On the international stage, Ireland likes to think of itself as the plucky underdog.

Think of the likes of Brexit, where we were painted as bravely standing up to the demands of the British.

Increasingly though, many countries looked at us as something of a bad guy.

Yes, this is about corporate tax again.

During the week, it was found that Ireland did actually do a sweetheart tax deal with Apple and the US tech giant now has to pay the state billions in taxes.

The case wasn’t strictly about profit-shifting. It was focused on state aid – that Ireland gave Apple a nice tax deal which wasn’t available to other companies.

But the thing which most people (from outside Ireland) are angry about is how multinationals shift their profits here.

This view is held by the likes of Margrethe Vestager, the European Commissioner for competition who led the Apple tax case, who said just this week that Ireland is “central” to multinational profit-shifting.

So, what is really happening? 

In a nutshell – yes, corporate profits are being moved from other countries to Ireland.

Ironically, there has actually been a big increase in this since around 2014, which marked the end of the investigation into the Apple tax affair.

Since then, the amount of money being funnelled by multinationals through Ireland has exploded.

Ireland taking a slice of this is what has largely driven the enormous rise in the state’s corporate tax take.

In 2014, Ireland took in just over €5bn in corporate tax. That figure has jumped basically every year since to stand at almost €24bn by 2023.

And despite repeated, endless warnings, this corporate tax windfall is now something the Irish government seems to be becoming reliant on to help meet spending gaps.

So what’s Ireland doing here that causes other countries to view us as the bad guy?

Essentially, the view abroad is that by pushing multinationals to shift their profits, Ireland has deprived many other countries of their share of the corporate tax bonanza.

And while many multinationals employ large numbers of people in Ireland, it is basically impossible to argue against the fact that the profits being shifted here are outsized relative to the size of their operations.

For example, a review by an Oireachtas body recently found that Ireland’s ‘computer services exports’ soared from €32bn in 2015 to €196bn in 2022.

Ireland isn’t producing that much extra stuff: instead, big global companies are booking their profits here.

A happy accident?

Sometimes, it’s implied that it’s kind of a happy accident that multinationals shift their profits to Ireland.

That the country has benefitted from an overhaul of global rules which meant that companies had to move their profits from jurisdictions with no corporate taxes to those which appeared more legitimate.

As many companies already had operations in Ireland, the country just made sense, the argument goes.

This ignores the fact that Ireland has actively encouraged this process.

For example, between 2015 and 2017, a government tax break made it more attractive for multinationals to move intellectual property (IP) to Ireland, resulting in many multinationals doing just that.

As IP often determines where profits wind up, this resulted in these businesses booking big chunks of their global sales in Ireland.

This means that when a multinational sells a product in somewhere like France, a big chunk of the profit (and tax for the state) tends to end up back in Ireland. 

This is what has led the likes of Vestager and a host of other prominent economists and analysts to the conclusion that Ireland is unfairly benefitting from profit shifting.

Now some might say – who cares?

Ireland is a small country with few natural resources. It never had an empire, it wasn’t blessed with fossil fuel resources.

Tax planning is a global game that Ireland just plays better than anyone else. 

Of course the government will act in the best interests of its citizens. 

And besides – the true fault really lies with the US.

Readers might have noticed that the companies involved in tax scandals tend to be American. This isn’t because German or French businesses are less eager to lower their tax bill.

It has more to do with the fact that the US tax system allows multinationals to not pay tax on foreign earnings until they are brought back to the US. 

If the US changed its system, a big part of the profits that European states are currently fighting over could just end up back in America.

While there is merit to this view, there are a few problems.

The big one being that as well as European countries, profits are shifted from poorer ones too. Analysts say this profit-shifting process, which Ireland has actively encouraged, deprives developing nations of desperately-needed corporate tax revenues.

Developing countries

Ireland is commonly just thought of as the ‘European hub’ for most companies, which is true.

But Ireland is also the base for many multinationals for their Asian and African profits.

For example, anti-poverty charity Christian Aid Ireland previously found that profits were moved to Ireland from the likes of Ethiopia and Nepal.

In 2020, a coalition of organisations from Ireland and Ghana made a submission to a UN committee.

They claimed that revenue lost in Ghana in 2013 to profit-shifting could have prevented 170 child deaths, if the money had been spent on health measures.

There wasn’t a detailed breakdown of how much Ireland may have contributed to this, but any effect is likely to have grown since.

Overall, it’s estimated that developing countries lose tens of billions in tax every year because of profit shifting.

But those are high-level estimates. 

More detailed figures on Ireland’s possible impact likely aren’t available because they’re not really collected.

In 2022, the Irish government said it had carried out its own study which found that our tax policies don’t have any negative impact on developing countries.

But the report cited was from 2015. 

As well as being outdated, it of course doesn’t take into account that profit-shifting to Ireland really exploded just after that.

Earlier this year a separate UN committee weighed in, saying that Ireland should carry out a new independent study to look at the impact its tax policy has on developing countries. 

Let’s see if anything comes of it. But all the accusations don’t look good for Ireland.

Other charities have been banging a similar drum for a long time, claiming that a chunk of the corporate tax riches we delightedly keep referring to as a ‘windfall’ -  as if it’s manna from heaven – actually comes from poorer countries who need the money more than we do.

Blowing our own trumpet on aid