The Irish Times view on international tax reform: change comes very, very slowly

A lot of the money moved through Ireland and taxed here is not related to activity in the Irish economy

The latest report on international corporate taxation, from a group called the EU Tax Observatory, illustrates how international perception of Ireland has changed in recent years. Ireland is now commonly referred to as a " tax haven” and while the semantics of this are debatable, the reality is that big companies shift tens of billions of euro through the country largely for tax reasons. Ireland’s welcome decision to sign up to the OECD reform plan will tighten some of the rules here, and ensure that these companies pay a bit more tax, but the fundamental factors will remain the same.

That these companies have major operations here employing tens of thousands of people means Ireland is not a Caribbean-style tax haven. But the tax structures located here by the big firms, while linked to their physical presence, are in essence separate. Ireland has done well from this dual structure, gaining both tax revenues and jobs. Both have accelerated, remarkably, since the first phase of OECD reform in 2015.

The report from the tax observatory, a research body linked to the Paris School of Economics and funded largely by public and non-profit bodies, estimates that some $140 billion of profits are “shifted” through Ireland each year, putting the country top of the European list alongside the Netherlands. Analysis by the Department of Finance that about half of Irish corporate tax receipts are " windfall” in nature effectively makes the same point. It is that a lot of the money moved through Ireland and taxed here is not related to activity in the Irish economy.

The report concludes that the 15 per cent tax rate being introduced as part of the latest phase of the OECD deal will increase payments from multinationals, but not as much as it might have due to allowances which have been agreed in negotiations. If this watering down emerges as central, that would be a pity. The new 15 per cent rate was meant to be be an effective minimum. Meanwhile, doubt hangs over the implementation of the rest of the OECD strategy internationally. Change will, it seems, be slow and incremental.