From the "Double Irish" to a "Green Jersey", Ireland Remains a Tax Haven

Andy Storey

Andy Storey is a lecturer in political economy at University College Dublin and a board member of human rights group Action from Ireland (Afri).


Those of us concerned with Ireland’s growing participation in Western-led warfare – especially the use of Shannon airport as a transit point for US troops to and from war zones – are routinely frustrated by the government’s insistence, despite clear evidence, that Ireland’s neutrality remains intact.

The devil is in the definition of neutrality, narrow and semantic. Something similar arises vis-à-vis the government’s claim that Ireland is not a tax haven – in the face of an increasingly overwhelming body of research that suggests otherwise.

To wit: a new report written for the European United Left/Nordic Green Left grouping in the European Parliament: “Exposed: Apple’s Golden Delicious Tax Deals: Is Ireland Helping Apple Pay Less than 1% Tax in the EU?”

The report looks at how Apple restructured its tax affairs after 2015 and several challenges to it, including the EU Commission’s charge that the corporation received illegal state aid to the tune of €13 billion (in the form of special tax concessions) from the Irish government.

Apple appears to have ridden out those challenges quite comfortably: the report estimates that Apple’s effective tax rate in the EU may have been as low as 0.7 percent between 2015 and 2017.

Ireland’s role in the facilitation of this ongoing tax avoidance is complex and multifaceted, but crucial.

One element of it is the company’s ability to claim a tax allowance here for the depreciation of non-tangible assets (essentially this means intellectual property). This write-off against tax, introduced by the Irish government at the suggestion of the American Chamber of Commerce in 2014, could be up to 100 percent to 2017 and can be up to 80 per cent for subsequent years.

It was in response to this change that Apple transferred substantial amounts of its intellectual property to Ireland, or at least declared that it had moved it to Ireland, which was one factor behind the improbable jump in recorded Irish economic activity in 2015. The purchase price of the licences for this intellectual property can then be used as tax offsets under the capital depreciation allowance scheme.

In addition, substantial money now flows (it had not previously) from Apple in Ireland to Jersey-based Apple subsidiaries in the form of debt repayments. Conveniently enough, interest payments on intra-group debt are also tax-deductible up to 100 per cent.

Why is all this money going to Jersey now? Because Apple’s Jersey companies lend the Irish ones the money to buy the intellectual property licenses. Emma Clancy, co-author of this new report, calls this two-step the “green jersey” routine.

The upshot of all this is “a significant increase in the amount of cash Apple is sitting on in offshore tax havens”. This, it needs to be emphasised, is not an accident: indeed, the authors make the reasonable claim that all this has “specifically been designed by the Irish government to facilitate near-total tax avoidance” by Apple and other companies.

Another new study, by University of Berkeley economist Gabriel Zucman working with colleagues from the University of Copenhagen, estimates that multinational corporations’ profits not generated in, but shifted to, Ireland (largely for tax reasons) amounted to more than $100 billion in 2015. That puts us at the top of the global league table for that particular activity.

Ireland gains some tax revenue from this because it is taking a small slice of a very large pie. There is, however, always the risk that a change in, say, US tax law could diminish or even wipe out this revenue, on which the government is now highly and increasingly dependent.

More broadly, the revenues lost at the global level far outstrip those gains.

Ireland’s distinctive role in these global systems is to act as what the development NGO Oxfam calls a “conduit tax haven”: it allows (indeed it encourages) corporate sales revenues and profits to transit through this country in a way that denies tax that would otherwise be due in other jurisdictions.

Fintan O’Toole can accurately describe Ireland as the “tax haven of choice for profit-shifting multinationals”, a point also recently stressed by former Greek Finance Minister Yanis Varoufakis.

Even a mainstream figure like former Central Bank governor Patrick Honohan asserts that “Some companies’ manipulations of this [tax] regime to shelter egregious amounts of global profit from taxation should never been allowed by the Irish authorities.”

But allowed they are. And, all the evidence notwithstanding, in an echo of the “we are still really neutral, honest” shtick, the Irish government still insists that the country is not a tax haven. Minister for Finance Paschal Donohoe points out that Ireland has eliminated previous tax avoidance tools like the so-called “double Irish“.

That is true, but what the work of Emma Clancy and others shows is that the state and the corporations can always (and will always) open another door for each one they close: a green jersey replaces the double Irish.

As historian Diarmaid Ferriter says, “the Department of Finance can persist in denying what seems obvious to the rest of us eejits”. But, eejits though we may be, we know that Ireland is not a neutral country and that it is a tax haven.

The question is what we are prepared to do about it.

Filed under:

Author:

Andy Storey: Andy Storey is a lecturer in political economy at University College Dublin and a board member of human rights group Action from Ireland (Afri).

Reader responses

Log in to write a response.

Understand your city

We do in-depth, shoe-leather reporting about the issues that shape Dublin. We're not funded by advertisers. We're funded by readers like you.

We use first-party cookies to allow visitors to log in to our website and read our articles.