Cus­tomer-list tax pro­pos­als may lure multi­na­tion­als

The Irish Times - Friday - The Ticket - - BUSINESS NEWS - TOM LYONS and GAVIN SHERI­DAN

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.”

‘In­tel­lec­tu­al­prop­erty’

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

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