World’s Largest Tax Havens: Ireland is Outshining Switzerland

Last updated on May 28, 2022

Ireland is in the news but for the wrong reasons. The country is being accused of providing a tax haven to large U.S. corporations.

After a U.S. Senate investigation into the tax strategy of Apple Inc., it was found that the company was using its subsidiaries in Ireland to evade paying taxes in the U.S.

Reports on the findings of a survey by a professor at Dublin’s Trinity College indicate that Ireland is a major tax haven for U.S. companies and has ‘tax haven/low-tax features.’ It is claimed that American companies in Ireland paid a tax rate of 4.2 percent on more than $100 billion of net profits in 2008.

The Irish Central elaborates: “The report says Stewart lists Ireland as one of six countries in the world ‘with tax haven/low-tax features’ which account for more than 60 percent of global U.S. profits.

The Netherlands and Luxembourg top the list with Bermuda, Switzerland, and the British Caribbean islands below Ireland. Claims made at the U.S. Senate committee hearing that Ireland acts as a tax haven for Apple were denied last week by the Irish government.

Irish Prime Minister, and his deputy Eamon Gilmore, claimed that Ireland’s corporation tax rate of 12.5 percent is ‘statute based’ and no individual companies had negotiated special lower rates.

Apple executives told the US Senate committee that Ireland calculated its tax liability ‘in such a way as to produce an effective rate’ of about 2 percent since 2003.

Stewart’s paper was completed last month and is due to be published shortly.”

There is no unanimity in how much Ireland’s effective corporate tax rate is. Some believe it is lower than 12.5 percent while others believe it is 11.9 percent. The study by senior finance lecturer Jim Stewart is, according to him, not based on “real data, but on a standard firm with 60 employees, a standard size, and a fixed gross profit margin of 20 percent. The report does not look at, for example, how a newly incorporated entity in Ireland is exempt from the corporation tax for the first three years, and does not allow for any investment incentives or benefits apart from the age and size of the company.”

 The Irish Central reports that Stewart’s paper adds that he “cites data produced by the U.S. Bureau of Economic Analysis (BEA) relating to American companies operating abroad which he says ‘shows a very different picture’ from the PWC report.

The study shows an effective rate of tax of 4.2 percent in Ireland, compared with 26.8 percent in France. The nominal rate in France is 33.3 percent.

American companies in Ireland filed a net income of over $100 billion in 2008 but paid just over $4 billion in taxes.

Stewart adds: “It is regular practice for big companies to negotiate with the Irish government over what are defined as taxable profits.

Changes in tax law happen all the time because Ireland prides itself on being responsive to business needs. Apple did a big reorganisation of its company around 2005 and as part of that it would have had to renegotiate its tax liability with Revenue.”

Ireland being called a tax haven by the U.S. Senate has contributed to controversy over Ireland’s tax policies.