Tax haven Ireland – government facilitates mega-profit making

Protesting too much

It is common knowledge that Ireland is a tax haven. It has been described as such by numerous economists, organisations, and studies around the world, and is backed up by reams of evidence of big corporations taking advantage of this status. It would seem no one could deny it – except perhaps the government. On at least six occasions over the past six years, Leo Varadkar has told the Dáil that, “Ireland is not a tax haven. We do not want to be perceived as a tax haven.”

Sweet deal with Apple

Meanwhile, at the end of May 2023, lawyers in the employ of the Irish government stepped into a top EU court to argue that Apple should not be forced to pay €13.5 billion owed in taxes – a result of a sweetheart deal with the Irish government that saw Apple paying 0.005% tax in 2014. In the same week, it was reported that the state would go to bat to defend Meta from being hit with a €1.2 billion fine by Irish data protection watchdogs.

Decades in the making

Ireland has been described as a tax haven in mainstream commentary since 1981. The Irish government joined other tax havens such as Barbados and St Vincent and the Grenadines in opposing OECD plans for a global minimum corporation tax at the already paltry rate of 15%. The government eventually reversed its position but not before extracting several compromises on behalf of large corporations.

Top of list

Ireland is listed as a tax haven in the ten most cited academic papers on tax havens, eight of which were categorised by the European Commission as the ‘most important research on tax havens’ in 2017. In 2015, Irish tax laws helped more taxation to be avoided by large companies than every Caribbean island put together!

12.5% tax rate... on paper

On paper Ireland has a 12.5% corporate tax rate – the average in the EU and globally is over 20% –but in practice, through loopholes and deals with the government, the effective rate is far lower. One 2018 study found the effective rate to be 4%. Companies such as Deloitte, Matheson and Grant Thornton have all marketed themselves as companies that pay an effective 2.5% tax rate in this state. In 2017, tech giants Apple, Google, Facebook and Oracle paid less than 1%.

Cooking the books

In the 2010s, the state developed a new method of tax avoidance.

Economist Brian O’Boyle, co-author of Tax Haven Ireland, described it as a system where corporations can invoice impossible-to-value intellectual property items such as “software, logos or a part of their brand”, essentially making up a price for them and deducting the amount from their taxes. He explained: “They can say they have a €320 billion asset and any profits that come up to €320 billion can be written off against that investment” – one they essentially made up.

Defenders of this tax regime may argue that a big portion of Ireland’s tax revenue comes from offering its low corporation tax. Ignoring for a moment that this additional revenue is a result of ripping off the people of other countries, including many much poorer countries, the government is reliant on a form of taxation that is highly vulnerable to economic change. As one economist recently said: “Ireland can not rely on corporation tax receipts into the future, because most of it is coming from large US companies and is at the mercy of US political change... the US tax system is almost more important in Ireland than the Irish tax system itself.”

Helping the corporate world make a killing

In 2021, the Tax Justice Network ranked Ireland 11th in its list of enablers of global corporate tax abuse. They estimate that Ireland facilitates $16 billion (€14.8bn) in taxes lost each year by other countries. By 2010, Ireland was reportedly shielding $100 billion annually in US multinational foreign profits alone, helping these corporations get rich at the expense of other state’s coffers.