Showing posts with label Ireland tax haven. Show all posts
Showing posts with label Ireland tax haven. Show all posts

Thursday, August 22, 2019

22/8/19: Irish Economy is Now Fully Captured by the Multinationals


Just as in the years prior, 2018 was another year of massive dominance of the foreign-owned multinational corporations in Irish official economic growth statistics. Per latest data from CSO (see the link below), in 2018, MNEs-dominated sectors of the Irish economy have contributed 5.6 percentage points to the overall growth in Gross Value Added in Ireland, against domestic sectors contribution of 2.3 percentage points. This marks an increase on 2017 growth contribution by MNEs (4 percentage points against domestic 2.9 percentage points), and 2016 figures (2.4 percentage points growth for MNEs against 2.3 percentage points for domestic).



Over the last 5 years, overall share of real Gross Value Added in the Irish economy accruing to the multinationals-dominated sectors has risen from 25.4 percent to 42.4 percent, as the Irish economic activity metrics have become increasingly removed from the reality of actual production and supply of goods and services.


Billions in taxpayers' spending on promoting Irish indigenous enterprises and entrepreneurship over the years have seen multinationals' share of the Irish economy growing threefold between 1995 and 2018.


Source: https://www.cso.ie/en/releasesandpublications/er/gvafm/grossvalueaddedforforeign-ownedmultinationalenterprisesandothersectorsannualresultsfor2018/?utm_source=email&utm_medium=email&utm_campaign=Gross%20Value%20Added%202018%20Results

Monday, May 14, 2018

14/5/18: Irish Tax Avoidance Machine and the Balance of Payments


One blog post and one paper tackling one of the greater mysteries of the Irish National Accounts, the Balance of Payments, peeling the layers of tax avoidance onion:

Both worth digesting.

Sunday, February 25, 2018

25/2/2018: Tax Havens and Financial Secrecy ca 2018


The notion of what defines a tax haven is a complex one and does not easily lend itself to a precise definition. This presents numerous problems. As a personal example is an academic paper that I am currently working on with three other co-authors in which we had to use several different definitions of tax havens, primarily because the official (OECD) designations were so deeply politicized as to exclude a wide range of countries.

Tax Justice Network this week published its Financial Secrecy Index (https://www.financialsecrecyindex.com/). The Index is based on 20 tax policy-specific indicators, which are described here (https://www.financialsecrecyindex.com/introduction/method-and-concepts) and in broad terms provides a view of just how open the country is to facilitating tax avoidance or tax evasion through its financial laws, regulations and systems. The 20 indicators are:

  • Banking secrecy
  • Wealth Ownership disclosures, covering: existence of a public Trust and Foundations Register, Recording of Company Ownership disclosures, and Other Wealth Ownership
  • Limited Partnership Transparency, Public Company Ownership, Public Company Accounts
  • Country-by-Country Reporting, and Corporate Tax Disclosure, Legal Entity Identifier, and Tax Administration Capacity
  • Consistent Personal Income Tax
  • Does the jurisdiction facilitate tax avoidance and encourage tax competition with its treatment of capital income in local income tax law? Is there tax court secrecy, and are there harmful tax structures, e.g. bearer shares; use of large banknotes, existence of trusts with flee clauses, etc
  • Public Statistics disclosures about international financial, trade, investment and tax position
  • Anti - Money Laundering regime 
  • Automatic Information Exchange, Bilateral Treaties, and International Legal Cooperation
Using the methodology described in the above link, the Tax Justice Network arrive at the country rankings in terms of how open the country system is to facilitation of tax avoidance and evasion, including through provision of financial secrecy and non-disclosure facilities that help international companies and investors avoid tax payments in their jurisdictions of origin.

The results are surprising, because they stand in a stark contrast to politically sanitized version of tax avoidance lists published by the likes of the toothless and politically controlled OECD:


Here's the top shocker: the U.S. - a country that routinely bullies other jurisdictions when it comes to extracting tax data that serves the American own purposes is number two most active tax avoidance facilitation countries in the world.  Germany, another stalwart of anti-tax avoidance rhetoric and co-sponsor of the OECD's BEPS anti-tax avoidance process alongside the U.S. is ranked number 7. Japan is number 13. Canada is number 21. And so on.

Another surprise, Ireland - previously ranked 37th in 2015 Index, with a secrecy score of 40 (see https://www.financialsecrecyindex.com/Archive2015/CountryReports/Ireland.pdf), the country is now ranked 26th, with a secrecy score of 51 (this year's country report here: https://www.financialsecrecyindex.com/PDF/Ireland.pdf). In other words, things are not quite improving for Ireland.

A third surprise is Lichtenstein. This country has been commonly accused of being a major secrecy tax haven for financial flows, quite often, without any serious consideration of the more recent reforms in the country's financial services sector. Yet, Lichtenstein ranks lowly 46th in the index, just below Norway. IN the same vein, Cyprus - that has been effectively labeled a dirty money Island for Russian mobsters during 2011 financial restructuring episode - ranks reasonably low at 24th place, well better than Germany - a country from which these accusations originated.

These, and other considerations, arising from the Index results should remind us of the complexity involved in assessing the extent of financial and tax systems facilitation of illicit and ethically questionable activities. Tax havens come in all forms and shapes, some benign, others damaging to the socio-economic environments, many having an adverse impact only in the long run.

It is quite easy for the media to label a jurisdiction a safe haven for crime. It is much harder to establish an empirical basis to either support or reject such a label.

Saturday, February 8, 2014

8/2/2014: Yahoo's Tax Base (err… Optimisation) is Moving to Ireland


Some slowdown in the tax haven news for Ireland recently and now a return back: http://www.reuters.com/article/2014/02/07/us-yahoo-europe-tax-idUSBREA160Y420140207

Yahoo! Inc will shift its European tax base to Ireland from Switzerland, due to mounting pressures on Swiss tax codes.

Aptly, French authorities, already rather irate about Irish tax loophole known as Double-Irish are fuming: http://www.irishtimes.com/business/sectors/technology/yahoo-move-a-blow-to-france-1.1682566

And of course our own leaders are denying… citing our tight to have a low tax rate... as if someone is challenging the rate. Nothing like 'deflect and deny' strategy at work.

You can track some of the top stories on Irish tax regime in the news starting from here:
http://trueeconomics.blogspot.ie/2014/01/2112014-no-special-ict-services-tax-but.html
or by searching this blog for 'tax haven'.


As an aside: 

There is an interesting dichotomy being played out across Irish policy and state institutions and the MNCs when it comes to the Double Irish loophole in the tax code.

The dichotomy is based on the argument that since Double Irish is not illegal, there is nothing wrong with it.

Let's quickly consider this argument: MNCs and the Irish State promote good corporate 'citizenship' via extensive deployment of and support for Corporate Social Responsibility programmes. So far so good.

Via Double Irish, the same MNCs with the blessing of the Irish State are at the same time reducing tax payments in the countries where the MNCs use public infrastructure, institutions and benefit from returns to social capital that are paid for, in large, by taxes. When this is done by locating actual value-added activities in a country, like Ireland, with low tax rate, there is a reduction in demand for the above resources in other countries (e.g. MNCs employees use these services and returns in Ireland instead of, say, France). But when it is done via loopholes and transfer pricing, the employees of MNCs are staying in the locations where the value-added is created (e.g. France), while their tax base is partially migrating to an arbitrary and unrelated to value-added activities jurisdiction (e.g. Ireland).

Thus, the function of these loopholes is to transfer resources from the activity-linked jurisdiction to Ireland. It is a zero sum game (no new value is created) and it is a beggar thy neighbour system (one jurisdiction gains at the expense of the other). In simple terms, whether it is legal or not, it is wrong.

So how come the executives of the companies and the State officials who so loudly extol the virtues of corporate citizenship so quickly forget the said virtues and run for the cover of legal codes when it comes to tax regime? Is ti because the price of doing things right is different from the price of doing things legally?

Sunday, June 16, 2013

16/6/2013: A Minister in Northern Ireland is Fond of Slaying Dragons

Readers of this blog are aware where I stand on excessively aggressive tax optimisation by some companies that the Irish system permits. There is, however, a major distinction implied by my arguments: Irish system of taxation is fully legal and does not violate other nations' laws. From economics point of view it is a form of tax haven. From legal point of view it is not.

This fine distinction is too often lost on some of this blog's readers, some Irish politicians (not readers of this blog) and, self-evidently after the below, to the Northern Ireland's  Finance Minister.


As reported by BBC (http://www.bbc.co.uk/news/uk-northern-ireland-22925772) "...Sammy Wilson has accused the Irish government of "stealing" UK tax revenue. The DUP minister said he was concerned companies were using the Republic of Ireland to pay tax which he claims should be paid in the UK. ..."My view is that the British government does have some leverage on the Irish government there, because they have a £7.5bn loan, that is a lot of leverage," he told the BBC programme Sunday Politics."

The terms of the loans conditions from the UK to Ireland are explained here: http://www.telegraph.co.uk/finance/financialcrisis/8203912/Key-points-terms-of-UK-loan-to-Ireland.html clearly showing the amount extended to be capped at maximum £3.25 billion (€3.76 billion) - subject to the exchange rate differences.

It might be possible that Minister Wilson was referencing some headline he read somewhere, e.g. http://www.independent.ie/business/irish/uk-slashes-its-interest-rate-on-our-7bn-bailout-loans-26863834.html but even the article headlined with '£7 billion loan' cites in the body of the text correct amount of £3.25 billion.

Another similar headline relates to the orignal estimates of the potential loan, e.g. http://www.guardian.co.uk/business/2010/nov/22/ireland-bailout-uk-lends-seven-billion, which was capped less a month after, e.g. http://www.guardian.co.uk/politics/2010/dec/08/george-osborne-cap-uk-loan-ireland ... at £3.25 billion.

NTMA reports the latest drawdown amounts here: http://www.ntma.ie/business-areas/funding-and-debt-management/euimf-programme/
According to the NTMA, Ireland has drawn down only £2.42 billion worth of UK funds so far.

We are, indeed, thankful to the UK taxpayers for providing these loans and for offering them on terms that reflected broader restructuring of these loans by other lenders.


On Minister Wilson's tax 'theft' charge, per Journal.ie report: "The Republic’s junior finance minister Brian Hayes, speaking on the same programme, said it was up to other countries to change their own tax laws if they wished to stop companies headquartered there from being able to avoid tax."

I often disagree with Minister Hayes on many matters, but on this occasion he is correct.