We are living in a modern world, full of excitement with constantly evolving technologies and ideas, and during my time here in Ireland I have learned many new things about Irish life, culture, politics, and economics. Being a science major and focusing mostly on subjects related to health sciences in my private studies leaves me a bit foreign to some of the specific details of how business and economic models work, especially at a corporate level. However, I did have a vague understanding about what tax havens such as Bermuda do and their role in earning the corporations even more money. What I did not know was that these sorts of tax evasion techniques were being used by companies such as Apple, Google, HP, and Facebook in Ireland. So I began to ask myself, is Ireland also a tax haven? (1, 2)
With the current global economy and the growing popularity of corporations, there is a lot of pressure on where to start a business or where to set up a corporate office. With an extremely attractive 12.5% corporate tax rate, Ireland may find itself in a similar category of countries and territories, such as Bermuda, known as tax havens. While there is no official list of all of the tax havens in the world, these countries typically have little to no corporate tax rates, much lower than the 35% that the federal government charges on businesses in the US. When these countries offer much more attractive tax rates than in the US or other countries, companies will set up shop in these countries bringing in additional revenue for countries like Ireland while saving the company money in the long run. For example, in 2012, the Irish government gained nearly €5 billion from corporate tax alone, while yielding about €36 billion in total tax revenue. (3) Conversely, this costs the US money. According to the Stop Tax Haven Abuse Act bill, U.S. Senator Carl Levin (D-MI), if the U.S. were to prevent these types of tax evasion ‘gimmicks’ and close offshore tax loopholes it would provide an addition $220 million in revenue over the next 10 years. (4)
The Irish government continues to support the 12.5% tax rate, while acknowledging and agreeing with rising concerns in the European Union over abuse of this system. This presentation provided by the Irish Department of Finance explains some of the more detailed strategies behind the Irish corporate tax system as well as how the government is working on addressing the concerns in the EU. (5)
Conclusively, I do not personally think that Ireland is in and of itself a tax haven, or at least it was not explicitly designed to be one. This is due to the fact that the government favors this rate due to its effective means of attracting and retaining Foreign Direct Investment for over 50 years. (6) The presidency is working politically with the European Union to prevent this type of abuse of their system. I believe that some companies like Apple may be using Ireland for a tax haven because it is far lower profile than the notorious Bermuda or other Mediterranean havens being scrutinized in U.S. politics, all while holding similar benefits. If this type of tax evasion is prevented, I believe it will lift the slightly negative view on Irish economics within the European Union, and perhaps even on a global scale.