* Dublin set to change tax residency rules in Oct. 14 budget
* Companies already in Ireland to be given time to adjust
* Measures due to be signed off by cabinet next Tuesday
By Padraic Halpin
DUBLIN, Oct 10 Ireland is set to announce legal
changes next week to phase out the "Double Irish" tax
arrangement that has let firms such as Google save
billions of dollars, two sources familiar with the matter said.
Ireland has come under sustained attack from Europe and the
United States over the past 18 months for its tax rules that
allow multinational companies such as Google and Apple
to cut their overseas tax rates to single digits.
Among the most criticized parts of the Irish tax code is the
complex corporate structure whereby a multinational can channel
untaxed revenues to an Irish subsidiary, which then pays the
money to another company registered in Ireland that is tax
resident elsewhere -- usually in a tax haven such as Bermuda.
This means there is little tax to pay in Ireland. The fact
both companies are Irish led to the term "Double Irish".
The government is set to bring in new measures in its budget
on Tuesday that would mean all Irish-registered companies would
over time automatically be deemed to be tax resident in Ireland,
the sources said, bringing Irish law in line with U.S. and
"It is more likely than not," one of the sources, who
declined to be named, told Reuters regarding an announcement
being made on budget day.
The measures cannot be signed off until the cabinet meets
for a final time before the budget is presented at 1330 GMT on
Tuesday. Companies already incorporated in Ireland will likely
be given a set time to change their accounting structures, while
new companies setting up in Ireland must abide by the new rules.
At risk for Ireland are the 160,000 jobs -- or almost one in
every 10 workers in the country -- who are employed by the more
than 1,000 foreign firms that have set up an base in Ireland to
benefit from its low 12.5 percent corporate tax rate and
flexible, English-speaking workforce.
SHINY NEW TOY
In last year's budget, Finance Minister Michael Noonan made
it illegal for a company registered in Ireland to have no tax
domicile at all, but kept open the loophole that let them
nominate any country they liked as their tax residence.
The move followed a U.S. Senate committee investigation that
found Apple had cut billions from its tax bill by declaring
companies registered in the Irish city of Cork as not being
resident for tax purposes in any country.
U.S. Senator Carl Levin said the company had achieved the
"holy grail of tax avoidance" with the structures.
Noonan has been urged by lobby groups such as the Irish
Business & Employers Confederation (IBEC) to balance the planned
changes by ensuring Ireland remains an attractive destination
for companies, particularly through improving its intellectual
property tax regime.
Ireland has been mulling whether to change its tax code now,
or wait until next year when the Organisation for Economic
Cooperation and Development (OECD) is due to implement new
international tax rules, some of which were proposed last month.
The government believes the OECD's aim of closing corporate
tax loopholes will ultimately be positive for Ireland and there
has been no slowdown in the level of foreign direct investment
(FDI) pouring into the country.
Dell announced on Friday that it would locate a new research
and development centre in its Dublin offices.
"The risks are well identified at this stage. This has been
well flagged as far as multinational companies are concerned,
what has been discussed in recent months is the timing," said
Feargal O'Rourke, who advises a number of U.S. technology
companies as head of tax at PwC Ireland.
"If you are going to move now, you need a sufficient
grandfathering period but also a 'shiny new toy' that Ireland
can sell as part of its tax offering to FDI. Changes to our
intellectual property tax regime would ensure the offering
(Editing by David Clarke)