Tax avoidance: The

Irish inversion
By Vanessa Houlder, Vincent Boland and James Politi

US companies are shifting their headquarters abroad to protect

growing overseas cash piles

he global headquarters of Endo International is so new that, apart from a few

desktop computers, the most visible purchase to date is the Nespresso machine in the
kitchen. Located in the basement of a Georgian house in central Dublin, the
company, which makes branded and generic medicines, does not even have a brass
plate on the door.
We are just getting started, says Blaine Davis, senior vice-president for corporate
affairs, who will run the office with a skeleton staff on behalf of a group with annual
sales of $2.6bn.

Endos arrival in Fitzwilliam Square is part of one of the biggest trends in global
mergers and acquisitions a practice known as inversion. By moving their
headquarters to another country, US companies are able to slash their tax rate.

This weeks announcement by Pfizer that it wanted to take over AstraZeneca in a

60bn deal that would move its tax domicile to the UK is the latest and largest
example of a pattern which is sweeping the pharmaceutical sector and beyond.
Dozens of US multinationals have moved their tax base outside the country to escape
the high tax rate, global reach and perverse incentives of a system that has
encouraged companies to build up a $1tn cash pile trapped overseas.
Yet inversions are increasingly contentious, focusing attention on corporate ploys
when governments around the world are intent on cracking down on tax avoidance.
For the US, the trend threatens billion of dollars of tax revenues and raises
significant policy concerns, in the words of the US Treasury. In March, President
Barack Obama announced plans to slam the door on inversions by the end of this
year, a move the US Treasury said would raise $17bn over the coming decade.
Inversions also shine a spotlight on the policies of the countries being chosen as the
new tax base for businesses wanting to cut their tax bills. The UK led calls for an
international crackdown on avoidance. But a series of business-friendly reforms in
the UK have made it a desirable tax base for companies that are headquartered
elsewhere. This is politically sensitive, as suggested by the delay in winning tax
approvals reported by Omnicom and Publicis last week, threatening the $35bn
merger to create the worlds largest advertising company.
The popularity of inversions is starting to worry the Irish authorities. They fret that
the countrys 12.5 per cent corporate tax rate a pillar of Irish development policy
is being used for purposes for which it was not intended. That undermines Irelands
insistence that it is not a tax haven, making it more difficult to defend its system in
an international climate that is turning sharply against tax avoidance.
Ireland began to adopt an active tax policy to lure foreign direct investment in the
1950s. In 1980 it introduced a 10 per cent tax on manufacturing, later changed to an
across-the-board 12.5 per cent. This incentive, together with the flexibility of the tax
regime, helped attract many pharmaceutical companies. Nine of the top 10 global
pharmaceutical companies now have operations in Ireland as well as leading
technology companies including Google, Facebook and Twitter.
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Apart from tax, Ireland appeals as a hub for pharma and tech companies because
many of their peers are already present. Its legal infrastructure is similar to the UK
and the US, and it turned out graduates in record numbers in the 1980s and 1990s.
Endo is one of the latest companies to be drawn to Ireland. Six months ago the
Pennsylvania-based group, which employs 4,100 people, had no connection with
Ireland. Now its global headquarters has arrived in Dublin following its purchase last
November of Paladin Labs, a Canadian drugmaker with equally tentative links to
Ireland.
Besides Endo, recent similar inversion examples include Perrigo, Horizon Pharma,
Actavis, Alkermes, Jazz Pharmaceuticals, Covidien and Forest Laboratories.
...

For shareholders, the process is attractive. Cian McCourt, a partner and head of the
New York office of A & L Goodbody, an Irish law firm, says inversions provide a real
boost to earnings per share, retained earnings and cash flow. That has a big bearing
on acquisition premiums. It is bridging valuation gaps for sellers and sometimes
exceeding sellers expectations, he says.
Endo, for example, is eyeing $75m of annual after-tax savings from operational and
tax synergies arising from its rebirth as an Irish company.

One driver of the deals is the trapped overseas cash of US multinationals, which
makes foreign acquisitions attractive even if they do not subsequently relocate their
businesses abroad. General Electrics cash hoard of $57bn is one reason behind its
bid to acquire Alstom of France.
But inversions offer additional advantages by making it easier for companies to
escape US tax on their offshore intellectual property, cutting US tax bills by loading
their domestic businesses with debt, and making low foreign tax rates permanent.
They halt the build-up of offshore cash. The cash pile is larger for healthcare
companies than any sector except technology, accounting for 15 per cent of the
$947bn total, according to a recent report by Moodys.
Irelands finance ministry argues that many of the factors driving the trend of
inversions are push rather than pull that the high rate of US tax rather than the
low rate of Irish tax is behind the trend of US companies inverting into Ireland.
Many US observers agree. Max Baucus, who chaired the Senate tax committee and is
now ambassador to China, said last year: It would be easy for us to attack these
companies by calling them immoral and unpatriotic. But its more constructive to
step back and ask, whats motivating these companies to move their headquarters
abroad?
Both Mr Obama and congressional Republicans have proposed cutting the US
corporate tax rate from 35 per cent to 28 per cent and 25 per cent respectively, and
changing the tax treatment of foreign income to cut gaming by multinationals.
But the bill has stalled because the White House and Congress disagree over the
details. There is little political appetite for slashing business tax breaks and
deductions that would help pay for a lower tax rate. Moreover, any reform would
likely have to include changing the rates paid by individuals and small businesses as

well, adding to the political challenge. The chances of tax reform advancing this year
are slim to none, and it may be very difficult to reach a deal during Mr Obamas
administration.

Still, Mr Obama and other lawmakers have tried to lay down some markers,
including high-profile hearings in the Senate lambasting companies such as Apple
and Caterpillar for tax avoidance strategies. Mr Obama sought to make it much more
difficult to execute deals involving inversions by raising the threshold of shares
needed to be transferred to foreign owners from 20 per cent to 50 per cent when a
company moves abroad.
That measure is unlikely to pass soon, but even so William McBride, chief economist
of the Tax Foundation, a think-tank in Washington, described it as a Berlin Wall
technique which would do nothing to solve the fundamental problem of an
uncompetitive tax system.
He predicted that big companies could end up spinning off divisions to get around
anti-inversion rules which stop the largest companies from moving. It is very likely
we will see an acceleration of inversions.
Irelands finance ministry is becoming worried about the growing criticism. In
relation to transactions that may not involve real substance in terms of jobs and
investment in the Irish economy, the [ministry] has concerns and is examining ways
to discourage such transactions without damaging legitimate business activity, says
a ministry spokesman.
Barry OLeary, chief executive of IDA Ireland, the inward investment agency, says:
Transactions that rely solely on tax benefits, with no substance behind them, will
not bring economic benefits to Ireland.
Deciding which transactions have substance could prove tricky, however. Mr Davis
says Endo could have re-domiciled to any country because of the way it structured its
purchase of Paladin. We chose Ireland because a lot of pharma companies are based
here, there is a big talent pool, and the skill set is very strong.
The demand for substance also raises tricky questions about how much of the Irish
pharma industrys profits are actually earned by its Irish operations. The industry

has an undeniably big presence in Ireland. It pays more than 3bn of taxes in the
country each year and has invested over 7bn in the past decade, according to the
Irish Pharmaceutical Healthcare Association. But its profitability is out of proportion
to its scale, a sign of tax planning that has allowed companies to route profits to tax
havens such as Bermuda.
The sector employs less than 2 per cent of Irelands workforce, yet data published by
the US commerce department suggest that Ireland generated profits in 2011 of
$21.8bn for US chemical and pharma companies. That is a third of all foreign profits
for US companies in the sector, and about 40 per cent of all Irish corporate profits.
...
US pharma companies paid a tax rate of less than 6 per cent on over $100bn of Irish
profits over the past decade, according to an FT analysis. It showed that the Irish
subsidiaries of US chemical companies have cut their tax rates far below the
statutory rate, from an average of 8 per cent in the seven years to 2004 to 4.5 per
cent in the following seven years.
The Irish government disputes the relevance of the data. But it faces criticism for
facilitating the tax planning that results in very low tax rates for Irish subsidiaries.
One tactic is the so-called double Irish structure that exploits different definitions
of residence in the US and Irish tax codes to move profits from Ireland to Bermuda.
This structure allows royalties paid by the Irish manufacturing subsidiary to end up
in a company that is not taxable under either Irish or US rules.
Tax arrangements of this sort are powerful attractions for US suitors. But they could
be under threat. The Paris-based Organisation for Economic Co-operation and
Development is considering an overhaul of international tax rules to boost the taxing
powers of countries where consumers are based. That would reduce Irelands
lucrative role as the cornerstone of multinationals tax structures.
In the US, despite the political deadlock over tax reform, bipartisan support is
growing for moves to tax offshore intellectual property, which could erode Irelands
appeal to US multinationals.
Endos Mr Davis remains untroubled. Were looking to build leadership positions
here, he says over a coffee, stressing that the company will be relocating key
personnel in research and development, finance, supply chain management, and
support services. Looking around his cramped new global headquarters in Dublin, he
adds: Fitzwilliam Square is just our temporary space...But we are [in Ireland] to
stay. This is now our global headquarters.
------------------------------------------Corporate tax rates: Flower pots and double Irishes
Call it the ceramic flower pot dilemma. The headline rate of Irish corporation tax is
12.5 per cent, and calculations by PwC and the World Bank show the effective rate of
tax levied on foreign company profits in Ireland is about 11.9 per cent.

Yet a recent study by Jim Stewart, associate professor of finance at Trinity College
Dublin, shows some US multinational subsidiaries operating in Ireland paid an
effective rate of tax of just 2.2 per cent on their Irish activities in 2011.
Prof Stewart argued that, in order for PwC and the World Bank to compare tax rates
across the world, they created a hypothetical company that does not engage in tax
planning, and was small, domestically owned, has no imports or exports and
produces and sells ceramic flower pots. Such a company bears no resemblance to
the US multinationals that operate in Ireland, ranging from big pharma (Pfizer,
Alexion) to big tech (Intel, Google, Apple, Facebook). One of the big attractions is
Irelands headline 12.5 per cent corporation tax rate. As recent examples show, that
provides a basis for further cutting their global tax bills.
Many US technology companies have taken advantage of a contentious loophole in
Irish corporate law, known as the double Irish, which allowed them to be registered
in Ireland without being tax-resident there. For example, Google holds its intellectual
property in an Irish company that is tax-resident in Bermuda, which has a zero rate
of corporate tax.
However, Ireland is starting to yield to pressure to close especially egregious
corporate tax loopholes. In the last budget, the government moved to ensure that
companies incorporated in Ireland that were in effect stateless for tax purposes had
to declare a tax residency in another jurisdiction or become liable for the Irish 12.5
per cent rate.
In the global debate about corporate tax avoidance, Ireland is anxious to retain its
competitive fiscal regime while not being branded as a tax haven. As Prof Stewart
says: Ireland is not a tax haven for individuals. But it does have the features of a
corporate tax haven a low nominal tax rate, light-touch regulation and a very
responsive state that is highly sensitive to international tax law.

Menelusur Pajak atas Transaksi e-Commerce

Kamis, 23 April 2015 - 15:03

Oleh Buyung Muniriyanto, Pegawai Direktorat Jenderal Pajak

Indonesia merupakan salah satu negara dengan pertumbuhan ekonomi tertinggi di dunia dengan pertumbuhan
kelas menengah terbesar di Asia Tenggara. Kondisi ini membuat Indonesia menjadi lahan subur bagi pemain
bisnis, terutama bisnis retail.
Jumlah penduduk besar (250 juta jiwa) dengan pendapatan perkapita 3.475 USD merupakan pasar yang gemuk
bagi pelaku bisnis ini. Ditambah lagi kondisi lalu lintas di hampir semua kota besar di Indonesia yang macet
menjadikan pasar Indonesia primadona bagi pelaku bisnis e-commerce asing.
e-Commerce merupakan transaksi bisnis yang dilakukan secara elektronik sehingga transaksi antara pembeli
dan pedagang dapat melakukan transaksi jual beli apapun, kapanpun, dan dimanapun. Fleksibilitas seperti ini
menjadikan perdagangan e-commerce digemari oleh masyarakat modern penggunan internet.
Meski belum ada penelitian secara empiris, pertumbuhan perdagangan e-Commerce berbanding lurus dengan
penurunan angka kemacetan di kota-kota besar di Indonesia
Penetrasi internet di Indonesia terhadap masyarakat sudah mencapai kurang lebih 35 persen dari seluruh total
populasi penduduk. Menurut lembaga riset pasar e-Marketer, populasi pengguna internet Tanah Air tahun 2014
mencapai 83,7 juta orang.
Dengan jumlah tersebut, Indonesia menempati urutan keenam dunia dalam hal pengguna internet. Angka
tersebut akan terus berkembang, diperkirakan pada tahun 2017 mencapai 117 juta netizen
(www.tekno.kompas.com). Sedangkan populasi pengguna internet lebih dari 3 (tiga) jam perhari (netizen)
berdasarkan Markplus Insight adalah sebesar 36 juta orang. Jumlah tersebut merupakan pasar terbuka bagi para
pedagang pelaku e-commerce.
Transaksi e-Commerce
Transaksi e-commerce menurut OECD yang kemudian diadopsi ke dalam Surat Edaran Dirjen Pajak No
62/PJ/2013 (SE-62) dapat dikelompokan dalam empat kelompok yaitu online marketplace, online retail, classified
ads, dan daily deals.
Meskipun pada prakteknya satu pelaku perdagangan e-Commerce dapat melakukan melakukan lebih dari satu
kelompok transaksi tersebut. Kompas menyebutkan bahwa peredaran transaksi e-commerce (PDB e-commerce)
di Indonesia sebesar kurang lebih 120 triliun rupiah. Transaksi e-commerce mencapai 8.5 % dari PDB dari sektor
perdagangan secara keseluruhan pada tahun 2014 sebesar kurang lebih 1400 triliun.
PDB e-commerce tersebut diperoleh dari transaksi yang dilakukan oleh lebih 75 ribu pedagang pelaku ecommerce. Jumlah tersebut akan terus meningkat pesat, karena berdasarkan sumber dari Markplus Insight dan
Markeeters ada sekitar 5 (lima) juta pedagang yang siap melakukan penjualan online apabila infrastruktur dan
jaringan sudah memadai. Sehingga bisa diprediksi betapa besarnya jumlah transaksi e-commerce beberapa
tahun mendatang.
Dalam transaksi e-Commerce terdapat potensi pajak yang seharusnya disetorkan kepada negara. Berdasarkan
SE-62 tidak ada pajak baru pada transaksi e-Commerce sehingga berlaku ketentuan umum. Apabila dapat
mengawasi transaksi e-commerce, maka penerimaan dari sektor ini akan dapat memberikan kontribusi yang
tidak sedikit terhadap penerimaan pajak.
Belajar dari Jepang
Pemerintah Jepang telah menangani e-commerce sejak tahun 2002. Dengan membentuk tim dengan nama
Protect. Sebuah unit khusus di National Tax Agency (NTA) yang hanya bertugas untuk mendeteksi transaksi ecommerce. Pemerintah Jepang sangat serius menggarap pajak atas e-commerce untuk menunjang penerimaan.

Bukan tanpa alasan pemerintah jepang sangat fokus kepada sektor e-Commerce karena peredaran transaksi ecommerce di Jepang mencapai sekitar 20 ribu triliun rupiah, jumlah yang sangat fantatis mengingat beberapa
tahun terakhir Jepang mengalami defisit anggaran.
Pemerintah Jepang berniat untuk meningkatkan penerimaan pajaknya dari sektor e-commerce. Perkiraan
potensi penerimaan yang dapat dihimpun Jepang dari pajak konsumsi dengan tarif 8 persen adalah sekitar 1600
triliun rupiah. Jumlah tersebut kurang lebih 35% dari penerimaan pajak Jepang secara keseluruhan. Tahun 2015
kurang lebih perkiraan penerimaan pajak sebesar 5.452 triliun rupiah.
Untuk memaksimalkan penerimaan pajak dari sektor ini pemerintah Jepang membentuk tim khusus untuk
menggali potensi dari transaksi e-commerce dengan nama Professional Team for e-Commerce Taxation
(PROTECT). Ada empat alasan yang melatarbelakangi pemebentukan tim tersebut diantranya adalah tingkat
kesulitan yang tinggi untuk mengidentifikasi pelaku e-commerce, wajib pajak yang banyak dan jumlahnya
berfluktuasi karena kemudahan untuk masuk ataupun keluar dari sektor ini, cross border transaction, dan semua
transaksi tercatat secara online yang tidak kasat mati sehingga memerlukan keahlian di bidang teknologi
informasi untuk membuka atau mendapatkan data tersebut.
Gambar 1. Struktur Tim PROTECT pada Tokyo Regional Tax Bureau

Sumber : First Taxation Departement, Tokyo Regional Bureau

Tim PROTECT tersebut mempunyai tugas melakukan pemeriksaan dan pengumpulan data dari segala transaksi
yang berhubungan dengan transaksi e-Commerce, mengoperasikan database dan memberikan pelatihan terkait
e-commerce.
Tim PROTECT tidak hanya mengumpulkan transaksi dari perusahaan perusahaan besar yang di Jepang tetapi
juga mengumpulkan transaksi dari SMEs yang rata ibu rumah tangga, pelajar/mahasiswa, atau orang pribadi
yang melakukan usaha sampingan berjualan secara elektonik.
Selain pembentukan tim, peraturan perundang-undangan di Jepang juga mendukung petugas pajak dalam
mengumpulkan data-data dari pihak ketiga. Data transaksi wajib pajak yang melalui lembaga keuangan, baik
bank atau bukan bank dapat dengan mudah diakses oleh petugas pajak.
Selain itu, keharusan menyerahkan data-data lain yang terkait perpajakan dalam mengamankan penerimaan
negara oleh instansi,lembaga, asosiasi atau pihak lainnnya sudah tersistem dengan baik.
Pajak e-Commerce di Indonesia
Pajak atas transaksi e-commerce sesuai dengan SE-62 telah mempertegas bahwa tidak ada pajak baru dalam
transaksi e-commerce. Sehingga tidak ada perbedaan dalam penerapan peraturan perundang-undangan
perpajakan antara transaksi e-commerce ataupun konvensional. Oleh karena itu bagi penjual atau pembeli dapat
dikenakan pajak sesuai ketentuan perundang-undangan perpajakan yang sudah ada.
Penggalian pajak atas transaksi e-commerce bertujuan untuk menerapkan keadilan bagi semua wajib pajak baik
konvensional maupun e-commerce. Karena pada dasarnya kewajiban wajib pajak pelaku bisnis konvensional
atau e-commerce tidak berbeda.

Kegagalan dalam memungut pajak dari transaksi e-commerce akan mengakibatkan tidak dilaksanakannya
prinsip keadilan dalam penegakan hukum, mengakibatkan ketidakseimbangan dalam persaingan antara
pengusaha karena beban pajak yang tidak merata di antara wajib pajak tersebut, serta penerimaan negara dari
pajak yang tidak maksimal.
Gambar 2. Ilustrasi Aspek Perpajakan e-Commerce

Pelaku bisnis di bidang e-commerce mempunyai hak dan kewajiban yang sama dengan pelaku bisnis yang lain.
Tidak ada perlakuan khusus atau pengenaan pajak baru terhadap transaksi e-commerce. Seperti di negara
Jepang penegenaan pajak dapt berjalan efektif apabila terjalin kerjasama yang baik antara berbagai institusi baik
pemerintah maupun swasta.
Jika kita melihat kesuksesan tim e-commerce PROTECT Jepang ada beberapa hal yang perlu digaris bawahi
yaitu adanya supplay data dari pihak ketiga yang dapat dijadikan bank data untuk memonitor kepatuhan wajib
pajak pelaku e-commerce. Data pihak ketiga ini sangat vital untuk melakukan penggalian potensi pajak. Hal ini
juga sudah disadari oleh Ditjen Pajak tentang penting bank data dari wajib pajak.
Tetapi dalam implementasinya untuk memperoleh data dari pihak ketiga tidaklah mudah karena menyangkut
kerahasian pihak-pihak tertentu. Padahal secara aturan jelas mewajibkan bagi pihak ketiga untuk memberikan
data terkait transaksi atau kegiatan lain yang berguna bagi Ditjen Pajak dalam rangka mengamankan
Penerimaan negara.
Selain itu dukungan teknologi informasi yang memadai sangat dibutuhkan Ditjen Pajak untuk menelusuri
transaksi keuangan dari wajib pajak pelaku e-commerce, mengingat kesulitan dari transaksi ini adalah semua
bukti dilakukan secara elektronik.
Teknologi informasi harus dapat mendeteksi transaksi yang dilakukan, sehingga pengawasan terhadap
kepatuhan wajib pajak dapat dilakukan. Tanpa kemampuan untuk mendeteksi transaksi, pengawasan terhadap
kepatuhan wajib pajak mustahil untuk dilakukan
Kesulitan lain adalah mendeteksi cross border transaction atas e-commerce. Transaksi jual beli yang melewati
batas negara tersebut dapat dikurangi dengan membuat National Payment Gateway(NPG). NPG merupakan
satu pintu pembayaran yang dilakukan melalui elektronik.
Sistem tersebut dapat mendeteksi semua transaksi yang dilakukan secara lebih terstruktur dan mudah diawasi
karena semua jaringan dan sistem pembayaran akan terhubung menjadi satu. Apabila hal-hal yang tersebut
diatas mulai dari data pihak ketiga, teknologi informasi yang mutakhir dan NPG dapat diwujudkan maka potensi
berapapun dari transaksi e-commerce dapat digali untuk mengamankan penerimaan negara.
*) Tulisan ini merupakan pendapat pribadi penulis dan bukan cerminan sikap instansi dimana penulis bekerja