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Is Ireland a one-trick pony by enticing corporations with low taxes?

Cillian Doyle says Ireland is a tax haven and we should change our ways before the decisions are taken out of our hands.

‘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.

ccc Central Bank of Ireland Central Bank of Ireland

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.

Read: The yawn-inducing name of this EU-US trade deal is what makes it so dangerous>

Read: The dirty side of election politics has already reared its ugly head>

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61 Comments
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    Mute Claire Mullins
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    Oct 7th 2013, 10:37 AM

    Hope these people get treated fairly at this stage. If you buy a jacket and the arms fall off you can return for a full refund but seems you can buy a home totally unfit for purpose and it’s just tough luck. Insane .

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    Mute Kaz Whelan
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    Oct 7th 2013, 11:19 AM

    Not if the shop goes bust! Do you go back to your credit card company or your job that paid the wage that you spent on that clothing for a full refund?
    Do you get compensation from another clothing factory for another jumper while refusing to pay your credit card bill for the original one?

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    Mute Sacha Mahady
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    Oct 7th 2013, 12:51 PM

    W T F kaz. What a comparison. Would you pay for something you never received. And then would you pay tax the rest of your life on the item you never got. If so your the tax mans wet dream.

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    Mute captain morgan
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    Oct 7th 2013, 2:39 PM

    That muppet cannot count lol

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    Mute Kaz Whelan
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    Oct 7th 2013, 6:30 PM

    I am all for those residents getting the outcome they want.

    I do NOT agree with DCC paying rent for them and they are missing their mortgage repayments! So no rent or mortgage being paid eh I would say that is not very fair to the ordinary tax payer wouldn’t you?

    They need to take some responsibility for this, ie independant surveys etc It is the banks, developers and surveyors and who ever signed off on those apartments fault.

    It is not mine or any other tax payers who is paying for them currently

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    Mute Sacha Mahady
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    Oct 7th 2013, 8:33 PM

    Do you agree for DCC to pay rent for the unemployed, single parents, etc etc. they would have all got surveys done. Anyway I’m not in any way with priory hall or the other condemned apts in Dundrum or anywhere else. I’ve been lucky enough but that’s the point. You should not get penalised due to bad luck.

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    Mute Kaz Whelan
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    Oct 7th 2013, 8:52 PM

    DCC don’t pay those rents social
    Welfare do and that’s another can of worms completely!

    These people are getting a free ride at our expense.

    The fight was never about not being able to afford it, it was about why they should have to!

    I really hope they resolve this in a fair way because other people haven’t got the way out they have

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    Mute Sacha Mahady
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    Oct 7th 2013, 9:28 PM

    I can’t actually make sense of what you are saying. Are you suggesting that these residents are getting it easy or am I misunderstanding. I’m not sure who your argument is against.

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    Mute Kaz Whelan
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    Oct 7th 2013, 9:37 PM

    I’m saying that the wrong people are left footing the bill for these residents!

    DCC had no part in their mortgage the surveying or the signing off of anything to do with the complex yet they are left with a massive bill

    The residents are refusing to pay their mortgage and that’s why they are behind.

    I don’t agree with that, they should at least be paying rent if they won’t pay back their loan. They can’t have it both ways.

    It’s sad that a man had to commit suicide but hopefully he didn’t do it in vain and they got a fair offer today a fair offer to everyone not just residents, as no one else in the same boat will have their mortgage wrote off so easily.

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    Mute Kerry Blake
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    Oct 7th 2013, 10:30 AM

    Hogan involved I’d not be holding my breath for anything intelligent to happen.

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    Mute Tony Slap
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    Oct 7th 2013, 12:55 PM

    SF/IRA thug involved I’m not holding my breath either.

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    Mute sean o reilly
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    Oct 7th 2013, 10:45 AM

    Hope this gets resolved. The residents need to be able to move on.

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    Mute jack arse
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    Oct 7th 2013, 10:48 AM

    Hogan ? This won’t end well for the residents,this guys useless

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    Mute Martin
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    Oct 7th 2013, 10:52 AM

    More shite to come from a shite bag

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    Mute Richie Rodgers
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    Oct 7th 2013, 11:44 AM

    Martin
    I have read three contributions from you this morning and it’s quite clear that you don’t have more than two brain cells to rub together. Any chance of crawling back under the rock?

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    Mute Martin
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    Oct 7th 2013, 12:01 PM

    Dear Richie if u could show me the rock u hid under all weekend after the defeat I will consider it

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    Mute Anthony Keane
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    Oct 7th 2013, 12:46 PM

    I’m sorry Richie have the Journal employed you as the new site moderator?

    I thought not you plank

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    Mute Johnnie Brogan
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    Oct 7th 2013, 10:34 AM

    end of the day? so, we’ll find out at the end of the week so.

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    Mute Leslie Alan Rock
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    Oct 7th 2013, 10:38 AM

    Probably the end of next year

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