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In October 2014, following revelations of tax abuse schemes set up by multinational corporations to stash billions in offshore tax havens, Ireland’s international reputation took a significant blow for facilitating corporate tax abuse at a colossal scale. It was no longer possible to ignore the global outcry and the incumbent Minister of Finance, Michael Noonan, vowed to take decisive action.
“Aggressive tax planning by multinational companies has been criticised by governments across the globe and has damaged the reputation of many countries” he said, during a much-publicised appearance before the Irish parliament.
“I am abolishing the ability of companies to use the ‘Double Irish’ by changing our residency rules to require all companies registered in Ireland to also be tax resident”, added Noonan.
The specific “Double Irish” scheme referred to by Noonan, allowed the most profitable companies in the world to cut their tax bills by hundreds of billions of dollars for more than a decade. It involved channeling profits from a company based in Ireland to another Irish-registered firm in an offshore tax haven such as Bermuda or the Cayman Islands. The transfer was typically done through a subsidiary based in the Netherlands in order to avoid paying a withholding tax for the transaction, hence the alternative designation “Double Irish-Dutch sandwich”.
Despite initiating a gradual phase out that would make this specific scheme unlawful over time, Noonan generously offered companies operating under this structure – including Google, Facebook, Apple, and Pfizer – to continue using it until 2020, giving them ample time to develop alternative tax abuse strategies. According to documents filed at the Dutch Chamber of Commerce, in 2017 alone Google shifted 19.9 billion euros through a Dutch shell company to Google Ireland Holdings, an affiliate based in Bermuda.
A decade after Noonan’s “landmark” declaration aimed at shedding Ireland’s reputation as a corporate tax haven, the EU country appears to be playing an even bigger role in facilitating cross-border corporate tax abuse. This is evidenced by Ireland’s surging corporate tax revenue arising from artificial profit shifting, as well as new research by the Tax Justice Network highlighting critical loopholes in its tax jurisdiction.
Moreover, the Irish Republic’s key role in facilitating corporate tax abuse is further exemplified by its undermining of global tax reforms led by the OECD, which were grossly ineffective and lopsided to begin with.
A budget surplus built on extraction of tax revenues
In June 2018, following the publication of a research paper labelling Ireland as the world’s biggest tax haven due to the revelation that more corporate profits were being transferred to the EU country than to all Caribbean tax havens, Noonan’s successor as Minister of Finance, Paschal Donohoe, categorically rejected the report’s finding.
“If you look at developments in our corporate tax code, over the last number of years now we have eliminated stateless companies, we are phasing out the double Irish,” he said, referencing changes made to Irish tax residency rules.
However, a closer assessment of Ireland’s financial updates by tax justice researchers, paints an altogether different picture.
Whilst most of its EU neighbours are currently facing significant budget deficits and the prospect of drastic austerity measures, Ireland is forecast to record a budget surplus for the third consecutive year in 2024.
The estimated surplus of 8.6 billion euros is largely a result of surging corporate tax receipts forecast to stand at 24.5 billion euros in 2024, with half of this revenue coming from only 10 companies in the tech and pharmaceutical sectors.
Ireland experienced a similar boost in its corporate tax receipt in 2023 and 2022, at 23.8 and 22.6 billion euros respectively, which amount to more than a doubling of this source of tax revenue since 2019. The corporate tax boom is expected to continue in the coming years.
On top of this surplus, Ireland is set to receive a huge “windfall” bonus of 13 billion euros in unpaid tax by Apple. The payment follows the European Court of Justice’s recent ruling that the tech company received unlawful state aid due to favourable tax arrangements In Ireland as far back as in 2003. According to the Irish government, the additional Apple tax will push the budget surplus to 7.5% of gross national income.
While some of this surging corporate tax revenue may reflect the relocation of real activities to Ireland, the bulk of the revenue stems from profit shifting schemes due to the relocation of intangible assets, such as intellectual property rights.
Based on calculations by researchers at the Tax Justice Network for the French newspaper Le Monde, multinational corporations transferred 130 billion dollars of artificial profits to Ireland from European countries in 2021, which would have resulted in 32 billion dollars of tax revenue in Europe. Instead, the profit shifting resulted in a tax revenue of 13 billion dollars in Ireland. In other words, for each dollar of tax revenue collected in Ireland, 2.5 dollars was lost to European countries during that year alone.
The researchers insist, however, that these figures likely under-represent the profits transferred and taxes paid by the multinational corporations. The data is based on the OECD’s latest country-by-country reporting on multinationals’ revenues and tax payments published in 2021, and contains limited data on tax havens based outside the European Union.
Ireland’s ongoing extraction of vast sums of tax revenue from other countries is also backed by new research by the Tax Justice Network, highlighting the country’s growing role in enabling cross-border corporate tax abuse.
Critical tax abuse loopholes remain open to exploitation
A recent update of the organisation’s Corporate Tax Haven Index – a research tool ranking jurisdictions on how big a role they play in enabling corporate tax abuse -has Ireland entering the top 10 biggest facilitators of corporate tax abuse for the first time. The Index evaluates countries based on how much leeway their laws and jurisdictions provide for corporate tax abuse, as well as the volume of financial activity entering and exiting the jurisdiction. According to the latest evaluation published on October 1st, Ireland ranks as the 9th largest enabler of corporate tax abuse, ahead of Luxembourg and the Bahamas, and behind only the Netherlands among EU countries.
According to researchers at the Tax Justice Network, the deterioration of Ireland’s position in the assessment is mainly due to lack of change in its anti-abuse laws. More specifically, the main dividing point between countries who showed progress in the latest evaluation and those whose position worsened, including Ireland, relates to lax rules on service charges and royalties.
Payments for services and royalties are two methods routinely used by corporations to cook the books and declare artificial profits in tax havens. By making subsidiaries located in high tax jurisdictions pay vast amounts for royalties and service charges, corporations reduce their tax base in these jurisdictions and underpay billions in tax. Placing limitations on deductions arising from these intra-company transactions, can help put an end to this type of fabricated profit shifting and ensure that profits are taxed in countries where economic activity takes place.
Whilst many EU countries reported progress in this legislative area, Ireland made no changes to these fundamental loopholes. Crucially, the exploitation of royalty payments for intellectual property use was a central feature of the “Double Irish, Dutch Sandwich” scheme used by corporations to underpay billions in tax.
These critical loopholes related to royalty payments and service charges, together with the country’s trademark 12.5% corporate tax rate and special tax incentives for intellectual property known as “patent box regimes”, underpin Ireland’s ongoing function as a major tax haven for some of the world’s largest multinational corporations.
It is no coincidence therefore, that during the EU court case over its tax arrangements with Apple, Ireland actively opposed the collection of 13 billion euros in unpaid taxes. The final verdict by the European Court of Justice in this dispute, upheld a 2016 decision of the European Commission that tax rulings in favour of two Irish affiliates of Apple in 2003 constituted a violation of state aid rules. The tax rulings allowed a split of the company’s profits for tax purposes, which meant that the vast majority of the company’s profits remained untaxed. As a result, the EU Commission found that Apple Sales International paid an effective tax rate as low as 0.005 per cent in 2014 in Ireland.
For researchers at the Tax Justice Network, not only is Ireland’s refusal to collect 13 billion euros in unpaid taxes a strong indication that it is keen to preserve its function as a European tax haven for the world’s wealthiest corporations, but its continued defence of the tax arrangements with Apple and failure to publish details of other tax rulings currently in force, makes it impossible to rule out the possibility that similar sweetheart deals which bring the effective tax rate close to zero do not still exist.
“15 will mean 15”
Ireland’s complicity in enabling corporate tax abuse is further exemplified by its watering-down of already inadequate and lopsided global tax reforms led by the OECD.
Finalised by the OECD’s Inclusive Framework in October 2021, the new Global Anti-Base Erosion (GloBE) rules setting a global “minimum” tax rate of 15% for multinational corporations with a turnover of over 750 billion, have come into force in the EU as of January 1st 2024. The new rules are part of a “Two-Pillar solution” devised by the OECD aimed at addressing tax challenges arising from the digitalisation of the economy.
The GloBE rules, or Pillar Two of the global tax reforms, aim to create a coordinated framework of taxation which imposes a top-up tax on multinationals’ profits that are not subject to the minimum rate of 15%. The taxing right for the top-up tax is primarily accorded to the country where the multinational corporation is headquartered. However, other countries where the multinational is active can levy the tax if the headquartering country refuses to do so. The stated objective is to end a global “race to the bottom” tax competition between countries.
The other component of the reforms, also known as Pillar One, aims to establish a reallocation of taxation rights for a small portion of multinationals’ profits, based on where the goods and services are sold. This particular reform package is effectively dead due to impasse in the negotiations and opposition by the US Congress and Senate.
However, aside from the limited scope of the new GLoBe rules – in that they only apply to the very largest corporations – the legal framework contains a set of economic substance carve-outs (deduction of 10% of payroll expenses and 8% of tangible assets from the tax base during a ten-year transition period) and other exemptions, which bring the effective tax rate considerably lower in many instances.
Yet even so, Paschal Donohoe, who was Ireland’s Finance Minister at the time of the negotiations, refused to sign up to the new tax rules until a reference to a global tax rate of “at least” 15% was removed from the text. The aim was to ensure that the new global rate would constitute a ceiling rather than a floor for a globally coordinated corporate taxation regime.
In an interview with the Financial Times shortly after signing up to the deal, Donhoe was asked if the new rate would be subject to revaluation. He replied: “I can’t see in my lifetime this kind of circumstances developing again . . . 15 will mean 15.”
The global average statutory corporate tax rate in 2021, the year the deal was finalised, stood at approximately 25%. The new “global norm” of 15% is significantly lower than this rate, thanks to Ireland’s refusal to endorse any deal that could potentially impose a higher rate in the future.
A decade after Finance Minister Noonan’s public commitment to put an end to Ireland’s facilitation of corporate tax abuse, the Irish tax haven in service of the world’s most profitable corporations, is alive and well.
International Political Economy Watch 
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