LONDON/ROME: Yahoo! Inc is shifting its main European tax base to Ireland from Switzerland, a Reuters examination of company statements and accounts shows, as pressure mounts on the Alpine nation to abolish some corporate tax incentives.
The internet search group said the shift reflected a streamlining of its European operations and was not motivated by a desire to cut its tax bill, one of the higher in the US tech sector.
“Yahoo pays all taxes required and complies with tax laws in all countries where we operate. We take our tax obligations seriously,” Yahoo spokeswoman Caroline Macleod-Smith said.
However, tax experts said it was likely the changes that Switzerland is expected to make to its tax rules, following European Union pressure, had some influence over the decision, and that other companies could follow Yahoo’s lead. “Obviously tax reasons are part of the reasons they are going out of Switzerland,” said Frank Marty, head of tax policy at lobby group Economie Suisse.
“The tax regimes we have are very successful (in attracting companies) but there is pressure that Switzerland abolishes the current regimes ... The risks are substantial,” he added.
Currently, Switzerland offers tax rates to companies which make their profits outside Switzerland that are less than half the rates imposed on companies that operate locally.
EU rules require countries not to discriminate between domestic and foreign firms in taxation and Brussels has told Switzerland that if it wants to enjoy unfettered access to the bloc’s market, it needs to scrap this practice.
Switzerland is discussing harmonizing corporate tax rates at a lower level than its current domestic rate of around 21 percent but Marius Brulhart, professor of economics at the University of Lausanne, said the country may not be able to go as low as Ireland’s 12.5 percent rate.
Barry O’Leary, chief executive of IDA Ireland, which is responsible for attracting inward investment into Ireland, said he was talking to “a handful” of other companies about possible relocations from Switzerland to Ireland. “If two or three of them decided to relocate that starts a trend,” he said. All companies have a duty to investors not to pay any more tax than they need to but in recent years, revelations that companies such as Google and Apple use complex structures to shift profits into tax havens have prompted public anger and spurred the Group of 20 leading economies to launch a drive to tackle profit shifting.
In recent months, Yahoo has published statements on its website and emailed customers to say the terms and conditions for European customers are changing. Since November companies which advertise on Yahoo! websites have entered contracts with Yahoo! EMEA Ltd, an Irish-registered business. From late March, private users of premium mail and other services will be doing business with the Irish company. Previously, customers in France, Germany, Italy and other countries contracted directly with local Yahoo subsidiaries and paid fees to them. Reuters
