development Box|knowledge box]]" or "[[patent box]]" for a class of IP-based BEPS tools, such as in Ireland and in the U.K.), however, their development as a GAAP accounting entry, with few exceptions, is for the purposes of tax management.<ref>{{Cite web|url=http://www.ey.com/Publication/vwLUAssets/EY-global-taxation-of-intellectual-property-20160518.pdf/$FILE/EY-global-taxation-of-intellectual-property-20160518.pdf|title=Global Taxation of Intellectual Property|publisher=Ernst & Young|date=2017|access-date=2018-05-16|archive-url=https://web.archive.org/web/20171003100906/http://www.ey.com/Publication/vwLUAssets/EY-global-taxation-of-intellectual-property-20160518.pdf/$FILE/EY-global-taxation-of-intellectual-property-20160518.pdf|archive-date=2017-10-03|url-status=live}}</ref><ref name= "ucla"/> A lawyer said "Intellectual property (IP) has become the leading tax-avoidance vehicle."<ref name="ucla"/>

When Apple "onshored" $300 billion of IP to Ireland in 2015 ([[leprechaun economics]]),<ref name="cofr"/> the Irish [[Central Statistics Office (Ireland)|Central Statistics Office]] suppressed its regular data release to protect the identity of Apple (unverifiable for 3 years, until 2018),<ref name="cso">{{cite web|url=http://www.cso.ie/en/media/csoie/newsevents/documents/pr_GDPexplanatorynote.pdf|title=CSO Press Release|publisher=Central Statistics Office (Ireland)|date=12 July 2016|access-date=13 May 2018|archive-url=https://web.archive.org/web/20171122183804/http://cso.ie/en/media/csoie/newsevents/documents/pr_GDPexplanatorynote.pdf|archive-date=22 November 2017|url-status=live|df=dmy-all}}</ref> but then described the artificial 26.3% rise in Irish GDP as "meeting the challenges of a modern globalised economy". The behaviour of the CSO was described as [[Put on the green jersey|putting on the "green jersey"]].<ref>{{cite web|url=http://www.cso.ie/en/media/csoie/newsevents/documents/seminars/globalisationinireland/Globalisation_-_Meeting_the_Measurement_Challenges_-_Michael_Connolly,_CSO.pdf|title=Challenges of Measuring the Modern Global Econpomy|publisher=Central Statistics Office (Ireland)|date=2017|access-date=2018-05-13|archive-url=https://web.archive.org/web/20180514064935/http://www.cso.ie/en/media/csoie/newsevents/documents/seminars/globalisationinireland/Globalisation_-_Meeting_the_Measurement_Challenges_-_Michael_Connolly,_CSO.pdf|archive-date=2018-05-14|url-status=live}}</ref>  Leprechaun economics an example of how Ireland was able to meet with the OECD's transparency requirements (and score well in the [[Financial Secrecy Index]]), and still hide the largest [[BEPS]] action in history.{{cn|date=January 2021}}

As noted earlier ({{slink||U.K. transformation}}), the U.K. has a Minister for Intellectual Property and an [[Intellectual Property Office (United Kingdom)|Intellectual Property Office]],<ref name="ukipo"/> as does Singapore ([[Intellectual Property Office of Singapore]]).  The top 10 list of the 2018 [[Global Intellectual Property Center]] IP Index, the leaders in IP management, features the five largest modern corporate tax havens: United Kingdom (#2), Ireland (#6), the Netherlands (#7), Singapore (#9) and Switzerland (#10).<ref name="gipc">{{cite web|url=http://www.theglobalipcenter.com/wp-content/uploads/2018/02/GIPC_IP_Index_2018.pdf|page=6|title=Global IP Index|publisher=GIPC|date=February 2018|access-date=2018-05-20|archive-url=https://web.archive.org/web/20180521021413/http://www.theglobalipcenter.com/wp-content/uploads/2018/02/GIPC_IP_Index_2018.pdf|archive-date=2018-05-21|url-status=dead}}</ref>  This is despite the fact that patent-protection has traditionally been synonymous with the largest, and longest established, legal jurisdictions (i.e. mainly older  G7-type countries).

===German "Royalty Barrier" failure===

In June 2017, the German Federal Council approved a new law called an IP "Royalty Barrier" (Lizenzschranke) that restricts the ability of corporates to deduct intergroup cross-border IP charges against German taxation (and also encourage corporates to allocate more employees to Germany to maximise German tax-relief).  The law also enforces a minum "effective" 25% tax rate on IP.<ref>Accordingly, as of 1 January 2018, German-based licensees will be unable to deduct royalties paid to affiliates to the extent that the licensor's royalty income is not subject to the regular tax regime (e.g. IP box regime) and taxed at a low rate within the meaning of the royalty barrier (effective tax rate of < 25 %).{{cite web|date=2 July 2017|title=Federal Council Approves New Law Limiting Royalty Deductions|url=https://www.bakermckenzie.com/en/insight/publications/2017/07/federal-council-approves-royalty-deductions|url-status=dead|archive-url=https://web.archive.org/web/20181214064403/https://www.bakermckenzie.com/en/insight/publications/2017/07/federal-council-approves-royalty-deductions|archive-date=14 December 2018|access-date=30 May 2018|publisher=[[Baker McKenzie]]|df=dmy-all}}</ref>  While there was initial concern amongst global corporate tax advisors (who encode the IP legislation) that a "Royalty Barrier" was the "beginning of the end" for IP-based BEPS tools,<ref>{{cite news|url=https://tax.thomsonreuters.com/blog/18th-annual-nyukpmg-tax-lecture-addresses-international-provisions-of-tcja/|title=18th Annual NYU/KPMG Tax Lecture Addresses International Provisions of TCJA|work=Reuters|date=13 May 2018}}{{Dead link|date=November 2019 |bot=InternetArchiveBot |fix-attempted=yes }}</ref> the final law was instead a boost for modern corporate tax havens, whose OECD-compliant, and more carefully encoded and embedded IP tax regimes, are effectively exempted.  More traditional corporate tax havens, which do not always have the level of sophistication and skill in encoding IP BEPS tools into their tax regimes, will fall further behind.

The German "Royalty Barrier" law exempts IP charged from locations which have:
{{ordered list|type=lower-roman
| OECD-nexus compliant "knowledge box" BEPS tools.  Ireland was the first corporate tax haven to introduce this in 2015,<ref>{{cite web|url=https://www.independent.ie/business/budget/budget-2016-do-you-know-what-the-knowledge-box-is-31576795.html|title=Do you know what the Knowledge Box is?|work=Irish Independent|date=9 October 2015|access-date=30 May 2018|archive-url=https://web.archive.org/web/20180615005005/https://www.independent.ie/business/budget/budget-2016-do-you-know-what-the-knowledge-box-is-31576795.html|archive-date=15 June 2018|url-status=live|df=dmy-all}}</ref> and the others are following Ireland's lead.<ref>A patent box of this kind is likely to be introduced in Switzerland in the context of tax package 17{{cite web|url=https://news.pwc.ch/34853/royalty-restrictions-germany/|title="Royalty Restrictions" in Germany|publisher=PwC Stiwzerland|date=11 July 2017|access-date=30 May 2018|archive-url=https://web.archive.org/web/20180218125951/https://news.pwc.ch/34853/royalty-restrictions-germany/|archive-date=18 February 2018|url-status=dead|df=dmy-all}}</ref>
| Tax regimes where there is no "preferential treatment" of IP.  Modern corporate tax havens apply the full "headline" rate to all IP, but then achieve lower "effective" rates via BEPS tools.
}}

One of Ireland's main tax law firms, [[Matheson (law firm)|Matheson]], whose clients include some of the largest U.S. multinationals in Ireland,<ref>At least 125 major U.S. companies have registered several hundred subsidiaries or investment funds at 70 Sir John Rogerson's Quay, a seven-story building in Dublin's docklands, according to a review of government and corporate records by The Wall Street Journal.  The common thread is the building's primary resident: Matheson, an Irish law firm that specializes in ways companies can use Irish tax law.{{cite news|url=https://www.wsj.com/articles/dublin-moves-to-block-controversial-tax-gambit-1381890312|title=Dublin Moves to Block Controversial Tax Gambit|newspaper=Wall Street Journal|date=15 October 2013|access-date=30 May 2018|archive-url=https://web.archive.org/web/20180616203914/https://www.wsj.com/articles/dublin-moves-to-block-controversial-tax-gambit-1381890312|archive-date=16 June 2018|url-status=live|df=dmy-all}}</ref> issued a note to its clients confirming that the new German "Royalty Barrier" will have little effect on their Irish IP-based BEPS structures - despite them being the primary target of the law.<ref>{{cite web|url=https://mnetax.com/germany-multinationals-faced-increasing-tax-compliance-obligations-2017-uncertainty-lies-ahead-25330|title=Germany: multinationals faced increasing tax compliance obligations in 2017, uncertainty lies ahead|publisher=MNE Tax|date=27 December 2017|access-date=30 May 2018|archive-url=https://web.archive.org/web/20181214083242/https://mnetax.com/germany-multinationals-faced-increasing-tax-compliance-obligations-2017-uncertainty-lies-ahead-25330|archive-date=14 December 2018|url-status=live|df=dmy-all}}</ref>  In fact, Matheson notes that that new law will further highlight Ireland's "robust solution".<ref name="math">{{cite web|url=http://www.mondaq.com/germany/x/644192/tax+authorities/Breaking+Down+The+German+Royalty+Barrier+A+View+From+Ireland|title=Germany: Breaking Down The German Royalty Barrier - A View From Ireland|publisher=Matheson|date=8 November 2017|access-date=30 May 2018|archive-url=https://web.archive.org/web/20180503182248/http://www.mondaq.com/germany/x/644192/tax+authorities/Breaking+Down+The+German+Royalty+Barrier+A+View+From+Ireland|archive-date=3 May 2018|url-status=live|df=dmy-all}}</ref>

{{quote|However, given the nature of the Irish tax regime, the [German] royalty barrier should not impact royalties paid to a principal licensor resident in Ireland.<br/>Ireland's BEPS-compliant tax regime offers taxpayers a competitive and robust solution in the context of such unilateral initiatives.|source=[[Matheson (law firm)|Matheson]], "Germany: Breaking Down The German Royalty Barrier - A View From Ireland", 8 November 2017<ref name="math"/>}}

The failure of the German "Royalty Barrier" approach is a familiar route for systems that attempt to curb corporate tax havens via an OECD-compliance type approach (see {{slink||Failure of OECD BEPS Project}}), which is what modern corporate tax havens are distinctive in maintaining.  It contrasts with the U.S. [[Tax Cuts and Jobs Act of 2017]] (see {{slink||Failure of OECD BEPS Project}}), which ignores whether a jurisdiction is OECD compliant (or not), and instead focuses solely on "effective taxes paid", as its metric.  Had the German "Royalty Barrier" taken the U.S. approach, it would have been more onerous for havens.  Reasons for why the barrier was designed to fail is discussed in [[Ireland as a tax haven#Political compromises|complex agendas]].

===IP and post-tax margins===

The sectors most associated with IP (e.g., technology and life sciences) are generally some of the most profitable corporate sectors in the world.  By using IP-based BEPS tools, these profitable sectors have become even more profitable on an after-tax basis by artificially suppressing profitability in higher-tax jurisdictions, and profit shifting to low-tax locations.<ref name="zuc"/>

For example, Google Germany should be even more profitable than the already very profitable Google U.S.  This is because the marginal additional costs for firms like Google U.S. of expanding into Germany are very low (the core technology platform has been built).  In practice, however, Google Germany is actually unprofitable (for tax purposes), as it pays intergroup IP charges back to Google Ireland, who reroutes them to Google Bermuda, who is extremely profitable (more so than Google U.S.).<ref name="google1"/><ref>{{cite news|url=https://www.theguardian.com/commentisfree/2017/dec/11/tech-giants-taxes-apple-paradise-corporation-avoidance|title=The tech giants will never pay their fair share of taxes – unless we make them|newspaper=The Guardian|date=11 December 2017|access-date=21 May 2018|archive-url=https://web.archive.org/web/20180522041315/https://www.theguardian.com/commentisfree/2017/dec/11/tech-giants-taxes-apple-paradise-corporation-avoidance|archive-date=22 May 2018|url-status=live|df=dmy-all}}</ref>  These intergroup IP charges (i.e. the IP-based BEPS tools), are artificial internal constructs.

Commentators have linked the cyclical peak in U.S. corporate profit margins, with the enhanced after-tax profitability of the biggest U.S. technology firms.<ref>{{cite web|url=https://gabriel-zucman.eu/files/Zucman2014JEP.pdf|title=Tracking Personal Wealth and Corporate Profits|publisher=Journal of Economic Perspectives|date=2014|access-date=2018-05-21|archive-url=https://web.archive.org/web/20180412225500/http://gabriel-zucman.eu/files/Zucman2014JEP.pdf|archive-date=2018-04-12|url-status=live}}</ref><ref>{{cite web|url=https://www.gsb.stanford.edu/insights/why-corporate-tax-shifting-bigger-you-think|title=Why Corporate Tax Avoidance Is Bigger Than You Think|publisher=Stanford Business|date=24 May 2016|access-date=21 May 2018|archive-url=https://web.archive.org/web/20180512025739/https://www.gsb.stanford.edu/insights/why-corporate-tax-shifting-bigger-you-think|archive-date=12 May 2018|url-status=live|df=dmy-all}}</ref><ref>{{cite web|url=https://www.marketwatch.com/story/ibm-earnings-beat-is-a-product-of-tax-avoidance-and-its-nothing-new-2017-10-18|title=IBM earnings beat is a product of tax avoidance, and it's nothing new|publisher=Marketwatch|date=October 2017|access-date=2018-05-21|archive-url=https://web.archive.org/web/20180522041428/https://www.marketwatch.com/story/ibm-earnings-beat-is-a-product-of-tax-avoidance-and-its-nothing-new-2017-10-18|archive-date=2018-05-22|url-status=live}}</ref>

For example, the definitions of IP in corporate tax havens such as Ireland has been broadened to include "theoretical assets", such as types of general rights, general know-how, general goodwill, and the right to use software.<ref name="acox">{{Cite web|title = Ireland as a Location for Your Intellectual Property Trading Company|url = http://www.arthurcox.com/wp-content/uploads/2015/04/Arthur-Cox-Ireland-as-a-location-for-your-IP-Trading-Company-April-20152.pdf|publisher = Arthur Cox Law|date = April 2015|access-date = 2018-05-13|archive-url = https://web.archive.org/web/20180323092245/http://www.arthurcox.com/wp-content/uploads/2015/04/Arthur-Cox-Ireland-as-a-location-for-your-IP-Trading-Company-April-20152.pdf|archive-date = 2018-03-23|url-status = dead}}</ref>  Ireland's IP regime  includes types of "internally developed" intangible assets and intangible assets purchased from "connected parties".  The real control in Ireland is that the IP assets must be acceptable under GAAP (older 2004 Irish GAAP is accepted), and thus auditable by an Irish [[International Financial Services Centre, Dublin|International Financial Services Centre]] accounting firm.<ref name="rev1"/><ref>{{Cite web|title=Capital Allowances for Intangible Assets "Specified Assets"|url=https://www.revenue.ie/en/companies-and-charities/reliefs-and-exemptions/capital-allowances-for-intangible-assets/index.aspx|publisher=Irish Revenue|date=September 2017|access-date=2018-05-27|archive-url=https://web.archive.org/web/20180324101652/https://www.revenue.ie/en/companies-and-charities/reliefs-and-exemptions/capital-allowances-for-intangible-assets/index.aspx|archive-date=2018-03-24|url-status=dead}}</ref>

A broadening range of multinationals are abusing IP accounting to increase after-tax margins, via intergroup charge-outs of artificial IP assets for BEPS purposes, including:
{{ordered list|type=lower-roman
|Amazon, a retailer, used it in Luxembourg.<ref name="amzn"/>
|Starbucks, a coffee chain, also used it in Luxembourg.<ref>{{cite news|url=https://uk.reuters.com/article/us-britain-starbucks-tax/special-report-how-starbucks-avoids-uk-taxes-idUSBRE89E0EX20121015|title=Special Report: How Starbucks avoids UK taxes|newspaper=The Guardian|date=15 October 2012|access-date=27 May 2018|archive-url=https://web.archive.org/web/20180527201658/https://uk.reuters.com/article/us-britain-starbucks-tax/special-report-how-starbucks-avoids-uk-taxes-idUSBRE89E0EX20121015|archive-date=27 May 2018|url-status=dead|df=dmy-all}}</ref>
|Apple, a phone manufacturer, used it in Ireland.<ref name="rotten apple">{{Cite journal|title=The Rotten Apple: Tax Avoidance in Ireland|journal=The International Trade Journal|volume=32|pages=150–161|date=2 August 2017|doi=10.1080/08853908.2017.1356250|last1=Barrera|first1=Rita|last2=Bustamante|first2=Jessica|s2cid=158385468}}</ref>
|
}}

It has been noted that IP-based BEPS tools such as the "[[patent box]]" can be structured to create negative rates of taxation for IP-heavy corporates.<ref>{{cite web| url=http://ftp.zew.de/pub/zew-docs/dp/dp13070.pdf| title=Intellectual Property Box Regimes: Effective Tax Rates and Tax Policy Considerations| publisher=ZEW Centre for European Economic Research| date=2014| access-date=2018-05-22| archive-url=https://web.archive.org/web/20160304113437/http://ftp.zew.de/pub/zew-docs/dp/dp13070.pdf| archive-date=2016-03-04| url-status=dead}}</ref>