Is Ireland making unfair tax deals with developing countries?

A new report says little has changed after a number of global tax scandals...

Is Ireland making unfair tax deals with developing countries?

Cover art from the European Debt and Development Network report

Ireland is entering unfair tax deals with developing countries according to a new report on 'sweetheart deals' in the EU.

Of the 18 countries in the study, Ireland is found to have on average "introduced the highest amount of reductions of developing country tax rates at 5.2 percentage points."

The Survival of the Richest paper adds that the number of sweetheart deals in the EU has soared from 547 in 2013, to 972 in 2014, and it reached 1444 by the end of 2015 – which is an increase of over 160% between 2013 and 2015 (and an increase of almost 50 per cent from 2014 to 2015).

The report highlights the European Commission's ruling that Ireland granted Apple a sweetheart deal - this ruling is subject to appeals

It states that most of these deals are "secret to the public [and] the content of these agreements is unknown."

The study's section on Ireland notes that Irish government announced that it will tighten laws to facilitate the prosecution of serious cases of offshore tax evasion in the wake of the Panama Papers and the it allocated €5m to the Revenue Commissioners to hire 50 new staff and strengthen the systems for auditing and investigation.

The report cites a 2015 International Bureau of Fiscal Documentation (IBFD) analysis of the Irish tax system on behalf of the Irish government - it concluded that "the Irish tax system on its own can hardly lead to significant loss of tax revenue in developing countries." But it notes that this review encountered issues as it said a proportion of the foreign direct investment was labelled as "confidential" or "unspecified."

The European Debt and Development says that it disagrees that Irish tax discounting is not significant - highlighting the high levels of reductions (at the 5.2 percentage point average). It adds that it is pulling from a deeper data pool than the IBFD report.

It also highlights recent research by ActionAid Ireland - which ranked three of Ireland’s tax treaties with developing countries as 'very restrictive'' on the taxing rights of 'developing' countries - including two treaties which were recently renegotiated with Zambia and Pakistan.

Ireland's response

The Department of Finance told Newstalk that it "does not agree with the analysis in ActionAid the report on Ireland’s tax treaties with developing countries which is repeated in this new report," and that it "does not agree with the further commentary on this issue in this report."

It adds that its commentary refers to the terms of old Zambia and Pakistan treaties.

"In relation to the new analysis in this report, it is unclear which of Ireland’s tax treaties have been considered" the Department continued - and that the use of old data would "distort the analysis and paint a misleading picture."

The Department of Finance said, "Double Tax Treaties are negotiated by countries and are only entered into if they are in the best interests of both countries concerned" - it states that, "Very positive efforts have been made by Ireland in recent years in the area of tax treaties and developing countries."

Reform

Tove Maria Ryding of Eurodad - a network of NGOs in 16 European countries - said: "It’s very surprising and deeply worrying to see that the number of secret sweetheart deals is skyrocketing in Europe – as if the LuxLeaks scandal never happened. We know from examples like the Apple case and LuxLeaks that these secret deals can be used for large scale tax avoidance by multinational corporations.

"We can see with the LuxLeaks trial, anyone who tells the public what’s in these deals can get threatened with lawsuits and jail time. The fact that multinational corporations now have more than one thousand sweetheart deals in Europe is deeply concerning, to say the least."

The study concludes that the establishing of an intergovernmental UN tax body could be an effective way to deal with this issue.