..and frankly there is nothing wrong with that.
Forgetting for the moment, and yes I know it is near impossible, strictly speaking, if according to the research findings of Professor James Stewart, from Dublin’s Trinity college, companies in Ireland paid tax of 4.2% on more than $100bn of net profits in 2008, that, I am afraid is proof positive.
Before getting defensive; which is perfectly understandable after hearing the U.S Senate refer to you by what the rest of the world calls the State of Delaware, that is, a tax haven, consider this.
You along with the Netherlands and Luxembourg, have been named among the six countries which account for 60% of all global US profits; and your present rate of corporate income tax is a paltry 12.5%, which is markedly lower than the average tax rates worldwide which hover between 20% to 35%.
To be clear, I have no quarrel with competitive tax rates once buttressed by a legal and regulatory regime that supports and fosters sensible and effective rules on transparency; and the sharing of confidential taxpayer information, in accordance with agreed disciplines.
For the record, it is important to be aware that according to the OECD Global Forum (GF),Ireland has 89 agreements which provide the basis for the legal exchange of tax information, including 68 tax treaties and 21 tax information exchange agreements.http://eoi-tax.org/jurisdictions/IE#determinations_ea4957c24b73a483e863118e2c78c8e0
I am the first to admit that numbers alone do not tell the whole story; so what else has the OECD Global Forum (GF) concluded about Ireland?
Ireland’s peers in the GF, including the U.S, adopted a 2011 report on Ireland’s Combined Phase 1 and 2 Assessment of the laws and rules which give effect to the global standards on information exchange. It concluded that among other things Ireland ensures that:
- ownership and identity information for all relevant entities and arrangements is available to their competent authourities;
- reliable accounting records are kept for all relevant entities and arrangements;
- banking information is available for all account holders; and
- its exchange of information mechanisms covers all relevant partners.
This is the finding of the body mandated by the G-20 in 2009 to expose the world’s tax havens, based on their inability to pass their Phase 1 and 2 assessments conducted by the Peer Review Group of the GF. Recall that even before undergoing this detailed examination of its regime, Ireland was ‘whitelisted’ and deemed largely compliant when measured against parameters designed to exclude countries from the list of tax havens.
How then is it that the U.S Senate, in discussing the corporate, and in particular, the tax saving activities of Apple concluded that Ireland, despite its stellar credentials, is a tax haven.
This must seem patently wrong, after all in the latest OECD Progress Report on the Jurisdictions Surveyed by the OECD Global Forum Implementing the Internationally Agreed Tax Standard, Ireland is listed as a jurisdiction that continues to substantially implement the standard. http://www.oecd.org/tax/transparency/progress%20report%205%20december%202012.pdf
In fact, the only tax haven referred to in this document is Nauru, still regarded as a jurisdiction, though committed to the internationally agreed tax standard, has yet to substantially implement it.
It would seem therefore, that according to the creators of the term ‘tax haven’, by every agreed measure, Ireland is not a tax haven, along with over a hundred others included on the 2012 whitelist.
So why this persistent bother about ‘tax havens’.
Here’s the reason.
Despite protestations to the contrary, it does not matter what metric is used or conclusions reached about the definition of tax haven by countries, as a matter of international law, that it to say, what states have said in global fora about tax havens and their characteristics. When as a matter of domestic law, practice and inclination, a tax haven is defined not only by reference to whether a country is sufficiently transparent, or exchanges tax information ‘on request’. Instead what remains as the defining feature of a ‘tax haven’, is its low and competitive corporate income tax rate.
To be precise, it is not just this type of tax competition that gives rise to this label; it is also the success of the country engaged in it that will, ten times out of ten, result in the appellation, tax haven.
The bottom line is, so long as your country’s tax rate is in the single or low double digits and you are attracting customers interested not only in the tax rate, because clearly this must be backed up by highly specialised local expertise, then, I am afraid, as far as the countries who are losing their taxpayers to you, are concerned, and even if it is because their tax systems are in need of a overhaul, you are a tax haven.
That said, it is far better to be just a tax haven than an uncooperative tax haven.
In closing, let me also say that it is right and proper to explain what type of tax haven you are as many other tax havens have and continue to do, but if this machinery is activated only at the whisper of ‘tax haven’ and rendered immobile when opportunities arise to reinforce the legitimacy and imperative of responsible tax competition, then let me congratulate you in advance for your enviable accumulation of frequent flier miles.