Monday, August 19, 2013

19/8/2013: 'Tax Haven' Ireland in the (2009) news again

I've been tracking articles relevant to the debate on the tax haven status of Ireland in relation to corporation tax for some time now.

Here's the last link which sets the chain of previous links on the topic:
http://trueeconomics.blogspot.it/2013/06/1062013-corporate-tax-haven-ireland.html

And since the above, I had couple of posts relevant to the subject:
http://trueeconomics.blogspot.it/2013/06/1662013-minister-in-northern-ireland-is.html
and
http://trueeconomics.blogspot.it/2013/07/2272013-g20-spells-out-squeeze-on-tax.html

Here are couple of most recent ones:

The Guardian covers 2009 case of Vodafone in two stories:
http://www.theguardian.com/business/2013/aug/18/vodafone-tax-deal-irish-office
http://www.theguardian.com/business/2013/aug/18/tax-vodafone-dublin
while the Tax Justice Network responds to the OECD Action Plan on corporate tax avoidance, explicitly identifying Ireland as a 'tax haven'
http://blogs.euobserver.com/shaxson/2013/07/19/press-release-response-to-oecd-action-plan-on-corporate-tax-avoidance/
and lastly the editorial in the EUObserver that also labels Ireland a 'tax haven':
http://blogs.euobserver.com/shaxson/2013/05/02/the-capture-of-tax-haven-ireland-the-bankers-hedge-funds-got-virtually-everything-they-wanted/

Note 1: The Guardian article references EUR67 million rebate on EUR1.04 billion in Vodafone dividends booked into Luxembourg. The dividends were paid on underlying revenues that were booked into Irish GDP and, thus, into our GNI (netting out transfers of royalties etc).These, in turn, required a payment of 0.59% of GNI-impacting activities to the EU Budget. While is is hard to exactly assess how much Irish Exchequer unnecessarily paid into the EU budget due to Vodafone activities, the amount is probably in excess of EUR 5 million and this compounds the transfers of EUR67 million referenced by the Guardian.


Note 2: I am not as much interested in the legal definitions of a tax haven (there are none and, thus, technically-speaking no country can be definitively labeled a tax haven) or in specific groups' definitions of the tax haven (the OECD definition is so convoluted, it virtually makes it impossible for any country with any global political clout - including that acquired via membership in the EU - to be labeled one, while the Tax Justice Network definition is broad enough to potentially include a large number of countries). I am concerned with the spirit of the concept - rent-seeking via tax arbitrage, and with the potential fallout from this in terms of distortions to economic development models and risks arising from same.

Note 3: A 'thank you' is due to a number of people who reminded me - in the context of the Guardian articles linked above - that Ireland charges a 25% corporate income tax on non-trading income. TY to    

2 comments:

Brian O' Hanlon said...

Constantin wrote, "I am concerned with the spirit of the concept - rent-seeking via tax arbitrage, and with the potential fallout from this in terms of distortions to economic development models and risks arising from same".

Very much so, and especially as we move further and further into a new era, where many of the forms of 'production' are digital in nature, and often only involve a country serving as a kind of 'chamber' in the world wide digital system, through which the stream of bits has to go through in order to reach its destination market, some place else entirely.

It's like how water meters are being installed now outside of houses etc. A lot of the time, all that is happening in places such as Ireland, is that the flow of digital enterprise is being 'clocked' at some destination like our island, and little more. I.e. The numbers get booked in one jurisdiction, like a small island, where it is just handy to do so, . . . but all of the real 'action', the back end innovation and the market for the produce, is some place else removed.

Brian O' Hanlon said...

'Ireland as a primary manhole in the digital economy'.

Obviously it can be dolled up for the election posters, but my fear is that that is what election 2016 will be about.