DUBLIN-REGISTERED companies are involved in a case where the huge US insurance company, American International Group (AIG), is suing the US government for the return of $306 million in taxes.
The case is among a number of AIG-related issues in the US, where the government has spent almost $200 billion in an attempt to prevent the group’s collapse.
A Bill due before the US Senate would impose a 90 per cent tax on bonuses paid to senior executives in firms such as AIG after they were the recipients of massive government bail-outs.
A report in the New York Times yesterday pointed out that AIG was currently suing the US for the return of taxes, “some related to deals that were conducted through offshore tax havens”.
The report said AIG had been involved in “aggressive tax deals” involving AIG companies “in the Cayman Islands, Ireland, the Dutch Antilles and other offshore tax havens”.
In Washington on St Patrick’s Day the Taoiseach, Brian Cowen, said US president Barack Obama had made it clear he did not consider Ireland to be a tax haven.
A copy of the complaint outlining AIG’s claim against the US government has been seen by The Irish Times. The complaint was lodged with the District Court in the Southern District of New York on February 26th last.
The complaint deals with a number of issues including deals done with companies based in Ireland, the Dutch Antilles, New Zealand, the Cayman Islands and France.
Three Cayman Islands companies that were managed and controlled from Dublin, and tax resident here, form part of the complaint. They are Lumagrove Finance Company Ltd, Palmgrove Finance Company Ltd and Maitengrove Finance Corp.
The court document details how in 1997 loans totalling £300 million were taken out from the Bank of Ireland (£200 million) and Irish Permanent (£100 million) using shares in the Irish-based companies as collateral.
Companies Registration Office (CRO) filings show that Lumagrove and Maitengrove were based in La Touche House in the IFSC. The companies closed their Dublin branches some years ago. While they were in operation here they paid very substantial amounts of Irish corporation tax.
The complaint says the funds borrowed from the Irish banks were low cost and were used to invest in income-producing securities. In its 1997 tax return, AIG included profits of approximately $17 million arising from the Irish-based companies.
The companies paid $9.55 million in Irish corporation tax in 1997. In March of last year the US Internal Revenue Service informed AIG it was not allowing it credits against US tax for the tax paid by the three Irish companies. It made similar rulings in relation to companies based in other jurisdictions.
The affidavit does not deal with the companies for the years after 1997. It does include tax matters relating to companies in Bermuda and elsewhere that were part of structures that made large payments to senior executives.
The last set of accounts for Lumagrove filed with the CRO are for the year to the end of 2000. Its auditors were KPMG, Dublin, and its solicitors were McCann Fitz-Gerald, Dublin. While its principal place of business was in the IFSC, its registered office was at Maples Calder solicitors in the Cayman Islands.
The accounts said the company was principally engaged in trading in “fixed and variable income debt securities” and paid dividends of $16.25 million during the year. Turnover was $178 million, pre-tax profits were $28 million, and corporation tax paid was $6.67 million.
The company had no employees, according to the accounts.
