Customer-list tax proposals may lure multinationals
A measure in the Finance Bill will greatly help multinationals such as Twitter, LinkedIn and Google with large amounts of valuable data about their customers to greatly reduce their tax bills.
The Finance Bill published yesterday said the Government planned to amend the definition of “specified intangible assets” that can avail of the Republic’s attractive intellectual property tax rules to “explicitly include customer lists”.
Tax experts said the move would go some way to offset the closure of the so-called “double Irish” tax loophole for multinationals and would encourage them to bring intellectual property associated with information about their customers to Ireland.
Dr Constantin Gurdgiev, a lecturer in finance in Trinity and the Smurfit School of Business at UCD, said: “Customer lists hold significant value for companies that have their own distribution channels (eg banks and media companies) as opposed to companies that supply goods and services into a retail chain (eg food producers) via intermediaries.
“Thus, inclusion of customer lists in the ‘knowledge development box’ [part of the budget] creates a significant opportunity for tax optimisation for a select group of larger companies operating their own retail or business-to-consumer platforms, such as direct-to-user social media and ICT services firms, including Google, Apple, Facebook, Twitter etc, as well as financial services firms.”
Joe Tynan, a partner with PwC, said: “Ireland manages EMEA [Europe, Middle East and Africa] customers for many multinationals. There is a lot of valuable intellectual property in customer lists.”
Mr Tynan said the intellectu- al property around these lists was in many cases held in offshore locations where the companies involved paid no tax but large multinationals were under increasing pressure to move out of these jurisdictions.
“Bringing that value onshore into Ireland will help make all these companies more sticky in Ireland and likely to base more of their operations here,” he added. “The Government promised to deliver a robustly competitive ‘knowledge development box’ arrangement, benchmarked against similar structures in the UK, Luxem- bourg, Belgium and the Netherlands,” Dr Gurdgiev said.
He said that the inclusion of “customer lists” did not deliver a “singular competitive advantage for the new Irish regime, but it shows the Irish Government is acutely aware of the need to introduce new means for tax optimisation targeted toward ICT services multinationals operating from Ireland”.
Mr Gurdgiev said the “real question” was how customer lists were valued as there was “no uniquely defined model” for assigning value. It is difficult to see how suchas- sets can be robustly valued and these valuations can be monitored and enforced by the authorities ... The ‘knowledge development box’ is starting to look more and more like a ‘black box’.”
Constantin Gurdgiev: customer lists hold significant value for certain companies