Andy: It’s Hard to Argue that Ireland Isn’t a Tax Haven

The European Union has just decided that 17 countries are tax havens, including Bahrain, Namibia and Panama.

The stated criteria were tax transparency (or the lack of it), fairness (whether or not preferential treatment was being given to some taxpayers over others), and participation (or not) in international initiatives designed to limit corporations egregiously reducing their tax bills.

Critics argue that the criteria for inclusion on the list were themselves not fully transparent, and have lambasted the fact that none of the EU’s own countries or territories were included.

For example, the development NGO Oxfam has welcomed the list as a step in the right direction, but claimed that at least four EU countries – Ireland, Luxembourg, Malta, and the Netherlands – should have been listed.

Ireland is identified by Oxfam as a “conduit tax haven”. In other words, it allows corporate revenues to flow through this country in a way that denies tax rightfully due to other jurisdictions.

It is hard to argue with that judgment, and indeed the EU’s own legal case against the Apple corporation’s tax regime in Ireland would seem to implicitly concede the point.

An analysis prepared for the UK-based Tax Justice Network agrees when it comes to EU countries, and goes even further, suggesting that Cyprus and the UK should be added to the list also (together with many of the latter’s dependencies and overseas territories).

In similar vein, a new report – Tax Games: the Race to the Bottom – prepared by a coalition of European NGOs documents how many European governments are actually accelerating this race to the bottom by cuts to corporate tax rates. (This is a somewhat different issue to tax avoidance, but it is related.)

The Race to the Bottom report was coordinated by the European Network on Debt and Development, a spokesperson for which said that the EU “blacklist looks like an attempt to divert attention away from the fact that EU governments have failed to clean up their own house”.

And that report’s chapter on Ireland – prepared by the Debt and Development Coalition – makes for interesting reading, describing this country as “among the frontrunners in the race to the bottom on corporate taxation”.

One particular issue highlighted by the chapter is Ireland’s tax treaties with developing countries, which are shown to significantly reduce poorer countries’ abilities to raise taxation. For example, “a number of other developed countries have tax treaties with Zambia, Ethiopia and Pakistan that allow the developing countries to apply significantly higher tax rates, compared to the rates contained in the treaties with Ireland”.

But none of this seems to greatly concern the proponents of the current system here, including Pádraig Cronin, vice chairman of the Deloitte financial company, writing in the Irish Times, who notes that, “From the Luxembourg Leaks to the Panama Papers to the Paradise Papers there seems to be an insatiable appetite to examine the activities of businesses and individuals.”

One gets the strong impression Cronin thinks this appetite constitutes a rather morbid obsession. He cautions, “It is important that Ireland does not overreact to this scrutiny” or be overly critical of “various complex but legal methods used by businesses and individuals to minimise their tax bills”.

Cronin might have mentioned that his company makes very good money out of promoting and facilitating precisely such complex methods for (completely legal) tax minimisation.

A report earlier this year compiled for a grouping in the European parliament found that Deloitte, along with the other “Big Four” accountancy firms, was “heavily over-represented in [tax] secrecy jurisdictions … This suggests that their presence in these places is related to the secrecy for transactions that these jurisdictions provide”.

Deloitte does what one would expect it to do – and it does so legally and well. But the question is whether what is good for Deloitte et al. is necessarily good for Irish or European society, or indeed for people in places as far afield as Zambia and Pakistan.