IRELAND’S TAX ARRANGEMENTS are depriving developing countries of millions in tax revenues, according to a new report published today.
The ActionAid study highlights how three Irish treaties “dramatically restrict” the ability of lower-income countries to tax the profits of multinationals.
Tax treaties are legal agreements between two countries not to retax income moving from one jurisdiction to another.
In some cases, they allow foreign companies to pay little or no tax in poorer countries.
The ActionAid research examined over 500 binding tax treaties signed by countries in sub-Saharan Africa and eastern and southern Asia since 1970.
The report claims that some $10.4 million (€9.2 million) was lost by Zambia, one of Africa’s poorest nations, between 2007 and 2012 as a result of one company’s use of Irish tax structures.
British-owned corporation Zambia Sugar previously admitted paying “virtually no corporate tax” during this time due to “substantial capital allowances”.
ActionAid alleges that one of the tax avoidance mechanisms used by the company involved routing a loan through Ireland to avoid Zambian tax on interest charges.
While Ireland’s tax treaty with Zambia was renegotiated in 2015, closing tax loopholes, the anti-poverty charity has ranked an updated version of the agreement as “very restrictive”.
Zambia Sugar’s parent company, Associated British Food, has repeatedly denied avoiding tax in the country, saying it has never “engaged in anything illegal, immoral or in any way designed” to reduce its tax obligations there.
Paying the price
ActionAid today called on the Irish government to reconsider treaties that reduce the tax companies pay in lower-income countries.
It also urged Ireland to increase transparency and adopt the UN model as a minimum standard when drafting new tax agreements.
“This really matters because women and children in poverty pay the price when crumbling public services like schools and hospitals are starved of possible revenue,” said Siobhán McGee, the charity’s CEO.
The full ActionAid report can be read here.
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