Diarmaid Ferriter: Semantics and Ireland’s tax status

Department of Finance persists in denying Ireland is world’s biggest tax haven

International Financial Services Centre: Team Ireland has constantly dismissed the description of Ireland as a tax haven, even when the extent of that haven is patently obvious.  Photograph: Bryan O’Brien

International Financial Services Centre: Team Ireland has constantly dismissed the description of Ireland as a tax haven, even when the extent of that haven is patently obvious. Photograph: Bryan O’Brien

 

If the Department of Finance is to be believed, there must be an awful lot of eejits slaving away on academic research projects about tax.

Economists at Berkeley and Copenhagen have concluded that Ireland is the biggest “tax haven” in the world used by multinationals to “shelter” profits. Foreign multinationals shifted $106 billion (€91 billion) of corporate profits to Ireland in 2015, according to these academics. This was the same year the former minister for finance Michael Noonan announced the phased closure of the “Double Irish”, which allowed companies to move profits to tax havens, with a transition period for existing companies until 2020. The department dismissed the findings in the recent report relating to Ireland as “overly simplistic . . . Ireland is not a tax haven and does not meet any of the international standards for being considered such”.

'Team Ireland' has constantly dismissed the description of Ireland as a tax haven, even when the extent of that haven is patently obvious

This has long been the mantra, helped by the assertion in 2013 by Pascal Saint Amans, the head of the OECD’s tax policy unit, that Ireland did not meet any of the OECD’s criteria to be defined as a tax haven, those being that there are no taxes, no transparency and no exchange of information. But what of Apple’s tax structures in Ireland which led to the European Commission finding that Ireland gave Apple illegal state aid valued at $13 billion via preferential tax treatment between 2003 and 2014?

Despite such developments, “Team Ireland” has constantly dismissed the description of Ireland as a tax haven, even when the extent of that haven is patently obvious; the Department of Finance’s outrage at the findings in relation to Apple was arguably fuelled by fears that Ireland’s reputation as a tax haven – or whatever alternative euphemism is employed – would be damaged.

Matter of definition

Team Ireland was also called into play when members of a US senate committee in 2012 accused Microsoft of using transactions with its subsidiaries in Ireland and other low-tax countries to avoid billions in US taxes; it identified one of Microsoft’s Irish subsidiaries, MIR, as reporting $4.3 billion profits in 2011, an effective tax rate of 7.2 per cent. In response, Joanne Richardson, chief executive of the American Chamber of Commerce Ireland, insisted “Ireland operates a transparent and robust tax regime and companies operate in accordance with the tax codes of the jurisdictions in which they are based”, and again reiterated the OECD’s key indicators of a tax haven: “none of these criteria applies to Ireland”.

The Department of Finance can persist in denying what seems obvious to the rest of us eejits

The EU has been speaking out of different sides of its mouth on this subject, deciding last year not to include Ireland or any of the EU countries in a list of 17 countries that are tax havens including Bahrain, Nambia and Panama. Oxfam pointed out in response that by allowing corporate revenues to come through this country in a manner that denies tax due to other jurisdictions, Ireland is a “conduit tax haven”, and surely that is precisely what the EU itself found in relation to Apple and Ireland? It has all been a very long time building; in 1956 Fianna Fáil’s Erskine Childers queried the new political preoccupation with low corporation taxes to attract American companies: “certain types of capital investments here are likely to be of a fugitive character”.

Certain characteristics

In 2013 Gary Tobin, a principal officer in the Department of Finance, and Keith Walsh of the Revenue Commissioners, published a paper for the Economic and Social Review with the subheading “An Assessment of International Standards Shows why Ireland is Not a Tax Haven”. Once again, the OECD’s criteria provided the spine of the defence: they also added, “the paper does not take any ideological perspectives but rather focuses on the evidence-based arguments around the definition of tax havens”. No room in this discussion, it appears, for ideology or, indeed, ethics or fairness. Ireland, it argued, was not a tax haven just “an open economy with a favourable corporation tax regime”. Despite Irish purity, they also observed that Ireland “has on occasion been criticised for having characteristics similar to a tax haven”.

One thing that irks Team Ireland is the reliance on a 1994 paper by US tax academics James Hines and Eric Rice, Fiscal Paradise: Foreign Tax Havens and American Business which identified Ireland as a tax haven. This paper has also been used by the authors of the report this week decried by Paschal Donohue. One of the chief complaints made about the Hines and Rice study is the focus on low corporation tax rates to identify tax havens. That the paper is still being used is surely not due to laziness or ignorance, but because the issue of corporation tax is still central to how Ireland is regarded internationally in relation to the movement of money.

But we can rest assured that, in the words of Tobin and Walsh, “there is no single and agreed definition of a tax haven”, so the Department of Finance can persist in denying what seems obvious to the rest of us eejits.

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