Ireland has often found itself at the centre of global attention regarding tax avoidance by multinational corporations. A low corporation tax rate of 12.5%, coupled with high-profile exploitation of tax rules like the infamous “double-Irish” by companies such as Apple, Google and Facebook, has meant that Ireland has had difficulty shaking off its reputation as “a well known tax haven” (as described by the United States Congressional Research Service) . While much has been written in Ireland on the precise definition of a tax haven and the claimed benefits to Ireland of existing corporation tax policy, there has been limited attention paid by Irish politicians to the impact of Irish tax policy on poverty and human rights, in particular in developing countries. Sorley McCaughey of Christian Aid Ireland explained on RTE’s Morning Ireland earlier this week that:
There are many examples of how Irish tax policy has been abused by multinationals to the detriment of developing countries. Christian Aid published research showing that $268 million flowed from the poorest 49 countries into Ireland.
The context of these comments was the publication by the Irish Department of Finance of a “spillover analysis” of the impact of Irish tax policy on the economies of developing countries. The finding in the analysis that “the Irish tax system on its own can hardly lead to significant loss of tax revenue in developing countries” demonstrates the global nature of the problem of corporate tax avoidance.
The impact of corporate tax avoidance on inequality, poverty and human rights was debated at length in the Dáil this month, when several TDs introduced a Private Members Motion on corporate tax policy. The Motion put forward a number of issues which it asked the House to take note of, including:
- the growing international consensus that aggressive tax avoidance and evasion by multinational corporations is now a major contributory factor in the staggering increase in global economic inequality and a spectacular growth in the gap between rich and poor […]
- that the global trend of increasing economic inequality and growing poverty is echoed in Ireland […]
- concern that Ireland’s low corporate tax rate and company regulatory regime do not support adequate accountability from multinational companies operating out of Ireland
- that the exchange of information between tax jurisdictions is not automatic
- concern that the recent European Commission investigation into Apple in Ireland revealed a lack of transparency and accountability from Ireland’s Revenue Commissioners to the people of Ireland at that time
- that Ireland is part of a network for international corporate tax avoidance and evasion as demonstrated in the so-called ‘LuxLeaks’ scandal and the widely criticised ‘double-Irish’ phenomenon
The Motion, which was put forward by Maureen O’Sullivan, together with Richard Boyd Barrett and Joan Collins, called on the Irish Government to take action in a number of respects:
- require full financial transparency from multinational companies in tax matters, making their annual ‘country by country’ financial reports publicly available;
- support automatic information exchange on tax matters between all tax jurisdictions including a non-reciprocal transition period and long-term support for developing countries to comply with requirements;
- establish a public register of the beneficial owners of companies and trusts operating in Ireland;
- close tax loopholes whereby multinational companies may engage in transfer pricing abuse in Ireland and empower the Revenue Commissioner to act to reverse this behaviour;
- move urgently to change Ireland’s corporate tax regime with the aim of ensuring that the corporate and financial sector significantly increase their tax contribution to the Exchequer and to society;
- ensure that, following the decision to close-off the so-called ‘double-Irish’ tax avoidance mechanism, the proposed ‘knowledge box’ does not become another mechanism for large-scale tax avoidance or evasion by multinational corporations; and
- eliminate any aspects of Ireland’s tax regime that facilitate ‘spill-over’ effects in developing countries which deprive those countries of tax revenue that should legitimately accrue to them
This call very much echoes what organisations such as Oxfam, ActionAid, TASC, and Christian Aid have been calling for in recent years in order to address tax abuse. Some inroads have been made through the OECD’s Base Erosion and Profit Shifting project, but recent efforts to establish a more representative United Nations global tax body have failed.
In the debate in the Irish parliament on the Corporate Tax Policy Motion, there was discussion of the effective rate of corporation tax in Ireland (the amount of tax actually paid), the power and influence of multinationals compared to small and medium-sized enterprises, the harmful nature of tax competition and the ‘race to the bottom’, and the effectiveness of national and international efforts aimed at curtailing abusive tax practices. Richard Boyd Barrett stated his view that “Ireland is at the centre of an international nexus of tax avoidance and tax evasion”. Joan Collins also emphasised Ireland’s role and pointed out that “the so-called aggressive taxation policy of the multinational corporations is possible because it is facilitated by states, governments and tax regimes”. Repeated references were made to growing inequality and poverty and the impact of diminished resources on public services in Ireland and in developing countries.
The speakers on behalf of the Government reiterated their support for the OECD’s approach to addressing tax avoidance and generally sought to emphasise the importance of foreign direct investment for Ireland. The threat of lost jobs was a repeated refrain in the interventions of those against the Motion. Simon Harris, the Deputy Finance Minister, reiterated the need for “a global process” on tax issues, and made a weak argument that developing countries had participated meaningfully in the OECD’s BEPS project. The OECD is effectively a rich countries’ club. Minister Harris noted that the requirement of country-by-country reporting by the OECD does not require public access to such reports. Regarding a potential UN tax body, Minister for Finance Michael Noonan expressed the Government’s opposition:
The Irish position has always been that the issues of base erosion and profit shifting are best addressed by a multilateral solution and that the OECD has the recognised international experts in this area. It is, therefore, important that the work of the EU, the UN or other intergovernmental work on tax takes into account the ongoing work at the OECD, and that a twin-track and potentially conflicting approach is avoided.
The general position of those opposing the Motion was that we should not do any more than is absolutely required – “We do not need to make martyrs of ourselves on the international altar”, Michael Creed put it.
During the debate, reference was made to tax avoidance as a human rights issue, a way of articulating concerns which has usually been absent from discussions regarding corporation tax in Ireland. Derek Nolan suggested that a “human rights-based approach to tax” should be considered, given that resources are essential to fully vindicating people’s human rights. He put it that:
Ireland must have an overarching vision of what it wishes to do with its tax system. It should be based on human rights and recognising Ireland’s obligations not just to itself, its people and Members’ constituents and their jobs but also to the lives of people around the world who are dependent on their own natural resources.
Maureen O’Sullivan made the connection with the business and human rights agenda, but lamented that it is taking “quite a long time” for Ireland to develop its national action plan on the UN Guiding Principles on business and human rights. She urged more consistency by Ireland in its human rights policies:
Just tax policies and systems contribute to equality, combating poverty and tackling discrimination. It is hypocritical of us as a member of the United Nations Human Rights Council where we are very well respected for our development aid because it is untied. We should have the same strong voice when it comes to taxation justice
Such concerns can be raised at an international level as Ireland’s human rights record is due to be reviewed by the UN Human Rights Council next year.
The Corporate Tax Policy Motion was debated in the Dáil over two days and generated vigorous inputs from a number of representatives on both sides of the House. Although it was eventually defeated, and the debate received little coverage in the media, the Motion has put on record concerns regarding the potential negative impacts of Irish corporate tax policy and pressed the Irish Government into explaining what measures it is taking to address concerns regarding Ireland’s role in global tax avoidance.