Ireland has been labelled as a corporate tax haven in multiple financial reports, an allegation which the state has rejected. Ireland is on all academic tax haven lists, including the , and tax NGOs. Ireland does not meet the 1998 OECD definition of a tax haven, but no OECD member, including Switzerland, ever met this definition; only Trinidad and Tobago met it in 2017. Similarly, no EU–28 country is amongst the 64 listed in the 2017 EU tax haven blacklist and greylist. In September 2016, Brazil became the first G20 country to "blacklist" Ireland as a tax haven.
Ireland's base erosion and profit shifting (BEPS) tools give some foreign corporates of 0% to 2.5% on global profits re-routed to Ireland via their tax treaty network. Ireland's aggregate for foreign corporates is 2.2–4.5%. Ireland's BEPS tools are the world's largest BEPS flows, exceed the entire Caribbean system, and artificially inflate the US–EU trade deficit. Ireland's tax-free QIAIF and L–QIAIF regimes, and Section 110 SPVs, enable foreign investors to avoid Irish taxes on Irish assets, and can be combined with Irish BEPS tools to create confidential routes out of the Irish corporate tax system. As these structures are OECD–whitelisted, Ireland's laws and regulations allow the use of data protection and data privacy provisions, and opt-outs from filing of public accounts, to obscure their effects. There is arguable evidence that Ireland acts as a , fostering tax strategies.
Ireland's situation is attributed to arising from the historical U.S. "worldwide" corporate tax system, which has made U.S. multinationals the largest users of tax havens, and BEPS tools, in the world. The U.S. Tax Cuts and Jobs Act of 2017 ("TCJA"), and move to a hybrid "territorial" tax system, removed the need for some of these compromises. In 2018, IP–heavy S&P500 multinationals guided similar post-TCJA effective tax rates, whether they are legally based in the U.S. (e.g. Pfizer), or Ireland (e.g. Medtronic). While TCJA neutralised some Irish BEPS tools, it enhanced others (e.g. Apple's "CAIA"). A reliance on U.S. corporates (80% of Irish corporation tax, 25% of Irish labour, 25 of top 50 Irish firms, and 57% of Irish value-add), is a concern in Ireland.
Ireland's weakness in attracting corporates from "territorial" tax systems (Table 1), was apparent in its failure to attract material financial services jobs moving due to Brexit (e.g. no US investment banks or material financial services franchise). Ireland's diversification into full tax haven tools (e.g. QIAIF, L–QIAIF, and ICAV), has seen tax-law firms, and offshore magic circle firms, set up Irish offices to handle Brexit-driven tax restructuring. These tools made Ireland the world's 3rd largest Shadow Banking OFC, and 5th largest Conduit OFC.
Context
Ireland has been associated with the term "tax haven" since the U.S. IRS produced a list on 12 January 1981. Ireland has been a consistent feature on almost every non-governmental tax haven list from Hines in February 1994, to Zucman in June 2018 (and each one in-between). However, Ireland has never been considered a tax haven by either the OECD or the EU Commission. These two contrasting facts are used by various sides, to allegedly prove or disprove that Ireland is a tax haven, and much of the detail in-between is discarded, some of which can explain the EU and OECD's position. Confusing scenarios have emerged, for example:
In April 2000, the FSF–IMF listed Ireland as an offshore financial centre ("OFC"), based on criteria which academics and the OECD support. The Irish State has never refuted the OFC label, and there are Irish State documents that note Ireland as an OFC. Yet, the terms OFC and "tax haven" are often considered synonymous. In December 2017, the EU did not consider Ireland to be a tax haven, and Ireland is not in the ; in January 2017 the EU Commissioner for Taxation, Pierre Moscovici, stated this publicly. However, the same Commissioner in January 2018, described Ireland to the EU Parliament as a tax black hole. In September 2018, the 29th Chair of the U.S. President's Council of Economic Advisors, tax-expert Kevin Hassett, said that: "It’s not Ireland’s fault U.S. tax law was written by someone on acid". Hassett, however, had labelled Ireland as a tax haven in November 2017, when advocating for the Tax Cuts and Jobs Act of 2017 ("TCJA").
The next sections chronicle the detail regarding Ireland's label as a tax haven (most cited Sources and Evidence), and detail regarding the Irish State's official Rebuttals of the label (both technical and non-technical). The final section chronicles the academic research on the drivers of U.S., EU, and OCED, decision making regarding Ireland.
Labels
Ireland has been labelled a tax haven, or a corporate tax haven (or Conduit OFC), by:
Ireland has also been labelled related terms to being a tax haven:
The term tax haven has been used by the Irish mainstream media and leading Irish commentators. Irish elected TDs have asked the question: "Is Ireland a tax haven?". A search of Dáil Éireann debates lists 871 references to the term. Some established Irish political parties accuse the Irish State of tax haven activities.
OECD plans While Ireland has been considered a tax haven by many for decades, the global tax system that Ireland depends on to incentivize multinational corporations to move there is receiving an overhaul by a coalition of 130 nations. This would cause changes to Ireland's official corporate tax rate of 12.5%, and the associated rules sometimes described as helping companies based there avoid paying taxes to other countries where they make profits. Originally Ireland was one of the few countries (one of nine) to oppose signing up for reform to a global minimum corporate tax rate of 15% and to force technology and retail companies to pay taxes based on where their goods and services were sold, rather than where the company was located. The Irish government would eventually agree to the terms of the deal after some debate. As of 7 October 2021 Ireland dropped its opposition to an overhaul of global corporate tax rules giving up its 12.5% tax rate. The Irish Cabinet approved an increase from 12.5% to 15% in corporation tax for companies with turnover in excess of 750 million euros. Additionally, the Irish Department of Finance has estimated that joining this global deal would reduce the country's tax take by 2 billion euros ($2.3 billion) a year, according to RTE. The other countries party to this deal did have to agree to compromise on a few key issues involved in the reform, dropping the "at least" in the statement "minimum corporate tax rate of at least 15%” updating it to just 15% — signaling that the rate would not be pushed up at a later date. Ireland was also given assurances that it could keep the lower rate for smaller firms located in the country.
Evidence
Global U.S. BEPS hub
Ireland ranks in all non-political "tax haven lists" going back to the first lists in 1994, and features in all "proxy tests" for tax havens and "quantitative measures" of tax havens. The level of base erosion and profit shifting (BEPS) by U.S. multinationals in Ireland is so large, that in 2017 the Central Bank of Ireland abandoned GDP/GNP as a statistic to replace it with Modified gross national income (GNI*). Economists note that Ireland's distorted GDP is now distorting the EU's aggregate GDP, and has artificially inflated the trade-deficit between the EU and the US. (see Table 1).
Ireland's IP–based BEPS tools use "intellectual property" ("IP") to "shift profits" from higher-tax locations, with whom Ireland has bilateral tax treaties, back to Ireland. Once in Ireland, these tools reduce Irish corporate taxes by re-routing to say Bermuda with the Double Irish BEPS tool (e.g. as Google and Facebook did), or to Malta with the Single Malt BEPS tool (e.g. as Microsoft and Allergan did), or by writing-off internally created virtual assets against Irish corporate tax with the Capital Allowances for Intangible Assets ("CAIA") BEPS tool (e.g. as Apple did post 2015). These BEPS tools give an Irish corporate effective tax rate (ETR) of 0–2.5%. They are the world's largest BEPS tools, and exceed the aggregate flows of the Caribbean tax system.
Ireland has received the most U.S. corporate tax inversions of any global jurisdiction, or tax haven, since the first U.S. tax inversion in 1983.
While IP–based BEPS tools are the majority of Irish BEPS flows, they were developed from Ireland's traditional expertise in inter-group contract manufacturing, or transfer pricing–based (TP) BEPS tools (e.g. capital allowance schemes, inter-group cross-border charging), which still provide material employment in Ireland (e.g. from U.S. life sciences firms). Some corporates like Apple maintain expensive Irish contract manufacturing TP–based BEPS operations (versus cheaper options in Asia, like Apple's Foxconn), to give "substance" to their larger Irish IP–based BEPS tools.
By refusing to implement the 2013 EU Accounting Directive (and invoking exemptions on reporting holding company structures until 2022), Ireland enables their TP and IP–based BEPS tools to structure as "unlimited liability companies" ("ULC") which do not have to file public accounts with the Irish CRO.
Ireland's Debt–based BEPS tools (e.g. the Section 110 SPV), have made Ireland the 3rd largest global Shadow Banking OFC, and have been used by Russian banks to circumvent sanctions. Irish Section 110 SPVs offer "orphaning" to protect the identity of the owner, and to shield the owner from Irish tax (the Section 110 SPV is an Irish company). They were used by U.S. distressed debt funds to avoid billions in Irish taxes, assisted by Irish tax-law firms using in-house Irish children's charities to complete the orphan structure, that enabled the U.S. distressed debt funds to export the gains on their Irish assets, free of any Irish taxes or duties, to Luxembourg and the Caribbean (see Section 110 abuse).
Unlike the TP and IP–based BEPS tools, Section 110 SPVs must file public accounts with the Irish CRO, which was how the above abuses were discovered in 2016–17. In February 2018 the Central Bank of Ireland upgraded the little-used L–QIAIF regime to give the same tax benefits as Section 110 SPVs but without having to file public accounts. In June 2018, the Central Bank reported that €55 billion of U.S.–owned distressed Irish assets, equivalent to 25% of Irish GNI*, moved out of Irish Section 110 SPVs and into L–QIAIFs.
Green Jersey BEPS tool
Apple's Q1 2015 Irish restructure, post their €13 billion EU tax fine for 2004–2014, is one of the most advanced OECD-compliant BEPS tools in the world. It integrates Irish IP–based BEPS tools, and Jersey Debt–based BEPS tools, to materially amplify the tax sheltering effects, by a factor of circa 2. Apple Ireland bought circa $300 billion of a "virtual" IP–asset from Apple Jersey in Q1 2015 (see leprechaun economics). The Irish "capital allowances for intangible assets" ("CAIA") BEPS tool allows Apple Ireland to write-off this virtual IP–asset against future Irish corporation tax. The €26.220 billion jump in intangible capital allowances claimed in 2015, showed Apple Ireland is writing-off this IP–asset over a 10-year period. In addition, Apple Jersey gave Apple Ireland the $300 billion "virtual" loan to buy this virtual IP–asset from Apple Jersey. Thus, Apple Ireland can claim additional Irish corporation tax relief on this loan interest, which is circa $20 billion per annum (Apple Jersey pays no tax on the loan interest it receives from Apple Ireland). These tools, created entirely from virtual internal assets financed by virtual internal loans, give Apple circa €45 billion per annum in relief against Irish corporation tax. In June 2018 it was shown that Microsoft is preparing to copy this Apple scheme, known as "the Green Jersey".