Ireland insists it can still be hi-tech hub despite axing ‘double Irish’ loophole

As 22,000 tech entrepreneurs, inventors and investors converged on Dublin for the city’s Web Summit last week, one big question threatened to bring the whole digital bonanza down to earth, The Guardian reports.

After the Ireland moved last month to close a lucrative tax loophole, former Apple chief executive John Sculley told the summit that the country risked losing the “edge” that has helped it become the European headquarters of US technology giants including Apple and Facebook. “There is a lot of talent in Ireland so I don’t think it will be an insurmountable problem but it will take the edge off, if tax advantages do go away,” he said.

The “double Irish” scheme has allowed corporations to save billions by legally moving huge profits at their Irish bases to countries regarded as tax havens. It will be phased out following the 2015 budget – although Taoiseach Enda Kenny confirmed last week that firms already benefiting from the scheme could continue to operate it until 2020.

At the summit – where speakers included Paypal co-founder Peter Thiel, Dropbox founder Drew Houston and actor and angel investor Eva Longoria – bosses of the latest wave of hi-tech companies to come to Ireland were keen to play down the significance of Dublin’s move to end the scheme. Eight software, telecoms and digital media firms announced that they would create 400 new jobs in the republic.

The boss of one of them, New Zealander Dr Jock Percy, whose Perseus Telecom provides fibre optics to connect major banks with stock exchanges, said he was encouraged that the Dublin government had decided to maintain its 12.5% corporate tax rate and planned new tax breaks for inventions and innovations minted in Ireland, like the UK’s “patent box” scheme.

“Low corporation tax in Ireland is attractive but the double Irish was not even considered or planned for. Instead we were more interested in the fact that there are multilingual skilled workers in Ireland and a pro-business government,” said Percy, whose company’s main base is in Galway.

“For us the introduction of a patent-box is much more valuable because our intellectual property, designs and software programs all belong here in Ireland. So getting tax relief for that is fantastic and we are looking forward to that coming in,” he said.

Kenny told an audience at the summit that the country had “nothing to fear” from the end of the double Irish scheme. “The end of it will make our country even more attractive for foreign direct investment in the future and there is that transition period for companies already here up to 2020.”

Richard Bruton, minister for jobs, enterprise and innovation also dismissed the concerns of Sculley, although he acknowledged the flak Ireland has taken over tax schemes in Brussels and Washington. “Clearly we understand that countries compete on a number of fronts and Ireland has always offered a competitive tax environment,” he said. “We know companies expect that and we will continue to compete very strongly but on a fair basis. There has to be a worldwide consensus to make taxation policy fair across the board.”

The 12.5% corporate tax rate, Kenny and Bruton said, would be protected as a cornerstone of Irish fiscal policy.

As Kenny and Bruton were speaking, Northern Ireland Secretary Theresa Villiers signalled that the UK Treasury would decide within weeks if Northern Ireland could set its own corporation tax rate. She promised in a speech to Co-operation Ireland in Belfast that the administration would know soon whether London would hand over control.

Political leaders in Stormont have looked on jealously as their southern neighbors continue to use low corporate taxes to attract foreign direct investment and want their own rate set at a level close to the republic’s.

Villiers said London was taking the calls to devolve tax powers “very seriously”. It could be a move the republic’s Industrial Development Agency will have to take very seriously too.