World Economy

Study Reveals Ireland as World’s Biggest Corporate Tax Haven

Foreign multinationals shifted $106 billion in corporate profits to Ireland in 2015.Foreign multinationals shifted $106 billion in corporate profits to Ireland in 2015.

Ireland is the biggest “tax haven” in the world used by multinationals to shelter profits, according to a new study by economists from the United States and Denmark.

The research from academics at the University California, Berkeley and the University of Copenhagen estimates that foreign multinationals shifted $106 billion of corporate profits to Ireland in 2015, Bloomberg reported.

This was more than all of the islands of the Caribbean combined ($97 billion), and well ahead of Singapore ($70 billion), Switzerland ($58 billion) and the Netherlands ($57 billion), according to the researchers.

The department of finance Tuesday night rejected as “overly simplistic” much of the findings made in relation to the republic in the paper–The Missing Profits of Nations–authored by economists Gabriel Zucman, Thomas Torslov and Ludvig Wier. The department also rejected the notion that the republic is a tax haven.

The research paper estimates that $1.7 trillion of foreign profits were made by multinationals, primarily from the US, in 2015 and that almost 40% of this total was shifted to tax havens.

  US Multinationals

The authors defined “tax haven” using a list of nations drawn up in 1993 by prominent US tax academics, James Hines and Eric Rice. They added Belgium and the Netherlands to the 1993 list.

The researchers homed in on the high level of profits declared in the state by US multinationals, relative to their numbers of employees in Ireland. The paper claims US companies declare $8 of profit in the republic for every $1 spent here on wages.

This, the authors say, is about 16 times the average for “non tax havens”. They claim the apparently turbo-charged profitability-per-head in the state is down to the huge volume of profits shifted to this jurisdiction from abroad.

The research estimates that profit shifting by multinationals costs tax authorities globally about $200 billion, and reduces by 20% the taxes paid in the European Union by multinationals.

The paper considers the relatively high share of national income in Ireland attributed to corporate tax, which the authors put at more than 5% in 2015, behind Malta at 8% and Luxembourg at 7%.

“Until the 1990s, Ireland used to collect relatively little corporate tax revenue, about 1.5% to 2% of national income–significantly less than the US,” the paper says.

“Then, as profit shifting surged, so did tax collection: since the mid 1990s, Ireland has collected significantly more corporate tax revenue (as a fraction of national income) than the US–about twice as much in 2015.”

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