Revenue Commissioners pay €90m in consultancy costs to company involved in $7bn intellectual property costs scheme

The Revenue Commissioners – Irish tax authorities – used to have a fearsome reputation, akin to the IRS in the US. Not only that, but the quarterly list of named-and-shamed tax defaulters applied moral pressure on society to conform, all so that the State could collect the taxes due and provide a functioning society in return.

In more recent times, the Revenue is looking like an army of clowns, who imposed a settlement of €2m on Independent TD Mick Wallace after deliberate under-declaration of VAT at his companies, and it turned out Mick wasn’t legally responsible for the settlement and his companies had gone bust, but Mick is, out of his own pocket, paying the Revenue back over the next 90-odd years.

At the start of this year, the Revenue was in the dock or at least before an Oireachtas committee to explain why it was scaring the bejesus out of pensioners after hundreds of thousands of letters had been issued to pensioners demanding tax on past pensions – “We caused confusion and distress to some people and I’m sincerely sorry for that” said the current boss at the Revenue, Josephine Feehily.

And next year, the quarterly defaulters lists will include non-payers of the household charge arrears and the new property tax, so chances are it will be so big that it will lose its moral suasion.

Today, we learn via a parliamentary question from the Labour Party TD, Joanna Tuffy that the Revenue Commissioners paid €90m to a company called Accenture in a four year period 2008-2011. Minister for Finance, Michael Noonan told her that Accenture received €11.69 million in 2011, €25.436 million in 2010, €22.466 million in 2009 and €28.927 million in 2008. I can’t link to the PQ because it doesn’t appear to be on the Oireachtas website yet for this week or under the “member and topic” section of the website, but the Irish Times reports about it here today.

Accenture is the name of the consulting arm of a firm called Arthur Andersen and we might remember the demise of Arthur Andersen in the Enron scandal in the US. Actually Arthur Andersen, the audit company, was resurrected after the charges against it were reversed in the US Supreme Court, but it apparently just employs a few hundred people today, and just in the US.

Accenture though, has blossomed. And we should not be surprised that it has received so much work  from the Revenue Commissioners. We should be surprised though, that Accenture has this year been involved in a – lawful, it should be stressed – transaction, whereby it moved USD 7bn (€5.3bn) of “intellectual property” costs  via Switzerland and Luxembourg to Ireland, where presumably, the costs are being used to offset against revenue generated in Ireland, so we are unlikely, it would seem, to see much, if any, tax paid on the €90m fees paid to Accenture by the Revenue Commissioners – you couldn’t make this stuff up.

The Accenture scheme was reported in the UK satirical magazine, Private Eye in October 2012, and it subsequently gave rise to a parliamentary question from the Sinn Fein finance spokesperson Pearse Doherty (shown below *). Minister Noonan refused to comment on the matter but said that companies generally can only use such allowances up to a maximum of 80% of income at any one time. So if Accenture were to earn €100m in revenue, then it could only deduct allowances for intellectual property and suchlike up to €80m, though presumably it could claim normal operating costs against the other €20m. We don’t know precisely what taxes Accenture pay in Ireland, but in Britain recently, the coffee-shop company Starbucks yielded to public pressure and committed to pay some tax in the UK after it transpired it was making losses on selling €4 coffees because of jiggery-pokery with international costs.

When contacted by the Irish Examiner to comment on the matter in October 2012, Accenture said “Accenture moved its incorporation to Ireland and pays full taxes under Irish law on all of our Irish operations”

Away from the realm of procurement, you really have to hand it to the Revenue Commissioners and their IT skills. Not only are they unable to get their computers to talk with those at the Department for Social Protection, so that benefits paid to high earners, like child benefit, can’t be taxed, but in September 2012, when the Property Price Register was launched, it turned out that the Revenue had provided data for a lousy 33 months only, and even that contained significant errors.

Deputy Pearse Doherty:To ask the Minister for Finance further to a report in a British publication which claims that a company (details supplied) has transferred US$7 billion of costs for intellectual property from Switzerland via Luxemburg to this State and is being given tax relief in this State equivalent to US$7 billion overtime, if the Revenue Commissioners are aware of same and have approved any such scheme..

Minister for Finance, Michael Noonan :  I am precluded from commenting on the tax affairs of any taxpayer, as these are confidential between the taxpayer and the Revenue Commissioners.

However, I wish to advise the Deputy that, under section 291A of the Taxes Consolidation Act 1997, a company can claim allowances for capital expenditure incurred on the provision of intangible assets for the purposes of its trade. These allowances apply to expenditure on a broad range of assets (e.g. patents, copyright, trademarks, know-how) that are recognised as intangible assets under generally accepted accounting practice.  The allowances, in providing relief for this expenditure, are intended to encourage companies to manage and develop the intellectual assets of their business.

Allowances for an accounting period are computed by reference to the amount charged to the profit and loss account in respect of amortisation of the intangible asset relative to its cost. Companies can alternatively opt for a write-down of expenditure over 15 years at a rate of 7 per cent per annum and 2 per cent in the final year. As the expenditures concerned – and, accordingly, the allowances – can be for very substantial amounts, the set-off of the allowances against the related income is restricted. In particular, the aggregate amount of allowances and deductible interest on borrowings, if any, in respect of intangible assets may not exceed 80% of trading income (before the set-off of allowances and any such interest) related to those intangible assets. This ensures that at least 20% of the relevant income will continue to be chargeable to corporation tax in an accounting period. Any unused allowances and interest can be carried forward to subsequent accounting periods for offset against trading income related to the intangible assets (subject to the 80% restriction).

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