Ireland remains a ‘centre of corporate tax avoidance,’ a senior adviser who served under US President Barack Obama has said.
On Breakfast Business, economist Brad Setser said Ireland “plays a unique role in the international economic ecosystem” due to its role as the preferred off-shore centre for major US companies.
He said he does not consider Ireland to be a tax haven in the conventional sense of the word – and blamed US Government policy for the huge amounts of corporate tax it is losing out on internationally.
Earlier this year the UN's Economic, Social and Cultural Rights Committee said Ireland needs to shore up its corporate tax policies as they are hindering efforts to ensure wealthy individuals and businesses are not exploiting loopholes to hide profits.
Mr Setser said Ireland is clearly the preferred option for US multinationals.
"Tax haven is a loaded word - rather than debate what exactly is or is not a tax haven, I prefer to simply call Ireland a centre of corporate tax avoidance," he said.
"It is clearly the preferred off-shore corporate centre for major US companies, particularly pharmaceutical and tech companies.
"It clearly helps lower their global tax bill, particularly their US tax bill.
"So it plays a unique role in the international economic ecosystem because it has become such a big centre for the offshore operations of US companies".
'Predictable outcome'
Mr Setser said he's not surprised US companies are able to move funds around.
"I think the 2017 Tax Cuts and Jobs Act - the US corporate tax law that was adopted at the beginning of the Trump administration - was designed in such a way that it left lots of room and lots of scope for US multinational companies to legally avoid US tax," he said.
"This was actually a completely predictable outcome of some poorly designed provisions in US tax law.
"I think ultimately [the] blame for the loss of the US corporate tax base resides with the US Congress for passing a law that allowed this".
OECD tax reform
Ireland has a minimum effective corporate tax rate of 15% since December 2023 - along with 137 other OECD countries and jurisdictions.
Mr Setser, however, believes nothing will really change until 'intangible allowances' for companies disappear.
"I think the impact of the 15% minimum [corporate] tax is sometimes overstated," he said.
"It doesn't get rid of all the depreciation allowances that reduces a companies' taxable profit in Ireland, or any other jurisdiction, in such a way that the effective tax rate is well below 15%.
"Apple has been able to deduct roughly 20bn a year because of Apple Ireland's purchase of Apple Jersey 10 years ago.
"Therefore, Apple Ireland's contribution to the Irish tax base is much smaller than the 50bn or so profit that it books in Ireland.
"Until those intangible allowances expire the effective tax rate is a fraction of 15% in Ireland," he added.
Back in 2016 Ireland was named as one of the world’s worst corporate tax havens in a global study.
Research undertaken by Oxfam put Ireland sixth in a list of 15 countries that are, “helping big business to cheat countries and their citizens out of billions of euro in tax every year.”
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