A volatile global tax environment


Sir, – I read with interest Diarmaid Ferriter’s column on Ireland‘s tax status (“State still denies what’s clear to the rest of us eejits”, Opinion & Analysis, June 16th). It brought to mind the historic and infamous window tax. In the 1690s, the English monarch William III was short of money, which he attempted to rectify by the introduction of a window tax. As the name suggests, this was levied on the number of windows in a property. Property owners went to great pains to avoid paying the tax and many windows were bricked up for that very reason. Irish cottagers used their own unique and innovative approach to avoid paying the tax by using the half door. It was possible to leave the bottom closed, while leaving the top open, thus maximising the amount of light coming in. Because the light coming in was from a door, rather than a window, they avoided paying the tax and in the process were engaging in legitimate tax planning.

Many legal concepts are difficult to define. The idea of tax avoidance is especially, perhaps uniquely, difficult. The crux of the issue is how to distinguish between tax avoidance and acceptable tax planning. The tax avoidance line is not an easy line to draw, as Mr Justice O’Donnell eloquently stated in the 2011 Supreme Court judgment in the O‘Flynn tax case: “In every examination there will be the last person to pass and the first candidate to fail, and they may be much more similar to each other than to their fellow candidates but that is not a reason to alter either of the results. The process of legislation and its application may often involve drawing lines in contested cases.”

In September 2013, the G20 drew a line by mandating that the OECD start the Base Erosion and Profit Shifting (BEPS) project, which was aimed to produce international tax rules that would tax companies where economic activities take place and where value is created. As of May 2018, Ireland would seem to have passed its BEPS examination in that it has, according to the OECD, fulfilled all the minimum requirements for the introduction of “country by country” tax reporting by large multinational companies. In addition, in 2015 Ireland unilaterally altered its corporate residency rules to outlaw the “Double Irish” tax structure.

To return to the half door. The Irish cottagers were by no means eejits, nor did they reside in a tax haven. Rather, they may have given us a window on how a small open economy can legitimately succeed in a competitive, complex and volatile global tax environment! – Yours, etc,


Lecturer in Taxation,

School of Business

& Humanities,

Limerick Institute

of Technology,

Moylish, Limerick.