Mr Bayrou, candidate to be french president, is promoting 0% of tax on patent royalties in order to promote small inventors and innovation. There are several problems with that kind of policy, and one of it is called fiscal evasion.
Recently, an american journalist, Lucy Komisar, has published an article in the NYTimes on "Corporate Profits Take an Offshore Vacation" mentioning that US companies are using proxy companies in Ireland in order to escape the US fiscal authority. The scenario is the following:
- the Irish company has a patent to which the mother US company pays patent royalties;
- the Irish company does not have to pay taxes on those patent royalties in Ireland;
- the US company thus manages to save a substancial amount of US taxes.
The IrishTimes reported in 2005 that "Google saves millions in taxes thanks to its Irish operation":
Recent filings in the Companies Registration Office in Dublin show that Google has two Irish-based operations, one of which, Google Ireland Holdings Ltd, received $388.55 million (€330.5 million) in royalty payments in 2004, its first year in operation.
Royalty payments for intellectual property developed in Ireland are not subject to Irish tax, so the multinational may end up paying relatively little in Irish tax on this income.
The royalty payments were made by another part of the Google company structure that is involved in the sale of advertisements on the internet, the firm's main income source. This company, Google Ireland Ltd, is the Dublin-based operating firm for Google's activities in Europe, the Middle East and Africa.
See also the FFII page on Ireland as a Tax Haven for US ICT companies and patent businesses.