Frances Black (Independent) | Oireachtas source

Recommendation No. 4 calls for a report by the Minister outlining an evaluation of the impact of Ireland's corporate tax regime on human rights, welfare and in particular, child welfare in the global south. Earlier this year, the United Nations Committee on the Rights of the Child called on the Irish Government to ensure that its tax policies do not lead to corporate profit shifting, which takes resources away from low-income countries and prevents them from having the resource they need to protect and enhance children's rights.

We also have research from Christian Aid, which demonstrates that base erosion and profit shifting is detrimental to large organisations and that multinational corporations using complex corporate structures to shift profits across borders into low- or no-tax jurisdictions has hugely negative implications for the global south. A 2022 paper from Christian Aid highlights how changes to Irish tax law have continually protected the ability of multinational companies to shift profits out of developing countries and elsewhere. These structures have mostly relied on the same two-step practice whereby companies book sales income as an Irish entity that acts as a sales hub and then ships profits to a low- or no-tax jurisdiction through payments to an Irish registered but overseas resident company, originally dubbed the "double Irish". This mechanism and its many variants have arguably been one of the world's most used corporate tax avoidance structures. As an indication of its scale, in 2019 alone, Google used this mechanism to shift more than $75.4 billion of profits from worldwide advertising income through Ireland to Bermuda where the standard rate of tax is 0%.

As the Irish Government began to phase out the tax residency rules that made the original double Irish structure possible, some multinationals were able to replace them by relying instead on tax breaks introduced on the transfer of intellectual property, IP, to Ireland. This allowed these companies to continue to book sales income in Ireland from around the world and, ultimately, incur a very low tax on the sale in Ireland itself rather than having to ship the profits on to a third country like Bermuda. This arrangement came to be known as the "green jersey" and was facilitated by a series of measures that significantly expanded the tax deductions available for the acquisition of IP by one company from another within the same multinational group.

In 2014, in the same legislation in which it claimed ended the double Irish, the Irish Government simultaneously increased to 100% the amount of related profits companies could shield in this way, thereby shrinking the effective tax rate on those profits from 2.5% to 0%. After public opposition, this was restored to 80% in September 2017, but the huge amounts of IP that multinationals had moved into Ireland prior to September 2017 were explicitly exempted. Therefore, while some multinationals relied on the onshore tax structure, others have instead turned to a new version of the original offshore double Irish dubbed the "single malt". This new structure allows multinationals to achieve the same effective result as under the double Irish by shifting profits to low-tax jurisdictions with which Ireland has signed tax treaties, including Malta. While the current Minister’s predecessor announced an agreement to end the facilitation of aggressive tax planning, due to the weakness of this agreement, a number of companies have been able to set up single malt tax structures.

It is unbelievable, really, when you think about it. We need to get real about the implications of our tax structures and the impact it is having on some of the world's most vulnerable communities, while at the same time allowing huge multinationals making bumper profits to minimise the tax they will pay. Our facilitation is morally wrong and undermining our goals in terms of sustainable development.