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Tax avoidance: focus may move from companies to individuals

Attitude towards international tax domicile may changes with future governments

It is fair to say that the property developer Johnny Ronan has a reputation for enjoying the finer things in life. He may not specifically cultivate such renown but he does little to dispel it.

His excesses, such as the midnight jaunts with models on private jets to Morocco, suit a specific and simplistic public view of the man – that of the unrestrained playboy. Ronan is more than that and even his enemies in business will attest to his skills as a developer of commercial buildings. It should not be seen as sycophantic to acknowledge that there are few at his game who are at his level.

Yet Ronan’s public image remains tied to the view of him as a socialite, the cliché of the wealthy gallivanter who runs around dropping atrocious amounts of money. There is often some truth in a cliché, however. He does spend heavily on his lifestyle. He does stay at the best hotels and eat at the best restaurants. He does live in ostentatious places – remember his Pink Palace?

It was interesting, then, to discover this week that he has changed his residency for tax purposes to a modest flat on the harbour road in the Maltese port of Birzebbuga. There is nothing wrong with Birzebbuga. It seems a perfectly pleasant place. It is just that the town, and the flats in the area chosen by Ronan, do not suit the prevailing image of him. It is easier to imagine him spending time elsewhere.

So why move his address there? Ronan is perfectly entitled to properly avail of tax rules to move his domicile wherever he likes. That is his right under the law. But it is mostly courts that construe according to the law. As Thomas More said in A Man for All Seasons, the world will construe according to its wits.

Using their wits, people may come to varying conclusions about Ronan’s decision to shift his residency to tax-friendly Malta. Some might conclude it is nobody else’s business, so push off and leave the man alone.

The scales are falling from the eyes of the general population to reveal that the wealthiest in society often seem able to avail of clever measures to reduce their tax bills

Others might point out that Ronan was, in effect, saved from a worse fate during the crash by taxpayers when State agencies acquired his loans and worked with him. That does not sit easily with the realisation that he is making moves that may limit his contribution to the taxpayers’ pot in future.

Take your pick on which view you prefer. Most of us will choose with as much accord to our own biases as to the facts.

What is unremittingly true, however, is that public attitudes towards legal tax avoidance by the wealthy and powerful are slowly hardening internationally. It started with the debate on corporation tax.

For years, Ireland insisted it would never change its corporation tax rate. It was an immovable cornerstone of this nation’s industrial development policy until the very moment that it wasn’t. Ireland moved on corporation tax because the rest of the world changed its view, and the Government could not hold out.

It may only be a matter of time before the international focus moves on to personal tax avoidance by rich and powerful individuals. The foundations for this public debate have already been laid.

Just look at the huge reaction over recent years to the leaks of the Pandora Papers, Paradise Papers, Panama Papers, LuxLeaks and so on. The scales are falling from the eyes of the general population to reveal that the wealthiest in society often seem able to avail of clever measures to reduce their personal tax bills.

In Ireland, our public discourse seems to be heading in a particular direction: one that is dominated by a form of left-wing populism. If a government of that hue is ever formed here, and it seems reasonably likely now, then the tax techniques used by the wealthy and powerful will inevitably become a target. It is guaranteed to be popular and, whether it is the correct thing to do or not, its popularity may be enough for it to be attempted.

Another hard truth is that no matter how determined an Irish government might yet be to target so-called tax exiles, it will be difficult to bring into effect any substantial change. This country is a signatory to a spider’s web of international tax agreements with dozens of countries, many of which deal with the location of the competent tax authority in defined situations.

Those international agreements may limit the scope to target tax-avoidance strategies built around, for example, international domicile. There is, however, already a €200,000 domicile levy in this State that is aimed at those tax resident abroad. Perhaps the quantum of this levy will become the mode for a future government to curry public favour on the issue.

Not every wealthy Irish business person using an address abroad does so for tax purposes... It does seem to be a popular move in certain circles, however

If Ronan does hang out in Malta, there will be no shortage of compatriots to keep him company. Malta's most famous Irish resident for tax purposes is, of course, the Digicel billionaire Denis O'Brien, who uses an address up the road in Sliema. Eason chairman David Dilger has an address in the same town. Fred Browne, the chief executive of Aergo Capital, where O'Brien used to be an investor, also lives close by.

Mark Turley, the ClonBio founder who is a member of a well-known business family from around the Terenure area, is also based in Malta. So is property developer Dave Arnold and Eddie Kilbane, the founder of data centre developer Dataplex, which recently got a huge investment from the Middle East. So, too, the Roqu Media founder Robert Quirke, whose €10 million deal to broker the sale of Chinese ventilators to the State during the first pandemic wave has been the subject of public scrutiny.

The Irish business diaspora based in tax-friendly locations spreads far beyond Malta. Company documents signed in May suggest that Dermot Desmond, the founder of Daon and the biggest shareholder in Celtic Football Club, moved from one luxury ski chalet to another in Switzerland this year. He is now based on Haute-Nendaz, an hour away from his old pad in Crans-Montana.

Also based in Haute-Nendaz is Eric Kinsella, the wealthy Jones Engineering chairman who earlier this year donated €30 million to Trinity College. David Shubotham, the former Davy stockbroker who in recent months was a party to litigation surrounding Davy Hickey Property group, is also Swiss-based, living on the shores of Lake Geneva.

Michael Smurfit and his son, the Smurfit Kappa chief executive Tony Smurfit, are both residents of Monaco. Most of that company's operations are global anyway – Ireland is just a small part of its operations. Other Monaco residents include Howard Beggs, the founder of Clanwilliam Health.

Not every wealthy Irish business person using an address abroad does so for tax purposes. Some may do it for privacy or because their interests are abroad. It is hard to know fully any individual’s motivation. It does seem to be a popular move in certain circles, however.

It will be interesting to see if the debate around tax residency changes, along with future governments.