Wednesday, 15 September 2021
Saincheisteanna Tráthúla - Topical Issue Debate
It transpires that the single malt tax shelter the Minister, Deputy Donohoe, thought he had closed down in 2018 appears to be still very much open for business. The so-called single malt allowed companies incorporated here to minimise their corporation tax bills by funnelling profits into low tax states, in this case Malta, with which we have tax treaties. We now know, thanks to Christian Aid, that at least one company, in this case, the pharmaceutical giant, Abbott, is still availing of a single malt-type tax avoid structure to avoid tax on profits from its rapid diagnostics division.
The Minister, Deputy Donohoe, attempted to close down the single malt structure in 2018 yet three new Abbott-related entities were set up here in 2019, purely with the intention of avoiding tax on profits. Thanks to what Christian Aid has described as the narrow drafting of the Ireland-Malta tax agreement, the deal that the Minister said in 2018 "should eliminate any remaining concerns about such structures" and which he said represented "another sign of Ireland’s commitment to tackling aggressive tax planning", it has turned out to be nothing of the sort. The Maltese operate a generous series of tax write-offs against intellectual property including licences, trademarks and so on. There is little that we in Ireland can do about that but, according to Christian Aid, it is the narrow drafting of the tax treaty that allows this abominable practice to occur in the first place. This is Ireland's problem. It is our problem. This elaborate game of pass the parcel might be lawful, bizarre as that sounds, but it is disgusting and immoral. The practice literally takes food out of the mouths of children in Ethiopia and Nepal, where Abbott sells Covid kits. Taxes on sales profits in those countries ought to be paid there. Christian Aid's analysis says that these structures will enable this entity to avoid paying corporation tax on nearly €500 million worth of profits attributable to intellectual property for its rapid tests, including its Covid-19 tests.
This is just the latest in a series of embarrassing tax controversies for the Government, although it comes at a particularly sensitive time in light of the ongoing OECD reform process. Ironically, it can be argued that the Abbott case has also come about due to the previous Government's failure to sign Ireland up to Article 12 of the OECD multilateral instrument despite warnings from Christian Aid and others at the time, including the Minister of State's ministerial colleagues, the Ministers, Deputies Michael McGrath and Darragh O'Brien, that this could lead to the kind of tax avoidance we have seen revealed by Christian Aid in the media today. Today's revelations prove yet again that standing on the sidelines of international agreements and taking a "whack-a-mole" approach to closing tax loopholes, as Christian Aid has rightly described it, simply does not work when the tax avoidance industry is always one step ahead.
Is it news to the Minister of State that these kinds of scheme still exist? What action will this Government take to close the loopholes exposed here? Are Abbott and its related companies the only series of firms exploiting such arrangements? Are there more? Are the Revenue Commissioners privy to this arrangement? Do they have knowledge of the arrangement operated by Abbott? Moreover, did they approve it at any level?