New research makes it plain that Ireland is a tax haven

February 11, 2014
Obsession
Borders
February 11, 2014

Is Ireland a tax haven? The Irish government bristles at the question, given rising interest in cracking down on offshore financial centers, but research from a Trinity College professor is pretty definitive: Yes, it is.

When Ireland’s leaders defend their country from accusations that global companies like Apple use Irish law to avoid taxes in other countries, they frequently cite a study prepared by the World Bank and PriceWaterhouseCoopers. It found that Ireland has an effective tax rate of 12.3%, higher than other European countries and places like Bermuda and the Caymans that are traditionally considered tax havens.

The only problem is that the study is based on a hypothetical firm’s hypothetical tax payments. And that hypothetical firm only has 60 employees, is domestically owned, doesn’t import or export anything, and makes ceramic flower pots. That’s not exactly a recipe for identifying the taxes paid by large multinational companies largely engaged in trade and reliant on intellectual property.

So James Stewart, a finance professor at Trinity, looked at data from the US Bureau of Economic Analysis, which reports the actual amount of money US multinationals paid for their operations in foreign countries. Here’s what he found:

How-much-tax-are-US-multinationals-paying-abroad-2011-effective-corporate-tax-rate_chartbuilder (1)

Ireland, at a cool 2.2%, is a lot closer to the British Virgin Islands and Luxembourg than it is to larger developed economies. And it certainly shows that the arguments Irish politicians are relying on won’t carry much water with the rest of the world. In fact, it’s strange that PriceWaterhouseCoopers is involved in creating supposedly objective research about the international tax system: Its top employee in Ireland is a lobbyist focused on helping multinationals reduce their tax burden.

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