The Irish Times view on the Pandora Papers: bringing the wealth ashore

There was a certain symmetry to the timing of the Government’s decision this week to bow to the inevitable and finally abandon a once-untouchable totem of Irish economic policy – the 12.5 per cent tax rate for big businesses. The decision came just days after the release, in this newspaper and in others across the world, of the Pandora Papers – a vast cache of leaked documents that cast further light on the offshore structures that the wealthy use to hide their wealth and avoid tax.

The political climate has altered dramatically in the quarter-of-a-century since Ireland first adopted the 12.5 per cent rate. Global public tolerance of vastly wealthy firms using laws, loopholes and lopsided national tax regimes in order to grow even wealthier has never been lower. The financial crisis shifted the discussion. And revelations such as those contained in the Pandora Papers – and its forerunners – helped to ensure that the arguments for change became irresistible.

The Pandora Papers project, organised by the International Consortium of Investigative Journalists (ICIJ), of which The Irish Times is a media partner, follows on from the FinCen Files (2020), which was focused on suspicious banking transactions, the Paradise Papers (2017) and the Panama Papers (2016), which focused on offshore companies and offshore trusts. On one level, the Pandora Papers show that the offshore world is not just alive and well, but prospering.

Yet not everyone is so pessimistic. The increased sharing of data between tax authorities may be having a real impact on the fight against tax evasion and aggressive tax avoidance. Projects such as the Pandora Papers may be making people think twice about the perils that aggressive approaches to their tax affairs can involve, while also encouraging reform. The latest ICIJ project has prompted calls for action to combat the use of shell companies.

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The Pandora Papers’ reports about political leaders and celebrities using offshore shell companies to keep their wealth and their financial affairs private, attract attention because they tally with the view that there is too much financial inequality in the world. Yet we already know that multinationals also use these structures. And that for many of those corporations, Ireland is very much a key location in their global tax strategies.

All advanced economies have a finger in the “offshore” pie, and seek to gain advantage in the ceaseless contest for foreign direct investment. Ireland needs to protect its tax base and the economic activity that comes from its highly successful foreign direct investment policies, and is far from being alone in doing so. But it also needs to play its part in pushing back against the forces that promote the type of unfairness that the Pandora Papers have helped to highlight. Getting that balance right is in everyone’s interest.