Dropbox confirms Irish tax dodge
Dropbox has become the latest technology firm to skirt local tax rates after confirming it will bill its customers from a company set up in Ireland.
In an email sent to users on the weekend, Dropbox confirmed it would bill its international users using the entity Dropbox Ireland from June.
“If you’re a user living outside of North America (US, Canada, Mexico), we’re updating our Terms of Service to better serve you and the growing number of Dropbox users around the world,” the email said.
“These changes include the fact that we’ll be providing our services (including Dropbox, Dropbox for Business, Carousel and Mailbox) to you via Dropbox Ireland starting on June 1, 2015. Please note that none of our services or features are changing as a result.”
There is no detail about Dropbox’s tax arrangements, but companies conducting their services from Ireland enjoy a low 12.5 per cent corporate tax rate and have shifted profits from their home entity to Ireland to reduce their tax bill.
Last year the Irish government said that varying the 12.5 per cent rate would “never be up for discussion”.
Until recently companies could set up a mirror company in another tax haven, such as the Cayman Islands, give it ownership of their intellectual property, and bill their Irish entity for its use to offset their income, thereby further reducing their Irish tax liability.
Ireland has announced it is abolishing this particular manoeuvre, known as the “Double Irish”, for new companies, but established companies have the benefit until 2020.
In January, Dropbox was reported to be opening an office in Dublin with 40 employees, which would give it tax resi¬dency.
Dropbox also has announced offices in London and Paris, but its email says that for users outside North America, its services will be regarded as coming from Ireland, not its other European offices.
An ongoing European Commission investigation has been looking at whether Ireland’s tax policy toward multinationals constitutes illegal state support.
As a result, Apple last week warned that it may need to pay a “material” amount of back taxes to Ireland.
US President Barack Obama earlier this year proposed that US companies pay a minimum 19 per cent tax on their foreign earnings and a 14 per cent tax on stockpiled profits.
However, there have also been reports of the Obama ¬Administration not wanting countries such as Australia to impose a “Google tax” on US multinationals that are also seen to have reduced their tax liabilities in other countries.
Big computer corporations such as Google and Microsoft have been channelling Australian revenue through entities in Singapore.
British Prime Minister David Cameron and Australian Treasurer Joe Hockey have both ¬suggested imposing a tax independently of any G8 plan to tackle tax avoidance.
The Australian Taxation Office has proposed that large companies be required to disclose moneys such as royalties paid to offshore entities. The Senate’s economics references committee has been investigating.