The Government’s paper on Ireland’s effective corporate tax rate confirms what the dogs in the street have known for a long-time: Ireland has a low,extremely low, corporate tax rate.
There is that vexed question of what corporate income counts for the purposes of determining the actual rate of tax companies pay here. Professor Jim Stewart produced data which showed that the effective tax rate of US multinationals operating here was 2.2 percent in 2011. This was disputed because Stewart – using the US’s Bureau of Economic Analysis – included the $140 billion that US multinationals move through Ireland on their way to other places, including tax havens. Some claim you can’t count this because it is not taxable in Ireland.
But, of course, that is the point. The issue is not the Irish corporate tax rate per se but the role that Ireland plays in the global tax avoidance chain – the ability of multinationals to use Ireland to avoid paying taxes that would be due elsewhere. That is the character of a ‘tax-haven conduit’.
In this respect, it is worth remembering:
‘Tax havens attract foreign investment not only because income earned locally is taxed at favorable rates, but also because tax haven activities facilitate the avoidance of taxes that might otherwise have to be paid to other countries.’
The Irish corporate tax rate is the sign on the door. It’s an inviting sign – a low-tax rate of 12.5 percent. But the real goodies are what’s behind the door – the prospect of using Ireland as a transit point in the global avoidance chain.