Ireland as a tax haven

Main articles: Tax haven and Corporate tax haven

Ex. Finance Minister Michael Noonan told an Irish MEP to "put on the green jersey" when told of a new Irish tax avoidance scheme replacing the "double Irish".

Ireland is labelled a tax haven or a corporate tax haven, which it rejects. Ireland's base erosion and profit shifting ("BEPS") tools give foreign corporates effective tax rates of 0% to 3% on all globally re-routed profits, and are the largest BEPS flows in the world. Ireland's QIAIF regime, 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 taxation system. While these structures are OECD-whitelisted, Ireland uses data protection and privacy laws, as well as opt-outs from the filing of public accounts, to obscure their effects. There is evidence Ireland behaves like a § Captured state willing to foster and protect tax avoidance strategies. Ireland features on all tax haven lists from academic and non-governmental organisations. Ireland does not meet the 1998 OECD definition of a tax haven, but no OECD member, including Switzerland, has ever met this definition and only Trinidad & Tobago met it in 2017. Similarly, no EU-28 country is amongst the 64 listed in the 2017 EU tax haven blacklist and greylist. Brazil became the first G20 country to blacklist Ireland as a tax haven in 2017.

Research attributes tolerance of Ireland as a corporate tax haven to be a result of § Political compromises arising from the traditional U.S. "worldwide" corporate tax system. The passing of the U.S. Tax Cuts and Jobs Act ("TCJA"), and move to a hybrid "territorial" tax system, has removed some of the need for these compromises. Forecast 2019 net effective corporate tax rates for IP-heavy U.S. multinationals are similar, whether they are legally based in Ireland or the U.S. While the TCJA neutralises some Irish BEPS tools, it has enhanced others (e.g. Apple's "Green Jersey"). A reliance on U.S. corporates (80% of corporate tax, 25% of direct labour, and 57% of OECD value-add), is a concern in Ireland.

Ireland’s traditional weakness in attracting non-U.S. corporates, or any corporates from full "territorial" tax systems (Table 1), was apparent in its 2017-18 failure to attract London financial services firms due to Brexit. However, Ireland’s expansion into traditional tax haven tools (e.g. QIAIFs, LQIAIFs, and Section 110 SPVs), has seen tax-driven law firms, including offshore magic circle law firms, setting up Irish offices to handle Brexit-driven tax restructuring. These tax haven-type tools have enabled Ireland to become the world's 4th largest shadow banking centre, and 5th largest Conduit OFC.

Source of labels

See also: Tax haven § Tax haven lists, and Corporate haven § Corporate tax haven lists

Ireland has been labeled a tax haven, or a corporate tax haven (or conduit ofc), by:

1. The three academic leaders in tax haven study: Hines (1994, 2007, 2010), Dharmapala (2006 and 2009), and Zucman (2015 and 2018); and influential studies by CORPNET in 2017 (Conduit and Sink OFCs) and by the IMF in 2018; and by academic tax-policy centres in Germany, the U.K., the UN, and Ireland;
2. The three main non-governmental tax organisations: Tax Justice Network, the Institute on Taxation and Economic Policy, and Oxfam;
3. The two U.S. Congressional investigations into global tax havens: 2008 by the Government Accountability Office, and 2015 by the Congressional Research Service.
4. The 2013 U.S. Senate Permanent Subcommitte on Investigation ("PSI") into tax avoidance activities of U.S. multinationals by using "profit shifting" BEPS tools;
5. The three main published books on tax havens in the last decade: Tax Havens: How Globalization Really Works, by Ronen Palan and Richard Murphy from 2010, Treasure Islands: Tax Havens and the Men Who Stole the World, by Nicholas Shaxson from 2011, and The Hidden Wealth of Nations: The Scourge of Tax Havens, by Gabriel Zucman from 2015.
6. The main financial media: New York Times, Bloomberg, the Wall Street Journal, Forbes, the Financial Times, and the Economist;
7. Some leading economists;
8. One G20 economy, Brazil, who blacklisted Ireland as a tax haven in 2017; and potentially the U.S. State of Oregon whose Department of Revenue recommend blacklisting Ireland in 2017.

Ireland has also been labelled related terms to being a tax haven:

1. In Germany, the related term tax dumping has been used against Ireland by German political leaders;
2. The Financial Stability Forum ("FSF") and the International Monetary Fund ("IMF") listed Ireland as an offshore financial centre in 2000;
3. Bloomberg, in an article on PwC Ireland's managing partner Feargal O'Rourke, used the term tax avoidance hub;
4. The 2013 U.S Senate PSI Levin-McCain investigation into U.S. multinational tax, as well as labelling Ireland a tax haven, called Ireland the holy grail of tax avoidance;
5. Because the OECD has never listed any of its 35 members as tax havens, Ireland, Luxembourg, the Netherlands and Switzerland are referred to as the OECD tax havens;
6. Because the EU has never listed any of its 28 members as tax havens, Ireland, Luxembourg, the Netherlands and Belgium are referred to as the four EU tax havens.

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.

The international community at this point is concerned about the nature of tax havens, and Ireland in particular is viewed with a considerable amount of suspicion in the international community for doing what is considered - at the very least - on the boundaries of acceptable practices.

— Ashoka Mody, Ex-IMF mission chief to Ireland, "Former IMF official warns Ireland to prepare for end to tax regime", 21 June 2018.

Evidence used

Global U.S. BEPS hub

See also: Corporation tax in the Republic of Ireland § Low tax economy

Ireland is not a base to sell into Europe, but a base to shield from U.S. taxes: Irish corporate gross operating surplus by the controlling country of the company (note: a material part of the Irish figure are from U.S. tax inversions who are also US-controlled companies). Eurostat (2015)

Apple's Q1 2015 Irish IP-restructuring (leprechaun economics), is the largest BEPS action in history.
Brad Setser & Cole Frank (CoFR), and led to the replacement of Irish GDP/GNP with GNI*.

Ireland ranks in all global lists of corporate tax havens, 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 into Ireland. Once in Ireland, these tools reduce Irish corporate taxes by re-routing to say Bermuda with the double Irish tool (e.g. as Google and Facebook do), or to Malta with the single malt tool (e.g. as Microsoft and Allergan do), or by writing-off internally created virtual assets against Irish corporate tax with the capital allowances for intangible assets tool (e.g. as Apple do post 2015). These BEPS tools give an Irish effective corporate tax rate of 0-3%. They are the world's largest tax tools, and exceed the aggregate BEPS flows of the Caribbean tax haven system.

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 provide material employment in Ireland (e.g. U.S. life sciences.). Some firms like Apple maintain expensive Irish contract manufacturing TP-based BEPS operations (vs. Asia), 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 4th largest global shadow banking centre, 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, which enabled the U.S. distressed debt funds to export the gains on their Irish assets, income and capital, 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.

Apple's Q1 2015 Irish restructure, post their €13 billion EU fine for avoiding Irish taxes from 2004-2014, is cited as a tax structure that integrates Irish IP-based, and Jersey Debt-based, BEPS tools. Apple Ireland bought circa $300 billion of a "virtual" IP-asset from Apple Jersey. The Irish "capital allowances for intangible assets" BEPS tool allows Apple Ireland to write-off this virtual IP-asset against future Irish corporation tax. The €26.220 billion jump in Irish intangible capital allowances claimed for 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 from virtual internal assets financed by virtual internal loans, give Apple circa €45 billion per annum in relief against Irish corporation tax. Microsoft is preparing to copy Apple’s tax scheme, known as "the Green Jersey".

The U.S Tax Cuts and Jobs Act of 2017 ("TCJA") GILTI-regime neutralises the Jersey Debt-based BEPS tool of this "Green Jersey" structure. However, because Irish intangible capital allowances are accepted as U.S. GILTI deductions, it now enables U.S. multinationals to achieve net effective U.S. corporate tax rates, via TCJA participation relief, of 0 to 3% from the Irish IP-based capital allowances part of this "Green Jersey" BEPS structure (i.e. why Microsoft is about to use it).

Domestic tax tools

See also: Qualifying investor alternative investment fund (QIAIF)

Ireland's Qualifying Investor Alternative Investment Fund ("QIAIF") regime is a range of five tax-free legal wrappers (ICAV, Investment Company, Unit Trust, Common Contractual Fund, Investment Limited Partnership). Four of the five wrappers do not file public accounts with the Irish CRO, and therefore offer tax confidentiality and tax secrecy. While they are regulated by the Central Bank of Ireland, like the Section 110 SPV, it has been shown many are effectively unregulated "brass plate" entities. Under the 1942 Central Bank Secrecy Act, the Central Bank of Ireland cannot send the confidential information which QIAIFs must file with them to the Irish Revenue.

QIAIFs have been used in tax avoidance on Irish assets, on circumventing international regulations, on avoiding tax laws in the EU and the U.S. QIAIFs can be combined with Irish corporate BEPS tools (e.g. the Orphaned Super-QIF), to create routes out of the Irish corporate tax system to Luxembourg, the main Sink OFC for Ireland. It is asserted that a material amount of assets in Irish QIAIFs, and the ICAV wrapper in particular, are Irish assets being shielded from Irish taxation. Offshore magic circle law firms (e.g. Walkers and Maples and Calder, who have set up offices in Ireland), market the Irish ICAV as a superior wrapper to the Cayman SPC (Maples and Calder claim to be a major architect of the ICAV), and there are explicit QIAIF rules to help with re-domiciling of Cayman/BVI funds into Irish ICAVs.

Captured state

See also: Leprechaun economics and Put on the green jersey

Irish Taoiseach Enda Kenny (l) PwC (Ireland) Managing Partner Feargal O'Rourke (r), architect of the double Irish BEPS tool.

There is evidence Ireland meets the captured state criteria for tax havens. When the EU investigated Apple in Ireland in 2016 they found private tax rulings from the Irish Revenue giving Apple a tax rate of 0.005% on +€100 billion of profits. When the Irish Finance Minister Michael Noonan was alerted by an Irish MEP in 2016 to a new Irish BEPS tool to replace the double Irish (called the single malt), he was told to "put on the green jersey". When Apple executed the largest BEPS transaction in history in Q1 2015 (see "leprechaun economics"), the Central Statistics Office suppressed data to hide Apple's indentity. Noonan changed the capital allowances for intangible assets scheme rules, the IP-based BEPS tool Apple used in Q1 2015, to reduce Apple's effective tax rate from 2.5% to 0%. When it was discovered in 2016 that U.S. distressed debt funds abused Section 110 SPVs to shield €80 billion in Irish loan balances from Irish taxes, the Irish State did not investigate or prosecute (see Section 110 abuse). The Central Bank of Ireland, who regulates Section 110 SPVs, does not look for tax avoidance. In February 2018, the Central Bank upgraded the little used L-QIAIF tax-free regime, which offers strong privacy from public scrutiny. In June 2018, the U.S. distressed debt funds transferred €55 billion of Irish assets (over 25% of Irish GNI*), out of Section 110 SPVs and into confidential L-QIAIFs.

The OCED's June 2017 Anti-BEPS MLI was signed by 70 jurisdictions. The corporate tax havens, including Ireland, opted out of the key articles, and especially Article 12.

Global legal firm Baker McKenzie, representing a coalition of 24 multinational US software firms, including Microsoft, lobbied Michael Noonan, as [Irish] minister for finance, to resist the [OECD MLI] proposals in January 2017. In a letter to him the group recommended Ireland not adopt article 12, as the changes “will have effects lasting decades” and could “hamper global investment and growth due to uncertainty around taxation”. The letter said that “keeping the current standard will make Ireland a more attractive location for a regional headquarters by reducing the level of uncertainty in the tax relationship with Ireland’s trading partners”.

— Irish Times. "Ireland resists closing corporation tax ‘loophole’", 10 November 2017.

Central Bank of Ireland ("CBI") regulates QIAIFs. When Irish public tax scandals concerning the Section 110 SPV, also regulated by the CBI, emerged in 2016, the CBI upgraded the little-used LQIAIF, to give the same benefits as Section 110 SPVs, but with confidentiality and tax secrecy.

Tax haven investigator Nicholas Shaxson documents how Ireland's captured state uses a complex, and "siloed", network of Irish privacy and Irish data protection laws to navigate around the fact that most of its tax tools are OECD-whitelisted, and therefore must be transparent to some State entity. For example, Irish QIAIFs (and L-QIAIFs) are regulated by the Central Bank of Ireland and must provide the Bank with details of their financials. However, the 1942 Central Bank Secrecy Act prevents the Central Bank from sending this data to the Revenue Commissioners. Similarly, the Central Statistics Office (Ireland) stated it had to restrict its public data release in 2016-17 to protect the Apple's identity during its 2015 BEPS action, because the 1993 Central Statistics Act prohibits use of economic data for revealing such activities. When the EU Commission fined Apple €13 billion for illegal State aid in 2016, there were no official records of any discussion of the tax deal given to Apple outside of the Irish Revenue Commissioners because such data is also protected. When Tim Cook stated in 2016 that Apple was the largest tax-payer in Ireland, the Irish Revenue Commissioners quoted Section 815A of the 1997 Tax Acts that prevents them disclosing such information, even to members of Dail Eireann, or the Irish Department of Finance (despite the fact that Apple is circa one-fifth of Ireland's GDP).

Commentators note the "plausible deniability" provided by Irish privacy and data protection laws, that enable the State to function as a tax haven while maintaining OECD compliance, and ensuring the Irish State entity that regulates each specific tax tool are fully "siloed" from any other Irish State body.

Rebuttal of labels

Effective tax rates

See also: Corporation tax in the Republic of Ireland § Effective tax rate (ETR), and Corporate tax haven § Financial impact

The Irish State has refuted the tax haven labels as unfair criticism of its low, but legitimate, 12.5% Irish corporate headline tax rate, which it defends as being the Irish corporate effective tax rate ("ETR"). Studies show that Ireland's aggregate effective corporate tax rate is circa 2-4%. This lower aggregate effective tax rate is consistent with the individual effective tax rates of U.S. multinationals in Ireland (U.S.-controlled multinationals are 14 of Ireland's largest 20 companies, and Apple alone is over one-fifth of Irish GDP; see "low tax economy"), as well as the IP-based BEPS tools openly marketed by the main tax-law firms in the Irish International Financial Services Centre with ETRs of 0-3% (see "effective tax rate").

The Irish State does not refer to QIAIFs (or L-QIAIFs), or Section 110 SPVs, which allow non-resident investors to hold Irish assets indefinately without incurring Irish taxes, VAT or duties (e.g. permanent "base erosion" to the Irish exchequer as QIAIF units and SPV shares can be traded), and which can be combined with Irish BEPS tools to avoid all Irish corporate taxation (see § Domestic tax tools).

Salary taxes, VAT, and CGT for Irish residents are in line with rates of other EU-28 countries (if not higher). Ireland's approach to taxes is summarised by the OECD's "Hierarchy of Taxes" pyramid (reproduced in the Department of Finance Tax Strategy Group's 2011 tax policy document). Ireland has a special lower salary tax scheme for employees of foreign multinationals ("SARP").

OECD 1998 definition

See also: Tax havens § Definitions

EU and U.S. studies that attempted to find a consensus on the definition of a tax haven, have concluded that there is no consensus (see tax haven definitions).

The Irish State, and its advisors, have refuted the tax haven label by invoking the 1998 OCED definition of a "tax haven" as the consensus definition:

1. No or nominal tax on the relevant income;
2. Lack of effective exchange of information; (with OECD)
3. Lack of transparency; (with OECD)
4. No substantial activities (e.g. tolerance of brass plate companies).

Most Irish BEPS tools and QIAIFs are OECD-whitelisted (and can thus avail of Ireland's 70 bilateral tax treaties), and therefore while Ireland could meet the first OECD test, it fails the second and third OECD tests. The fourth OECD test was withdrawn by the OECD in 2002 on protest from the U.S., which indicates is a political dimension to the definition. In 2017, only one jurisdiction, Trinidad & Tobago, met the 1998 OECD definition of a tax haven (Trinidad & Tobago is not one of the 35 OECD member countries), and the definition has been subject to criticism.

The noted tax haven academic James R. Hines Jr notes that OECD tax haven lists never include the 35 OECD member countries (Ireland is a founding OECD member). The OECD definition was produced in 1998 as part of the OECD's investigation into Harmful Tax Competition: An Emerging Global Issue. By 2000, when the OECD published their first list of tax havens, it included no OECD member countries as they were now all considered to have engaged in the OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes (see § External links). Because the OECD has never listed any of its 35 members as tax havens, Ireland, Luxembourg, the Netherlands and Switzerland are sometimes referred to as the "OECD tax havens".

Subsequent definitions of tax haven, and/or offshore financial centre/corporate tax haven (see definition of a "tax haven"), focus on effective taxes as the primary requirement, which Ireland would meet, and have entered the general lexicon. The Tax Justice Network, who places Ireland on its tax haven list, split the concept of taxes from transparency by creating a secrecy jurisdictions and the Financial Secrecy Index. The OECD has never updated or amended its 1998 definition (apart from dropping the 4th criteria). The Tax Justice Network imply the U.S. may be the reason.

EU tax haven lists

While by 2017, the OECD only considered Trinidad and Tobago to be a tax haven, in 2017 the EU produced a list of 17 tax havens, plus another 47 jurisdictions on the "grey list", however, as with the OECD lists above, the EU list did not include any EU-28 jurisdictions. EU Commission was criticised for not including Ireland, Luxembourg, the Netherlands, Malta and Cyprus

Hines-Rice 1994 definition

See also: Tax haven § Tax haven lists, and Corporate haven § Corporate tax haven lists

The first major academic paper to produce a list of 41 tax havens, which included Ireland, was by James R Hines Jr and Eric M Rice in 1994. Most academic papers into tax havens cite the Hines-Rice paper which is still regarded as important in the study of tax havens. Hines has expanded his original 1994 list to 52 countries (papers in 2007 and 2010), and Ireland still features in it. Subsequent major academic papers on tax havens by Dharmapala (2009, 2010), and Zucman (2015, 2018) cite the 1994 Hines-Rice paper, but create their own tax haven lists, all of which include Ireland.

The Irish State, and related advisors, criticise modern academic studies on tax havens, which estimate Ireland to be the world's largest tax haven, as being "out-of-date" because they cite the Hines-Rice paper. In 2013, the Department of Finance (Ireland) commissioned an investigation into tax havens with the Department of the Revenue Commissioners and the state-sponsored Economic and Social Research Institute, who found the only sources of Ireland being a named a tax haven were from:

1. "First, because of Ireland’s 12.5 percent corporation tax rate"; (see § Effective tax rates)
2. "Second, the role of the International Financial Services Centre in attracting investment to Ireland" (this is effectively also linked to § Effective tax rates);
3. "Third, because of a rather obscure, but nonetheless influential paper by Hines and Rice dating back to 1994."

The following is from a 2018 Irish Independent article by the CEO of the key trade body that represents all U.S. multinationals in Ireland on the 1994 Hines-Rice paper:

However, it looks like the 'tax haven' narrative will always be with us - and typically that narrative is based on studies and data of 20 to 30 years' vintage or even older. It's a bit like calling out Ireland today for being homophobic because up to 1993 same-sex activity was criminalised and ignoring the joyous day in May 2015 when Ireland became the first country in the world to introduce marriage equality by popular vote.

— Mark Redmond, President American Chamber of Commerce in Ireland, 21 June 2018

Unique talent base

See also: Global Competitiveness Report

In a less technical manner to the rebuttals by the Irish State, the labels have also drawn responses from leaders in the Irish business community who attribute the value of U.S. investment in Ireland to Ireland’s unique talent base. At €334 billion, the value of U.S. investment in Ireland is larger than Ireland's 2016 GDP of €291 billion (or 2016 GNI* of €190 billion), and larger than all U.S. investment into the BRIC countries. This unique talent base is also noted by IDA Ireland, the State body responsible for attracting inward investment, but never defined beyond the broad concept.

Ireland has no university in the top 100. Irish education does not appear to be distinctive. Ireland has a high % of third-level graduates, but this is because it re-classified many technical colleges into degree-issuing institutions in 2005-08. This is believed to have contributed to the decline of its leading universities, of which there are barely two left in the top 200 (i.e. a quality over quantity issue). Ireland continues to pursue this strategy and is considering re-classifying the remaining Irish technical institutes as universities for 2019.

Ireland shows no apparent distinctiveness in any non-tax related metrics of business competitiveness including cost of living, league tables of favoured EU FDI locations, league tables of favoured EU destinations for London-based financials post-Brexit (which are linked to quality of talent), and the key World Economic Forum Global Competitiveness Report rankings.

Without its low-tax regime, Ireland will find it hard to sustain economic momentum

— Ashoka Mody, Ex-IMF mission chief to Ireland, "Warning that Ireland faces huge economic threat over corporate tax reliance - Troika chief", 9 June 2018.

Global "knowledge hub" for "selling into Europe"

See also: Double Irish arrangement § Effect of Tax Cuts and Jobs Act

In another less technical rebuttal, the State explains Ireland's high ranking in the established "proxy tests" for tax havens as a by-product of Ireland's position as preferred hub for global "knowledge economy" multinationals (e.g. technology and life sciences), "selling into EU-28 markets". When the Central Statistics Office (Ireland) suppressed its 2016-2017 data release to protect Apple's Q1 2015 BEPS action (i.e. leprechaun economics), it released a paper on "meeting the challenges of a modern globalised knowledge economy".

Ireland has no non-U.S./non-U.K. multinationals in its top 50 companies by revenue, and only one by employees (German retailer Lidl who sells into Ireland). The U.K. multinationals in Ireland are either also selling into Ireland (e.g. Tesco Ireland), or date pre-2009, after which the U.K. overhauled its tax system to a "territorial" model, and is now becoming a tax haven (see U.K. transformation); post this change no major U.K. firms have moved to Ireland (Ireland has failed to win Brexit financial services firms).

U.S.-controlled multinationals are 25 of the top 50 Irish firms (including tax inversions), and 70% of top 50 revenue (see Table 1). U.S. multinations pay 80% of Irish corporate taxes (see "low tax economy"). These Irish-based U.S. multinationals may be selling into Europe, however, the evidence is that they route all non-U.S. business through Ireland. Ireland is more accurately described as a "U.S. corporate tax haven". The U.S. multinationals in Ireland are from "knowledge industries" (see Table 1 below). This is because Ireland's BEPS tools (e.g. the double Irish, the single malt and the capital allowances for intangible assets) require intellectual property ("IP") to execute the BEPS actions, which technology and life sciences possess in quantity (see IP-Based BEPS tools).

Intellectual property (IP) has become the leading tax-avoidance vehicle.

— UCLA Law Review, "Intellectual Property Law Solutions to Global Coporate Tax Avoidance", (2015)

Rather than a "global knowledge hub" for "selling into Europe", Ireland is a base for U.S. multinationals, with sufficient IP to use Ireland's BEPS tools, to shield non-U.S. revenues from U.S. taxation.

In 2018, the U.S. converted into a "territorial" tax system (the U.S. was one of the last remaining "worldwide" tax systems). Post this conversion, U.S. effective aggregate tax rates for IP-heavy U.S. multinationals is very similar to the effective tax rates they would incur if based in Ireland (even net of Irish BEPS tools). This represents a substantive challenge to the Irish economy (see effect of U.S. Tax Cuts and Jobs Act).

Ireland's recent expansion into traditional tax haven services (e.g. Cayman Island and Luxembourg type ICAVs and L-QIAIFs) is a diversifier from U.S. corporate tax haven services. Brexit has been disappointing for Ireland in its failure to attract any London financial services firms, underlying Ireland’s traditional weakness in non-U.S. corporates. Brexit has led to growth in U.K. centric tax-law firms (including offshore magic circle firms), setting up offices in Ireland to handle traditional tax haven services for clients.

TABLE 1: Top 50 companies in Ireland by 2017 revenue booked in Ireland (€ billions)

List omits foreign companies who file very limited Irish accounts (e.g. Accenture)

Rank (By Revenue)	Company Name	Operational Base	Sector (if non-IRL)	Inversion (if non-IRL)	Revenue (2017 €bn)
1	Apple Ireland	United States	technology	not inversion	119.2
2	CRH	IRL	-	-	27.6
3	Medtronic plc	United States	life sciences	2015 inversion	26.6
4	Google	United States	technology	not inversion	26.3
5	Microsoft	United States	technology	not inversion	18.5
6	Eaton	United States	industrial	2012 inversion	16.5
7	DCC	IRL	-	-	13.9
8	Allergan Inc	United States	life sciences	2013 inversion	12.9
9	Facebook	United States	technology	not inversion	12.6
10	Shire	Great Britain	life sciences	2008 inversion	12.4
11	Ingersoll-Rand	United States	industrial	2001 inversion	11.5
12	Dell Ireland	United States	technology	not inversion	10.3
13	Oracle	United States	technology	not inversion	8.8
14	Smurfit Kappa	IRL	-	-	8.6
15	Ardagh Glass	IRL	-	-	7.6
16	Pfizer	United States	life sciences	not inversion	7.5
17	Ryanair	IRL	-	-	6.6
18	Kerry Group	IRL	-	-	6.4
19	Merck & Co	United States	life sciences	not inversion	6.1
20	Sandisk	United States	technology	not inversion	5.6
21	Boston Scientific	United States	life sciences	not inversion	5.0
22	Penneys	IRL	-	-	4.4
23	Total Produce	IRL	-	-	4.3
24	Perrigo	United States	life sciences	2013 inversion	4.1
25	Experian	Great Britain	technology	2007 inversion	3.9
26	Musgrave	IRL	-	-	3.7
27	Kingspan	IRL	-	-	3.7
28	Dunnes Stores	IRL	-	-	3.6
29	Mallinckrodt Pharma	United States	life sciences	2013 inversion	3.3
30	ESB	IRL	-	-	3.2
31	Alexion Pharma	United States	life sciences	not inversion	3.2
32	Grafton Group	IRL	-	-	3.1
33	VMware	United States	technology	not inversion	2.9
34	Abbott Laboratories	United States	life sciences	not inversion	2.9
35	ABP Food Group	IRL	-	-	2.8
36	Kingston Technology	United States	technology	not inversion	2.7
37	Greencore	IRL	-	-	2.6
38	Circle K Limited	IRL	-	-	2.6
39	Tesco Ireland	Great Britain	food retail	not inversion	2.6
40	McKesson	United States	life sciences	not inversion	2.6
41	Peninsula Petroleum	IRL	-	-	2.5
42	Glanbia	IRL	-	-	2.4
43	Intel Ireland	United States	technology	not inversion	2.3
44	Gilead Sciences	United States	life sciences	not inversion	2.3
45	Adobe	United States	technology	not inversion	2.1
46	CMC Limited	IRL	-	-	2.1
47	Ornua Dairy	IRL	-	-	2.1
48	Baxter	United States	life sciences	not inversion	2.0
49	Paddy Power Betfair	IRL	-	-	2.0
50	Icon Plc	IRL	-	-	1.9
Total					454.4

From the above table:

1. US-controlled firms are 25 of the top 50 and represent €317.8 billion of the €454.4 billion in total 2017 revenue (or 70%);
2. Apple alone is over 26% of the total top 50 revenue and greater than all top 50 Irish companies combined (see leprechaun economics on Apple as one-fifth of Irish GDP);
3. UK-controlled firms are 3 of the top 50 and represent €18.9 billion of the €454.4 billion in total 2017 revenue (or 4%), and Shire and Experian are pre the 2009-2012 U.K. transformation to a "territorial" tax system;
4. Irish-controlled firms are 22 of the top 50 and represent €117.7 billion of the €454.4 billion in total 2017 revenue (or 26%);
5. There are no other firms in the top 50 Irish companies from other jurisdictions.

Political compromises

See also: Corporate haven § Failure of OECD BEPS Project, and Double Irish arrangement § Effect of Tax Cuts and Jobs Act

Contradictions

While Ireland's development into traditional tax haven tools (e.g. ICAVs and L-QIAIFs) is more recent, Ireland's status as a corporate tax haven has been noted since 1994 (the first Hines-Rice tax haven paper), and discussed in the U.S. Congress for a decade. A lack of progress, and delays, in addressing Ireland's corporate tax BEPS tools is apparent:

1. Ireland's most famous BEPS tool, the double Irish, which is attributed to creating the largest build-up in untaxed cash in history, was being documented in 2004. It took over a decade for the EU-OECD to get Ireland to close the double Irish BEPS tool in 2015, however, Ireland was given a further five-year delay to 2020 for existing users of the tool, which include Google and Facebook;
2. Ireland's replacement for the double Irish tool, the single malt, was already up and running in 2014 (and used by Microsoft and Allergan), and has as yet not received any EU-OECD attention. It is noted that since the closure of the double Irish in 2015, the use of Irish BEPS tools increased materially;
3. The OECD, who is running a project since 2012 to stop global BEPS activities, has made no comment on Apple's Q1 2015 $300 billion Irish BEPS action, the largest BEPS transaction in history (i.e. leprechaun economics), with Ireland's expanded capital allowances for intangible assets, BEPS tool;
4. The U.S. administration condemned Apple's Irish tax structures in the 2013 Levin-McCain PSI, however, it ran to Apple's defense when the EU Commission levied a €13 billion fine on Apple for Irish tax avoidance from 2004-2014, the largest corporate tax fine in history, arguing that Apple paying the full 12.5% Irish corporate tax rate would harm the U.S. exchequer;
5. Germany has condemned Ireland for its tax tools, however, Germany is believed to have stalled the EU Commission's Digital Services Tax, and the German administration neutralised its own Parliment's 2018 "Royalty Barrier" by exempting all OECD approved IP schemes (i.e. all of Ireland's BEPS tools), see German Lizenzschranke;
6. Tax haven economist, Gabriel Zucman, showed in 2018 that most corporate tax disputes are between high-tax jurisdictions, and not between high-tax and low-tax corporate tax haven jurisdictions. In fact, Zucman's (et alia) analysis shows that disputes with the major corporate tax havens of Ireland, Luxembourg and the Netherlands, are rare.

Reaolution of TCJA

Tax haven experts explain these contradictions as resulting from the different agendas of the major OECD taxing authorities, and particularly the U.S. and Germany, who rank #2 and #7 respectively, in the 2018 Financial Secrecy Index of tax secrecy jurisdictions:

1. U.S. Perspective. Pre the Tax Cuts and Jobs Act of 2017 ("TCJA"), the U.S. had one of the highest global rates of corporation tax at 35%. Allowing U.S. multinationals to "check-the-box" and use Irish BEPS tools on non-U.S. revenues was a compromise to keep U.S. multinationals from leaving the U.S. The aggregate worldwide tax rates of U.S. multinationals is far lower than 35%. This compromise was not unanimously supported in Washington and some U.S. multinationals still inverted to Ireland.
2. EU Perspective I. The EU is the world's largest net exporting block. Many EU countries therefore also rely on IP-based BEPS tools to re-charge gross profits from global sales of automobiles, chemicals, and other exports, back to the EU. Because most EU countries run a "territorial" tax system, which allows lower tax rates for foreign sourced income, EU multinationals do not need to use Irish BEPS tools as the U.S. multinationals do;
3. EU Perspective II. A second noted EU perspective is that if U.S. multinationals need Ireland as a BEPS hub because the pre-TCJA U.S. "worldwide" tax system did not enable them to charge IP direct from the U.S. (without incurring larger U.S. taxes), then the money Ireland extracts from these U.S. multinationals (e.g. some Irish corporate taxes and Irish salaries), are still a net positive for the aggregate EU-28 economy.

Up until the passing of the TCJA in December 2017, the U.S. was one of eight jurisdictions to run a "worldwide" taxation system. Ireland also operates a "worldwide" tax system. The other six jurisdictions who have "worldwide" tax systems are: Chile, Greece, Israel, Korea, Mexico, and Poland.

Post the TCJA, net effective tax rates for IP-heavy U.S.-controlled multinationals are similar, whether legally headquartered in Ireland or the U.S. It is expected that Washington will be less accommodating to U.S. multinationals using Irish BEPS tools. The EU Commission has also become less tolerant of U.S. multinational Irish tax strategies, as evidenced by the €13 billion fine on Apple for Irish tax avoidance from 2004-2014.

“Now that [U.S.] corporate tax reform has passed, the advantages of being an inverted company are less obvious”

— Jami Rubin, Managing Director and Head of Life Sciences Research Group, Goldman Sachs, March 2018,

TCJA issues

While the Washington and EU political compromises tolerating Ireland as a corporate tax haven may be eroding, tax experts point to various technical flaws in the TCJA which, if not resolved, may actually enhance Ireland as a U.S. corporate tax haven:

1. Acceptance of Irish capital allowance charges in the GILTI calculation. Ireland's most powerful BEPS tool is the capital allowances for intangible assets scheme (i.e Apple's Green Jersey). Post TCJA, U.S. multinationals can achieve net effective U.S. tax rates of 0% to 3% via this Irish BEPS tool. In June 2018, Microsoft prepared a Green Jersey scheme.
2. Tax relief of 10% of Tangible Assets in the GILTI calculation. This incentivises development of Irish infrastructure as the Irish tax code doubles this U.S. GILTI relief with Irish tangible capital allowances. Every $100 a U.S. multinational spends on Irish offices reduces their U.S. taxes by $42 ($21 & $21). In May-July 2018, Google doubled their Dublin hub.
3. Assessment of GILTI on an aggregate basis rather than a country-by-country basis. Ireland's BEPS schemes generate large tax reliefs that net down the aggregate global income eligible for GILTI assessment, thus reducing TCJA’s anti-BEPS protections, and making Ireland’s BEPS tools a key part of U.S. multinational TCJA tax planning.

A June 2018 IMF country report on Ireland, while noting the significant exposure of Ireland's economy to U.S. corporates, concluded that the TCJA may not be as effective as Washington expects in addressing Ireland as a U.S. corporate tax haven.

See also

• Corporation tax in the Republic of Ireland
• Corporate tax haven
• Tax haven
• Leprechaun economics Apple BEPS tool in Ireland
• Modified gross national income replace Irish GDP/GNP
• Green jersey agenda
• Feargal O'Rourke architect of Ireland's BEPS tools
• Matheson (law firm) Ireland's largest U.S. tax advisor
• Qualifying investor alternative investment fund (QIAIF) Irish tax free wrappers
• Double Irish IP-based BEPS tool
• Single Malt IP-based BEPS tool
• Capital Allowances for Intangible Assets IP-based BEPS tool
• Section 110 SPV Debt-based BEPS tool
• Conduit and Sink OFCs analysis of tax havens
• Panama as a tax haven
• United States as a tax haven

External links

• Tax Justice Network: Ireland Section
• OECD Global Forum on Tax Transparency
• Tax Havens: How Globalisation Really Works by Ronen Palen
• American Chamber of Commerce Ireland, the main lobby group for U.S. multinationals in Ireland