Sign in. It’s quick, free and it’s up to you.
An account is an optional way to support the work we do. Find out more.
‘WE’RE NOT A tax haven, we have never been involved in any kind of tax malpractice’ said Michael Noonan last October.
If your top political figures need to constantly state that you are not a tax haven, then the chances are you probably are a tax haven. And as the UN’s Philip Aston says, ‘when lists of tax havens are drawn up, Ireland is always prominently among them’.
The US Senate similarly found that by any ‘common sense definition of a tax haven’ Ireland easily met the criteria. I mean when Forbes regularly ranks you in their list of ‘Top ten tax havens’, there’s not really much of a debate to be had.
In Ireland there’s no debate to be had, but that has more to do with it being a taboo subject amongst our mainstream media. Take pharmaceutical giant Pfizer’s recent announcement that it was relocating its HQ here, solely for tax purposes.
This drew international condemnation with the Financial Times calling us a financial ‘black hole’, The Guardian arguing that we should be ‘subject to economic sanction’, and US presidential hopefuls Trump, Clinton and Sanders all issuing criticism.
For the most part our media skirted around the issue, stating obvious facts like our tax regime was ‘back in the international spotlight’, but failing to offer any serious analysis of why this was. Then there was the customary denial by a top political figure, this time Simon Conveney, who declared ‘nobody is using Ireland as a tax haven’.
Someone should tell poor Simon to take a stroll down to five Harbour Master Place in the IFSC.
There he’ll find a small building which houses around 250 companies controlling almost €2 billion worth of assets, but he won’t find any employees – because there are none. Not even a fella to clean the brass plates on the doors!
The OECD has launched its new Base Erosion and Profit Shifting project (BEPS) designed to clamp down on the kind of tax dodging measures Ireland supports, whilst there has been talk of standardised corporation tax rates at the European level.
This is a clear indication of the way the wind is blowing, meaning Ireland urgently needs to change course. The first step is facing up to the fact that we are a tax haven, so let’s review the historical and contemporary evidence.
A taxing history
The dominant narrative here in Ireland is that we were the economically ‘sick man’ of Europe up until the 1990s, after which time we slashed corporation tax, multinationals flocked and the Celtic Tiger was born. It’s the old low corporation tax = high growth rates line, yes that old canard!
In reality our tax haven strategy was born in the 1950s after a range of tax exemptions on corporate income and profits, as well as offshore tax exemptions were introduced. But it was the 1970s before things really got going, when Ireland was marketed abroad as a ‘no tax’ regime and the idea of establishing an Irish Financial Services Centre was hatched.
Back in 2000, Padraic White, former head of the IDA and one of the IFSC’s chief architects, co-authored the book The Making of the Celtic Tiger. The book describes how White recruited a Wall Street expert on offshore banking, who ‘examined the success of Bermuda in creating jobs in financial services, and he was satisfied that Ireland could emulate its achievement.’
Yes, Ireland planned to create its own Bermuda triangle, but the only thing disappearing would be the taxes of multinationals. Although the Central Bank initially rejected the plan because it ‘smacked of a banana republic’, the election of Charlie Haughey, saw the plan quickly revived.
Today the IFSC administers almost 50% of global alternative investment funds (hedge funds, venture capital, derivative contracts, mortgage back securities, etc) and has disparagingly been referred to as the ‘Lichtenstein on the Liffey’.
But as the graph from the Tax Justice Network demonstrates below, the Celtic Tiger didn’t take off because large multinationals flocked here after we slashed corporation tax in the 1990s. Ireland had long been trying to market itself as a tax haven, it just wasn’t working, not until we gained access to the European Single Market in 1993.
If it walks like a duck…
The two defining characteristics of a tax haven are; (1) a jurisdiction there is little/no tax liabilities for foreign individuals/businesses and (2) where key financial information is suppressed.
1. Multinationals
Our 12.5% corporation tax rate is often referred to as the ‘cornerstone’ of our economy, but even the dogs on the street know that the amount that’s actually paid is as little as 2%, and sometimes it’s nothing at all.
Between 2007 and 2012, the likes of Google, Microsoft, and pharmaceutical giant Abbott Laboratories, all managed to pay less than 1% tax on their profits.
Bermuda is top of the charts not because of genuine economic activity.
2. Tax deals under investigation
Last year a report by 19 European nongovernmental organisations found that the lack of “financial and company transparency” is one of the reasons Ireland is so attractive a location to corporate subsidiaries.
This shouldn’t be surprising, just take the example of Apple, which is now being investigated by the European Commission to see if our government gave them a number of tax deals. Our strict law surrounding taxpayer confidentiality has meant that these deals have been beyond the scrutiny of the public and the Oireachtas, even though they are of huge significance to the exchequer.
Our government doesn’t seem to like transparency, especially not in the area offshore trusts. The users of trusts enjoy relative anonymity which makes it difficult to ascertain who owns them, what assets they control and how to tax them. That’s why the establishment of a public register of all the beneficial owners of companies and trusts is being pursued at the European level, but unsurprisingly, our government along with the likes of Luxembourg are lobbying hard against this.
What’s the fuss?
Our tax haven strategy isn’t just screwing our own citizens; we’re screwing the citizens of other countries too. Our legal framework undermines the tax laws of other nations by inducing economic activity to relocate here purely to dodge tax. And it’s not just developed countries who are losing out, Christian Aid estimates that the loss to developing countries from the kind of transfer pricing operations is somewhere in the region of $160 billion annually.
For that reason the international community is now taking steps to clamp down on tax havens and the transfer pricing they facilitate. With the net beginning to close Ireland needs to change direction before the decision is taken out of our hands. Attracting investment solely by way of low taxes is the policy equivalent of a one trick pony.
It’s high time we put this pony out to pasture.
Cillian Doyle is an economist and activist. He works as an executive officer at Trinity College Dublin.
To embed this post, copy the code below on your site
Interesting show on BBC2 last night, The Town that Took on the Taxman about business owners and residents of Crickhowell in South Wales.
It give an insight into how big business avoid paying UK corporation tax, Ireland and U2 did get a mention.
Fair Tax Town https://www.youtube.com/watch?v=QElOlY9gi5E
Watched it. Eye opener. Bono is some hypocrite.
Great article. Our establishment political class has always served the interests of domestic and international capital at the expense of the majority of the people. Google are typical of the parasitic multinational sector to which Michael Noonan eagerly tugs the forelock. Google use the nifty accountancy trick of paying massive intellectual property royalties to their own subsidiary to avoid paying tax.
So in 2014 Google Ireland Ltd paid €12.5 billion largely in royalties to Google Ireland Holdings. Conveniently Google Ireland Holdings, despite the name, is tax resident in Bermuda and so has no tax liability in Ireland. This neat arrangement leaves Google Ireland Ltd (who are tax resident in Ireland) with declared profits of only €168 million on which they paid a very modest €18 million in tax.
Hey Presto! €12,500 million in profits vanished in a puff of smoke and so not liable for taxation anywhere. Just one of the many many ways in which big capital uses it’s political, financial, legal and technical might to enrich itself at the expense of the society and workers which sustain them.
@Wally Mooney
Actually have to agree with you the article is spot on however the IFSC / 12.5% is the engine the generates the wealth that keeps the majority of the people in Ireland in work of funds their social welfare.
We Ireland needs a new plan after all Google / Facebook / Hedge Funds don’t make most of their sales in Ireland only a matter of time before other governments ask why they paid tax in Ireland for making a profit on sales in Italy, Spain, Greece, USA…
One of the most corrupt tax havens in the world is the city of London, the Square mile. Rotten to the core.
Thats right you live there, you pop over to ireland all uppity to tell US how you live in london and you’re the go-to guy, “Listen to me, simpletons I live in London now!!”.
Im working my way down immigrant..
Tax the poor; subsidise the rich with tax breaks.
Attract FDI; avoid supporting indigenous business.
Reward complex schemes of tax avoidance; stick the boot in on local business.
Support the banks; flog low income families.
US style taxes; US style “services”.
Give to the rich; take from the poor.
Many flush bodies not supportive of Ireland’s indigenous start- up communities.
A Government led initiative is required for 2.5% of every individual and entities’ post tax income, generated in Ireland, to be set aside specifically for investment in R & D and early-stage start ups.
Willing participants to secure a double- Irish “hang sanwich” tax break for their risk taking.
Ireland’s Seed Capital Equity Funds deficiency could be solved at the stroke of a pen, with this initiative, and a lesson for all investment-shy cash hoarders in our country on the fun, joys, risks, possibilities, and rewards, of investing in new ventures for our children’s future.
The poor pay little to no tax.
The vast majority of taxes are paid by the wealthy.
http://www.wsj.com/articles/top-20-of-earners-pay-84-of-income-tax-1428674384
http://www.pewresearch.org/fact-tank/2015/03/24/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/
But your argument will persist.
Lower income families pay VAT and many charges. The tax imposition falls proportionately higher on the lower income families.
7.1 trillion goes through Holland apparently in the double dutch
Its called the Dutch Sandwich, and much of it arrives via the Double Irish.
In a fiercely competitive global economy, we are world leaders in tax strategy.
The rest of the world would copy our success in a heartbeat if they could.
It is naive to think otherwise.
OK dream on….
Great article:
“There he’ll find a small building which houses around 250 companies controlling almost €2 billion worth of assets, but he won’t find any employees – because there are none. Not even a fella to clean the brass plates on the doors!”
The dogs in the street and Forbes know the truth.
As Cillian says, we are screwing the rest of Europe as well as our own citizens.
All to keep taxes flowing in to pay for obscene pensions for a multitude of politicians and public servants.
The Economist magazine wrote a very similar article about Ireland-some thirty years ago.!!
Time they helped pay for our new sewage plants-not by gouging the poorest families in the State.!
Or they could just leave. Wouldn’t be too difficult for them.
The logic in this article, Jesus H Dawkins:
“If your top political figures need to constantly state that you are not a tax haven, then the chances are you probably are a tax haven.”
or a swan. It follows as legitimately as the above line of reasoning
“And as the UN’s Philip Aston says, ‘when lists of tax havens are drawn up, Ireland is always prominently among them’.”
The OECD says that Ireland is not a tax haven. In fact, it’s not even close, but if the UN says it, it must be true.
http://www.independent.ie/business/irish/ireland-is-not-a-tax-haven-oecd-29442226.html
“I mean when Forbes regularly ranks you in their list of ‘Top ten tax havens’, there’s not really much of a debate to be had.”
And best places to do business and one of the highest quality of life. I thought we were a one trick pony.
“The US Senate similarly found”
An omnipotent body, if there ever was one. Is that Calamity McCain? The guy who wants America involved in 42,000 wars and whose economic predictions have been so accurate and well researched.
If Ireland is only a tax haven, then why don’t the companies have the minimum amount of employees?
Why would Intel choose Ireland as their R&D centre, given the intense competition from other nations?
The company already benefits from any tax advantage, so why put their critical jobs and the future of their company in Ireland?
IFSC angle. What on earth do you think goes on in the square mile or Wall Street? How do you think Switzerland got on so well all these years…Toblerones.
Have you even bothered to examine the tax ploys used by the very nations that criticize us?
http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html
“Our tax haven strategy isn’t just screwing our own citizens; we’re screwing the citizens of other countries too.”
200k+ jobs directly, not to mention the indirect trade, but those jobs and the tax revenue would be much better in the French coffers.
“For that reason the international community is now taking steps to clamp down on tax havens and the transfer pricing they facilitate. With the net beginning to close Ireland ”
The international community, meaning a few of the big players looking after their own self interest. A bit like the our wonderful bailout. I would say, that tax law, a sovereign right of a nation, should never be dictated by anyone but the nation itself, but since we have already given up monetary policy, why not give up fiscal policy too. The expenditure side is already dictated by outside Dublin, why not the revenue side, too.
Great reply, eagerly looking forward to the journals “balanced” opposite opinion piece but doubt it will ever materialise as giving out about the big bad corporations is de rigueur right now
Whatever government gets in, one obvious problem will never go away. The bankers debt..
We need hospitals, houses now. We pay huge taxes and it’s going out of the country. They want us to pay more even. Water tax , home tax.. Then you have silly moves of putting motor tax into setting up another tax vehicle in IW. The circus needs to stop. The country is in recovery Enda and Joan tell us.. My fu(king Ar§e…
We have plenty of hospitals. We need less management and better spending and control of budgets.
“We need less management and better spending and control of budgets.” What areas or levels of management would you take out? Who would produce better spending and control of budgets?
You may be right but it’s not exactly a roadmap to better outcomes in the health sector.
I’m no suggesting nothing can be done. The questions are what, where, by whom?
There is probably a governance issue. That means how health institutions are run, who finances, manages and oversees. Neither politicians or consultants seem able to solve that. Neither can ‘slash and burn’ or other macho management or talk. I didn’t give you a thumb either way but it amazes me that you got over 20 green ones for what is, at best, a laconic soundbite post.
Can you please do better? I’m confident you can. I personally cannot see how to do much better unless there is a sea change in how the country is governed at all levels. You have to change organisations and things in general from the top down. Ignoring the banking disaster and the looming threat to our tax haven status are not good signs. Sorry I can’t do better but one-liners ain’t gonna fix health or anything else in Ireland or in other jurisdictions with similar governance problems. And there are lots of them.
Yep. Take it away and see them flyyyyyyyyyyy……..
Another 2% will not see any of them fly.
Even implementing the current tax will not see them fly.
The EU should investigate to see what dirty deals are currently agreed..
They are investigating over the apple case. Someone can correct me if I’m wrong but it’s over something like €19 billion? And of course, Mr Noonan wants nothing to do with it.
If Europe finds apple received ‘state aid’ from ireland then they may face a huge tax bill, may make them do some calculations to find if there is a better deal outside Ireland.
Wishful thinking from you NI……it would be great for Ireland if the EU say it’s owed billions from these companies. These companies are in Ireland many decades and have invested many 10s of billions in the economy.
The corp. Tax figure cannot go below 10%, that’s a European agreed limit, 2% may be considered state aid – its not my opinion, its already been speculated in newspapers……….
“another 2% will not see them fly”
Effective tax in Switzerland is already at 8.25%
http://www.finfacts.ie/Irish_finance_news/articleDetail.php?Swiss-focus-on-innovation-tax-breaks-23
and 2% of earnings is the difference between making an earnings target and missing it.
If successive governments had any long-term plans, we would have been investing in Irish start-ups and SME’s quite heavily using the proceeds brought in from these tax deals. Instead we used that money to build motorways which aren’t used and giant metallic toothpicks.
Exactly which motorways were a waste?
50% of the money spent on the motorways went to farmers and landowners.
I know one such instance in County Dublin where a sports club received 12 million Euros for a quarter of an acre of land.Same thing happened all around the country. if town bypasses were involved, the councillors rushed through planning permission so that the NRA had to pay development land prices-which they were paying anyway-even for agricultural land-thanks to the power of the IFA.
Many overnight millionaires were made when our new highways went in..
Exactly. Great point. Crooked little country. Nod wink.
Jason, it is seldom if ever that I agree with you, but on this point you are correct. I will make a somewhat odious (but none the less reasonable) comparison. What is one of the critical bases of Germany’s success? That they protect, nurture and invest in indigenous enterprise. Germany, of course, welcomes foreign investment but unlike ourselves and the British does not rely on it to the detriment of their domestic economy. I am aware that Germany is a very large, industrialized country, but the principle holds true even for smaller countries.
This unsustainable gravy train house of cards could end overnight if the US people get the right president at the next election.
And why wouldn’t it?
In worrying about Robin Hood style socialism, we support Sheriff of Nottingham style fiscal policies.
Ha. You have to hand to the LLA. No one does amateur dramatics better.
2 points on this.
1. If we weren’t so obsessed about what everyone thinks of us, we wouldn’t give a toss what the international media has to say.
2. What is the alternative? Where are all the jobs going to come from? We are great as a country at pointing at issues (in this case there is none IMO), but absolutely useless and offering up solutions.
Well, international media are often a reflection of their respective readers. People on the ground getting fed up of tax avoidance via Ireland will have effects in government.
India is to introduce protections against its big corporations using such avoidance techniques in its 2016 budget, the world will be watching, the UK have plans to tighten things too.
I don’t know what the alternative is, but the current situation is not healthy. The government push jobs as a good news story for electioneering purposes. But these jobs are ready-made imports. ireland is destined to have a yo-yo economy from boom to bust in every generation..
The same could be said about all economies NI. All countries have good times and bad, something not unique to Ireland.
No not Unique at all, but lets not make it a habit, is my point..
A good, well written article. This is another bubble. When the plug is eventually pulled on out low tax policy the job losses will be horrendous.
It over two decades. Do you know what a bubble is?
So, we should speed up the jobs and revenue losses to Europe, because, what?
Perhaps it might be better if Ireland defended one of it’s advantages, so these horrendous job losses don’t occur.
‘Fears that the global economy could be heading for a repeat of the 2008 financial crash have sent shockwaves through financial markets – prompting a rush to safe havens by investors.’
William White, a former chief economist of the Bank for International Settlements (BIS), the central bankers club, who now chairs the OECD’s review committee warned that central bankers had “used up all their ammunition”.
“The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up. Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief,”
So.
Another recession on the way.
Forecasts are worse than the last one.
And still Fine Gael try to convince us we are well on the way to recovery.
Whatever about Google, Facebook, EMC etc. who bring a definite economic advantage, there’s no value to be had by allowing the likes of Pfizer, Shire, WPP to do these tax inversion deals.
Of course ireland is a tax haven it’s blatantly obvious but we are not breaking any laws, it doesn’t sit well with other countries but that’s just it every country have Cooperative tax rates some just as low as ireland the ones complaining can easily change their rates but are trying to influence us here to suit their own agendas!
Fails to mention the why? Where does the exchequer benefit? If it’s about just morality then see the movie The Big Short – there is no morality in banking, insurance or regulation?
How about job sustainability or longevity? These are throwaway jobs, they’re not ‘tech’ jobs, google Ireland employs a lot of people – 2/3 are from overseas, 1/3 local – the vast majority doing customer service, sales and administration, AKA call centre jobs. Compare that to google UK- it employs over 500 software engineers.
The irish gov have created a system of rent-a-jobs, they are not supporting development of local, irish roots business and manufacturing, only 3% of the exporting companies in ireland are Irish companies, the rest are subsidiaries of American and international companies, even with this Ireland still runs a import export deficit, importing 2.5 billion euro more than it exports. This is not an economy that shows any long term prospects.
Irish people are amongst the highest earners in the EU, sounds lovely doesn’t it, but when the data is adjusted to take into account Actual Individual Consumption (AIC) as a measure of living standards, we find that ireland is way down there with Italy and Cyprus.
We are all being hoodwinked by politicians and their positive Buzzwords…
Google employs hundreds of Software engineers at it’s Dublin offices, the company employs 2,800 staff and over 2,200 contractors, not all call centre jobs as you put it!! Your views on Ireland are always very negative Belfast. The north is known as call centre central of Europe.
Im not in Belfast, nor am i from Belfast, i started my twitter account when i did live there. So well done Sherlock from London W1K. Im from the Good olf ROI, I notice you live in london, are you british or are you an irish immigrant?
Also my information is correct, i never stated specific numbers. I never heard of the North being in anyway associated with call centres, even when i lived there, infact anytime i had to call one i went straight through to Wales….However anytime i called Ebay or paypal its always an irish person. And maybe you consider what i say to be negative, dont care, i can see the wool being pulled over everybody’s eyes by the shams in government, its amazing how much bulls**it people will swallow when you dress it up all pretty.
Its a reasonable article but he is confirming his own bias.
U2 is based in Holland with their Dutch Sandwich, Holland is a tax haven with 87 trillion euros going through its tax messing each year…
YES, YES and thrice YES. This is the extent of the intelligence and innovation of our ruling class.
Mr Doyle doesn’t disclose here that he ran for the People before Profit In Dun Laoghaire at the last council elections. Obviously his views are going to be those of PBP
So what? Can you respond to the article? I have no interest in PBP or any other political party or grouping but I pay attention to what is said, including by the government.
The government is concerned by this low tax image even though we are not the only one at it. If we were, we would capture all the FDI coming into Europe. They are concerned about because they regularly get an earful about it in Brussels by lesson-givers such as our near and dear neighbours UK and France.
Your flippant and apparently knee-jerk response reminds me of those who dismissed warning about the real estate bubbles. ‘Ah shur trees can grow up to the sky, if you dont think so consider suicide… and who are you to be talking and what about this or that’. Pathetic. People here are going to vote for same old same old once again and it goes on forever. I’m going back to the sports pages. Joe Schmidt has changed some key personnel. Let’s hope he gets some reward for it. Not same old same old.
Companies can locate in Holland or Belgium or Luxembourg and pay lower taxes than in Ireland. More to it than low C.T.
Nice article – I suspect we have about 4 or 5 more years and then the sands will begin shifting and multinational loyalty will be properly tested – the other element in play is a Brexit – that would have positive and negative impacts on the Irish economy.
A tiny bit too much activism in the piece for me to think it is a balanced unbiased view of the issue.
Seems to be me its dammed if we do and dammed if we don’t
So what country has a fair unblemished tax policy towards multinationals company’s free of any bias or distortion or criticism?.
YES!
No. I hope this helps.
Can i comment now???
I completely disagree with this article. Why should Ireland have to change its tax system to help out our wealthy neighbours. Let them fix their systems. We are in a really good position right now and we should stop worrying about what everyone is saying about us and forget those tossers in the FT and Guardian.
Also how can it be a bubble if these companies aren’t employing anyone?
hey there
have your say