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The Bill put forward by Sinn Féin to ban Irish State investment in businesses operating in illegal Israeli settlements on the West Bank would probably have more impact on Ireland than on Israel.
What is being talked about are the shares held by the Ireland Strategic Investment Fund in companies that are on a United Nations database of companies operating in the illegal settlements. The ISIF – which began life as the National Pensions Reserve Fund before being raided to bail out the banks – has €5.2 billion under management and its brief is to invest on a commercial basis to support economic activity and employment in Ireland.
It has committed to investing €1.15 billion in the Land Development Agency (LDA) and €0.4 billion in Home Building Finance Ireland (HBFI). The rest of the money (€3.65 billion) is invested with various banks and fund managers until the Government can find something better to do with it.
A very small portion of the money managed by these third parties (€4.2 million) is invested in 11 companies operating in illegal settlements.
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The Department of Finance has pushed back on the issue, telling the Oireachtas Committee on Finance that there are legal difficulties in relying on the UN database, whilst the ISIF highlighted the practical difficulties.
It’s all a bit “Yes Minister”. The Government doesn’t want to be on the wrong side of public opinion but in truth it is terrified of opening this particular can of worms.
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The amount of money that ISIF has invested in companies operating in illegal settlements is dwarfed by the amount pumped directly by the Government into companies that operate in the settlements or benefit from their existence.
These include Airbnb, which is on the UN database as of last June, and is one of the many jewels in the Irish inward investment crown. Airbnb Ireland “generates substantially all of its revenue from facilitating guest stays at accommodation offered by hosts on Airbnb’s online marketplace for users outside of the United States of America,” according to its most recent set of accounts.
The Irish operation’s turnover in 2022 was $4.2 billion (€3.9 billion) and its profits were $82 million after paying $15.6 million in tax to the Irish Government. Its wage bill for the year was $56 million and presumably its 380 employees pay their taxes to the Irish Government. Let’s not forget the $289,000 it paid to its auditors PwC. Again, presumably all taxable in Ireland. The IDA does not disclose the incentives that it offers companies such as Airbnb to establish international head offices in Ireland, but they are substantial.
There are also plenty of IDA clients who are not in the database but indirectly benefit from Israel’s security and settlement policies. There is probably not an army in the Western world that doesn’t run on Microsoft software and the Israeli Defence Forces is no exception. According to Who Profits – an NGO that looks at the commercial involvement of Israeli and international corporations in the occupied territories – Microsoft Israel “has been providing services to the Israeli government, the Israeli ministry of defense and providing cloud services to the Israeli military and security bodies in Israel”.
It highlights an application used to manage the issuing of work permits to Palestinians in the West Bank and Gaza.
It is no secret that Ireland plays a very important part in how Microsoft manages its finances outside of America. It has a number of Irish subsidiaries involved in doing it in a tax efficient manner.
At the top sits Microsoft Round Island One, which made a profit of $78 billion in the year to June 2022. It paid just over $1 million in tax and has no employees other than its directors. Its main subsidiary, Microsoft Global Finance, operates as an “in-house cash centre” to other Microsoft entities. It made a profit of $2.1 billion in 2022 and paid $157 million in tax. It had two employees.
It would be interesting to know whether Microsoft Israel comes under the purview of the Ireland-based global treasury operation.
What the above goes to show is that imposing sanctions is not as straightforward as it seems.
Take the sanctions against Russia. We are currently paying more than three times what we used to for electricity and gas as a result of these sanctions, imposed following the invasion of Ukraine. But they are working. Russia is being denied an important source of revenue with which to fund its aggression.
No one in Ireland is going to suffer as a direct consequence of the ISIF liquidating €4.2 million worth of investments. The various counter parties will understand. The Israelis will be annoyed. The carnage in Gaza will continue.
But whereas it’s debatable what impact it might have on Israel were Ireland to withdraw the favourable tax treatments and the grants it gives to companies based here that trade in the illegal settlements or benefit indirectly from their existence, we do know what the consequences for Ireland would be. And they would be significant.