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Tech Industry

Ireland to close tax loophole favored by US tech giants

Come 2015, Ireland plans to start doing away with the "Double Irish" tax structure, which has allowed companies like Apple, Google and Facebook to shelter billion of dollars in profits from taxes.

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Google is one of many US tech firms that's benefited from the Double Irish tax structure. Getty Images

Ireland's government on Tuesday announced plans to close a controversial tax loophole that's allowed many US-based tech companies -- including Apple, Google and Facebook -- to shelter billion of dollars in profits from taxes.

Irish Finance Minister Michael Noonan told the country's parliament Tuesday that the well-known "Double Irish" corporate-tax loophole will be closed to new entrants next year and phased out by 2020, according to the BBC.

The change could force many US tech companies using the loophole to reconfigure their corporate structures. Noonan's announcement comes amid a broader push to overhaul international tax codes by governments and the European Union, with Ireland receiving mounting criticism during the crackdown. The European Union last month said it is investigating Ireland and Apple to see whether the iPhone maker received unfair state aid from the Irish government to attract investment in the country.

Ireland's 12.5 percent corporate tax rate -- far lower than the US' 35 percent rate -- has helped it attract major corporations, including Amazon, Facebook, PayPal and Twitter. Apple has based its international operations in Cork, Ireland, since 1980, and employs over 4,000 people in the country.

In addition to the low corporate tax rate, many US-based tech companies have used the Double Irish, a twist in the Irish tax code, to siphon royalties for intellectual property from one Irish-registered subsidiary to another that's usually based in a country with no corporate income taxes. That structure has helped the parent company avoid taxes on the royalties in the process.

"As we've always said, it's for governments to decide the law and for companies to comply with it," a Google spokesperson said Tuesday. "We're deeply committed to Ireland and will work to implement these changes as they become law."

Apple and Facebook representatives didn't immediately respond to requests for comment.

While Ireland's low tax rate is also controversial, Noonan said Tuesday his government doesn't plan to change it. "The 12.5 percent tax rate never has been and never will be up for discussion," he said, according to the BBC. "The 12.5 percent tax rate is settled policy. It will not change."