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 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 U.S. 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.
DUBLIN BOUND
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.
The national units passed the revenues directly to a Swiss
affiliate, Yahoo! Sàrl, based in Rolle, in the Swiss Canton of Vaud,
and Yahoo! Sàrl paid them commissions for securing clients, accounts
for the units show.
The commissions were set at a level which were just about enough to
cover the national units' costs and generated little profit that
European authorities could tax.
U.S. internet companies have been especially effective at cutting
their overseas tax bills because weaknesses in European tax rules
means it can be hard for tax authorities there to claim taxing
rights on online sales revenues.
Between 2009 and 2012, Google had a non-U.S. average income tax rate
of 2.9 percent while eBay Inc.'s bill over the period was 3.1
percent, according to a Reuters analysis of company filings.
But Yahoo, which has struggled to grow revenues and profit in recent
years amid strong competition from Google, has one of the higher tax
rates in the sector.
Between 2009 and 2012, its overseas income tax rate averaged 27
percent.
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It's not clear why Yahoo has a higher tax rate but tax advisers say
the bigger a company's profits, the greater the opportunities for
tax optimization. The company declined to answer questions about its
tax arrangements. Google and eBay said they comply with all tax
rules.
Yahoo's new structure echoes that employed by Google, whose European
customers pay money direct to Google Ireland Limited.
This company sends most of its more than 12 billion euros a year in
revenues to an affiliate in Bermuda where there is no corporate
income tax. The arrangement allows Google to pay effective tax rates
far below even the headline Irish tax rate.
Yahoo, which generates most of its revenue from advertising on
its websites, said in a statement that the changes in its
arrangements were intended to "streamline our operations further".
"The structure of our business is driven by business needs and we
believe it is in the best interest of our users to have Yahoo EMEA
provide all services for all users in the region," it added.
Yahoo said it planned to shut its Rolle office by July. Spokespeople
in France and Italy said there would be no changes in the mainly
sales and marketing functions conducted in those offices.
DUBLIN OFFICE
Spokeswoman Macleod-Smith said the current Senior Vice President for
Europe, Middle East and Africa (EMEA), Dawn Airey, will continue to
be based in London.
Yahoo opened a Dublin office in 2003 to provide customer support and
technical and other support for other Yahoo units. In March last
year, it announced it was hiring 200 new customer and internal
support roles but did not announce the new financial structure
whereby all sales revenues would be diverted directly to Dublin.
O'Leary declined to name the companies he was trying to lure to
Ireland but other highly mobile technology companies whose main
European tax base is in Switzerland include travel group Expedia
Inc., auction site eBay Inc., Videogames publisher Electronic Arts,
domain name manager Verisign Inc. and software groups Salesforce.com
Inc, CA Inc, Citrix Systems Inc. and Autodesk Inc.
Electronic Arts said it had no plans to shift its international
headquarters from Switzerland. The other companies declined to
comments or did not respond to requests for comment. A sales
agreement published on Salesforce.com's website shows that its Swiss
unit continues to be the counterparty for European sales.
Noble Corp, owner of the world's third-largest offshore drilling rig
fleet, announced a move from Switzerland to Britain last year,
citing Britain's tax regime which had recently been changed so that
overseas profits were largely made exempt from tax.
Lorraine Griffin, tax partner at accountants Deloitte in Dublin,
said the G20 effort to tackle corporate tax avoidance could also
help to make Dublin more attractive for companies, even though
Ireland itself has been branded a tax haven by U.S. and European
politicians.
Documents published by the Organisation for Economic Co-operation
and Development, the body leading the G20 tax avoidance drive, have
said that in future companies should be forced to report profits and
revenues where the economic activity which generates the profit
takes place.
(Additional reporting by Alexei
Oreskovic in San Francisco; editing by Giles Elgood)
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