As we all know any development needs investments. And Ireland got it. Simple as that? Not really. Imagine you need to attract clients to your online store. You have to try lots of techniques to find the one that works for you. It takes your time, money and efforts…
The same processes are applicable to a country but the scale is much larger. And Ireland succeeded in finding a way out. Attracting foreign investments by lowering corporate rates was the solution. Irish 12,5% as compared to American 40% makes a significant difference for US business giants. That’s exactly the reason why 90% of US Fortune 500 decided to open their offices in Ireland.
While most of the economists are familiar with “Double Irish and a Dutch Sandwich” for ordinary people this term doesn’t ring a bell. As you can guess it’s not a name of a dish, in fact it’s one of the tax avoiding strategies. The scheme involves 3 companies that form so called sandwich. One of them, being an offshore company registered in Ireland, gets intellectual property rights from a company willing to avoid taxing.
Then the profits go to a Dutch company and in the end the money are transferred to the second Irish company with a headquarter in Bermuda, Cayman Islands or any other tax haven. Hence, Eire appears to be the next tax haven for such companies as Google, Facebook, Pfizer, IBM, General Electric and many others. One more thing that lets companies reduce costs is outsourcing to the countries with lower tax rates. The logics is pretty clear - instead of employing one local specialist company can hire two workers due to an outsourcing company that provides them with a work place and all the necessary equipment.
Look through these two strategies big businesses use and check the infographic for more details.
Infographic by: qubit-labs.com