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Tax Analysts


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Taxes 27,271 views

If Ireland Is Not A Tax Haven, What Is It?


Howth - Ireland

Howth - Ireland (Photo credit: infomatique)


Ireland has a 12.5% corporate tax rate. That’s a big deal on its own. If a U.S. corporation builds a factory in Ireland that generates $10 million in profit, it pays $1.25 million in Irish tax instead of the $3.5 million that it would pay if it built the factory in Indiana, where the federal rate is 35%. But that’s only the beginning of tax benefits available for locating in Ireland. Lax U.S. transfer pricing rules allow the Irish factory to book inordinate profits that rightly should have been taxed in the United States. Suppose that in the example, the Irish factory books something like $30 million of profit in Ireland. It pays $3.75 million in Irish tax, but at the same time, because it shifts $20 million of profit from the United States to Ireland, it reduces its U.S. tax by $7 million. So the choice between locating a factory in Indiana or Ireland is the choice between pay $3.5 million of U.S. tax or net tax of negative $3.25 million (that is, $3.75 million of Irish tax minus $7 million of lower U.S. tax.) In effect, the U.S. Treasury is subsidizing investment in Ireland.

But wait — there’s more. Multinationals are no longer satisfied with Ireland’s 12.5% corporate rate. They can turbocharge their tax benefits by shifting profits out of Ireland to zero-tax jurisdictions like Bermuda. This maneuver received a lot of attention at a Senate hearing earlier this year. And so Ireland, fearing for its reputation with multinationals and with the European Union, has moved to restrict this benefit.

Irish politiciansbusiness leaders, and newspapers are ardent defenders of the country’s corporate tax regime. And any hint that you think Ireland is a tax haven will set off a storm of protest. They point out that Ireland does not meet the OECD’s definition of tax haven. Well, that’s a low standard if there ever was one. And they like to say that Ireland is not a tax haven because it is not the legal domicile of letterbox companies but a location for real investment with real business purpose. That’s true. But to me, that makes their tax generosity even more offensive because instead of just reducing U.S. tax, they are reducing U.S. jobs.

Ireland is in the throes of a deep recession. Scaring away foreign investment is the last thing it needs. We all understand perfectly well why the Irish will never accept their country being called a tax haven. But if we cannot use that label we must have a term for a country whose extremely generous tax rules allow it to attract enormous amounts of foreign capital. Hmmm, if not a tax haven, let’s just say Ireland is a bagel.

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  • DavidSLesperance DavidSLesperance 10 months ago

    The basic problem is that the term “tax haven” has so many different meanings.

    If you call a “tax haven”, a “sunny place for shady people”, then you are talking about a jurisdictions whose laws (or lack thereof) allow and even facilitate the use of undisclosed bank accounts to allow the holder to engage in illegal tax evasion or the hide the proceeds of crime and corruption. As a result of whistleblowers, John Doe Summons, Information exchange treaties, Qualified Intermediary Regime, and FATCA, “tax havens” of this sort are quickly becoming extinct.

    If you call a “tax haven”, a jurisdiction that allows foreign corporations or individuals a tax advantage over native corporations or individuals because of domestic laws or tax treaties, then you must include pretty much every G-20 country including Ireland is a “tax haven”

  • seekandwander seekandwander 10 months ago

    I love the article. I’d like to point something out about your introductory paragraph: “If, as in the United Kingdom, the general public perceives that corporations are abusing tax rules, then democratically elected governments may have to stop pandering to footloose multinational businesses and start cracking down on them.”

    The United States is not a democracy. We are all slaves in a kleptocracy. The politicians only pander to the wealthy constituents who bankrolled their campaigns, including both rich people and corporations. Corporations and rich people demand loopholes and tax havens for themselves, and the politicians gladly oblige.

    There will never be a remedy to the tax abuses committed by corporations in the foreseeable future in a corrupt nation like the United States.

  • Derek Redican Derek Redican 10 months ago

    I think Martin is part of a sinister lobby group trying to portray Ireland as an enemy of the US. America is the richest country in the world. You’d think people like Martin would be happy with that. But no, even the crumbs are begrudged to others.

  • Bernard Bernard 10 months ago

    Where to begin with this drivel, purporting to be rational thought.

    So, an independent agency says it is not a tax haven. This ruins your argument and is against your clear agenda, so you choose to ignore it. Move along, nothing to see hear.

    Here is a few questions you failed to ask, Marty:
    1. Why did Intel choose Ireland as their new R&D centre beating the US and Israel. Why would a company already in Ireland(for ages) and already availing of our tax system, choose to have their cutting edge design and place the future of their company, in Ireland. Again, kind of ruins your tax haven nonsense, so ignore. Move along, nothing to see here.
    2.These great companies that you criticize already employ thousands of people in the US, paying thousands of dollars. Apple, IBM, Microsoft, all in Ireland, are all in the top 10 of companies, who pay the highest US taxes. Again, your argument is withering on the vine. You have skillfully played on this false dichotomy of, locate in Ireland or the US.
    The question is not whether to locate in the US or Ireland because we are talking about their European HQ., so the question is, Where in Europe do they locate.
    The ends of your line of reasoning(in loosest of terms) is for US companies to move from Ireland to Vienna, Warsaw or London etc, Where their profit gets diluted and goes to the UK exchequer instead of returning to the US in the form of profits and/or increase in share value, Thereby moving the wealth back to the US.(Have someone in finance, explain that to you.) You have made no attempt to explain this or worse, see it.

    You flippantly criticize these companies. How many people have you employed? What is your contribution to the exchequer compared to these companies and their employees’ tax contribution.

    3.You choose to ignore the fact that Ireland is in the top 10 of graduates per capita. Not bad for a small nation and quite useful for cutting edge tech companies.
    It is English speaking.
    It is a Capitalist country that is business friendly and safe. We are not ruled by Unions. Try basing a business in France, Italy, Germany or even the UK. Socialist countries in all but name where the effective rates of tax keep rising and rising. France is still seeking it’s 75% rate. The main opposition leader in the UK, leading the polls, declared he will bring back Socialism to the UK. He was elected solely on the basis of Union support.
    4. Why do foreign companies, located in Ireland, not have the minimum workforce required by law? If all they are there for, is the tax, why not have the minimum there? Why not rent a dingy office in the wilds of Mayo? Irish wages are quite expensive. Locate the bulk to eastern Europe or Belgium.
    Facebook, Google etc keep expanding, adding hundreds to their workforce. Surely this can be done elsewhere.
    5. The Irish taxpayer is currently having to pay for a bank guarantee which let degenerate American/German/UK private banks, who gambled on Irish private banks, off the hook. We are paying for the gambles of Wall Street. Under proper Capitalist rules, we would have protected the Irish bank deposit holders only and let the bondholders and shareholders burn. Did you not scratch your head and wonder why the UK, not even in the Euro, paid 7 billion in the bail out. Why Germany(bank exposure €150 Billion) bailed out Ireland. Why the Wall Street Journal ran the headline: ‘Ireland bails out Germany, again.’
    6. You want successful companies like Facebook and Google, who, by definition are efficient to give the government, more money, because the trillions they already get in tax revenue is not enough. How many more drones do you need? For the price of catching Bin Laden, how many people could you have put through college. You are trying to pass this Inefficiency onto good companies.
    Soros was right. Economics is a pseudo science and debases real science.

    As a side note:
    There is no race of people on earth, who seem to take a more perverse pleasure in the seeing and seeking, misery for their fellow Irishman. It would explain why the O in your name is dropped.
    Ó Súilleabháin means an ancient family lineage going back millennia.
    Sullivan means nothing.

  • reader reader 10 months ago

    Great reply, Bernard. When I saw the surname of the author under the title, I initially expected an article that may even have strayed too far towards the unfairly pro-Ireland side. How wrong I was…

    As I read this poorly reasoned article, many of your arguments sprang to my mind too. Also as I read the article, I too started to jump to conclusions about the surname and dropping the O! It’s a cheap shot, but the phrase ‘took the soup’ springs to mind :)

  • Adrian Mulligan Adrian Mulligan 10 months ago


  • Jean-Pierre Rupp Jean-Pierre Rupp 10 months ago

    I could not have argued it better. Excellent reply. I moved to Ireland more than a year ago, and I am very satisfied with my decision. Let’s keep the statists out of this island.

  • Jdog Jdog 9 months ago

    Bernard, I created an account just so I could reply to your comment. I would share this article just so my friends could read your reply. Not alone did it make much more sense but it was also witty and well written. Thank you.

  • Paul Marconi Paul Marconi 9 months ago

    “Ó Súilleabháin means an ancient family lineage going back millennia.
    Sullivan means nothing”

    Actually, it means “One-Eyed”. Sums up the article pretty well.

  • Christal Christal 10 months ago

    There is no way you can call Ireland a Tax Haven. We have very strong Tax Law and on average have to pay far more than individuals would in the USA. The only reason people call us one is because companies pay less Corporation Tax and the reasons behind that decision while strategic are justifiable and fair. By your reasoning you could say that the USA is a tax haven because it doesn’t charge VAT unlike Canada Europe and most of the civilized world in Ireland we pay 23%!

  • Keith Costigan Keith Costigan 10 months ago

    ” the wrath of the citizenry of the European Union, who want Ireland to stop using low-tax rates to steal jobs and investment from their countries.” How do you steal a job?? Maybe I could steal myself a higher paid job. The European Citizenry that seem to be so upset about this might be better served understanding how much of their banks unsecured bonds the Irish people have had to pay for with their taxes when really they should have been told to eat it!!!