Ireland as a tax haven

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Ireland summarises its taxation policy using the OECD's Hierarchy of Taxes pyramid, which emphasises high corporate tax rates as the types of tax most harmful to economic growth.
Irish Finance Minister Michael Noonan (2011–2017), told an Irish MEP to "put on the green jersey" when told of a new tax scheme to replace the "Double Irish".[1]

Ireland has been labelled as a tax haven or corporate tax haven in multiple financial reports, an allegation which the state has rejected in response.[a][2] Ireland is on all academic "tax haven lists", including the § Leaders in tax haven research, and tax NGOs. Ireland does not meet the 1998 OECD definition of a tax haven,[3] but no OECD member, including Switzerland, ever met this definition; only Trinidad & Tobago met it in 2017.[4] Similarly, no EU–28 country is amongst the 64 listed in the 2017 EU tax haven blacklist and greylist.[5] In September 2016, Brazil became the first G20 country to "blacklist" Ireland as a tax haven.[6]

Ireland's base erosion and profit shifting (BEPS) tools give some foreign corporates § Effective tax rates of 0% to 2.5%[b] on global profits re-routed to Ireland via their tax treaty network.[c][d] Ireland's aggregate § Effective tax rates for foreign corporates is 2.2–4.5%. Ireland's BEPS tools are the world's largest BEPS flows, exceed the entire Caribbean system, and artificially inflate the US–EU trade deficit.[8][9] Ireland's tax-free QIAIF & L–QIAIF regimes, and Section 110 SPVs, enable foreign investors to avoid Irish taxes on Irish assets, and can be combined with Irish BEPS tools to create confidential routes out of the Irish corporate tax system.[e] As these structures are OECD–whitelisted, Ireland's laws and regulations allow the use of data protection and data privacy provisions, and opt-outs from filing of public accounts, to obscure their effects. There is arguable evidence that Ireland acts as a § Captured state, fostering tax strategies.[11][12]

Ireland's situation is attributed to § Political compromises arising from the historical U.S. "worldwide" corporate tax system, which has made U.S. multinationals the largest users of tax havens, and BEPS tools, in the world.[f] The U.S. Tax Cuts and Jobs Act of 2017 ("TCJA"), and move to a hybrid "territorial" tax system,[g] removed the need for some of these compromises. In 2018, IP–heavy S&P500 multinationals guided similar post-TCJA effective tax rates, whether they are legally based in the U.S. (e.g. Pfizer[h]), or Ireland (e.g. Medtronic[h]). While TCJA neutralised some Irish BEPS tools, it enhanced others (e.g. Apple's "CAIA"[i]).[19] A reliance on U.S. corporates (80% of Irish corporation tax, 25% of Irish labour, 25 of top 50 Irish firms, and 57% of Irish value-add), is a concern in Ireland.[j]

Ireland's weakness in attracting corporates from "territorial" tax systems (Table 1),[k] was apparent in its failure to attract material financial services jobs moving due to Brexit (e.g. no US investment banks or material financial services franchise). Ireland's diversification into full tax haven tools[l] (e.g. QIAIF, L–QIAIF, and ICAV), has seen tax-law firms, and offshore magic circle firms, set up Irish offices to handle Brexit-driven tax restructuring. These tools made Ireland the world's 3rd largest Shadow Banking OFC,[24] and 5th largest Conduit OFC.[25][26]

  1. ^ Cite error: The named reference pearse was invoked but never defined (see the help page).
  2. ^ "Irish Taoiseach Leo Varadakar: Ireland is not a Tax Haven". Irish Independent. 13 September 2013. Separately, Taoiseach Leo Varadkar told attendees [at a U.S. Embassy event in Ireland] that "Ireland is not a tax haven, we do not wish to be a haven, nor do we wish to be seen as one".
  3. ^ Cite error: The named reference OECDhaven was invoked but never defined (see the help page).
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  7. ^ "Revenue: Double Taxation Treaties". Revenue Commissioners. 3 September 2018.
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  17. ^ Kyle Pomerleau (3 May 2018). "A Hybrid Approach: The Treatment of Foreign Profits under the Tax Cuts and Jobs Act". Tax Foundation. Retrieved 15 April 2019. While lawmakers generally refer to the new system as a "territorial" tax system, it is more appropriately described as a hybrid system.
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