Editing Corporate haven (section)

===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>}}