Irish Eyes Are Blinking
So, in the great stand-off between Ireland and the OECD, Dublin has been the one to blink first, with the Irish Government having announced in the 2015 Budget new corporate residency rules that will put paid to the infamous “Double Irish” international tax planning technique so beloved of American technology and pharmaceutical firms. This is not really surprising, given the amount of pressure Ireland has been under from the international community with regard to its corporate tax regime. What was more unexpected was the speed with which Ireland has acted, especially since it has fought tooth and nail against the likes of the EU and the OECD for years to ensure that Irish tax laws are decided in Ireland. But ultimately, perhaps the Double Irish just wasn’t worth the hassle anymore. Physical investment on the other hand, is. Ireland is often maligned for being one of those jurisdictions with a tax regime attracting a lot of corporate profit, but not a lot of corporate substance. This is unfair, and the country’s detractors misunderstand (or pretend to misunderstand) what the Government is trying to achieve by having one of the lowest rates of corporate tax outside of the world of offshore: jobs, wealth creation and economic growth. AmCham Ireland, the American Chamber of Commerce’s Irish branch, has some quite astounding statistics about the level of FDI pumped into Ireland by American firms in recent years: US companies have USD204bn in FDI in Ireland, more than the total invested in the BRICS economies combined, and during the decade to 2010, US investment in Ireland was triple that of China-bound investment. This has created over 115,000 jobs in more than 700 US firms in the Irish Republic. Pretty impressive for a country with a total population of 4.5m. Certainly, not all that shines in Ireland is gold (or should that be emerald?), and the scale of its banking crisis leaves it vulnerable. But would Ireland be recovering to the same degree it is now, or even recovering at all, if it had put corporate tax up, a move the French and Germans were clamoring for in the bail-out? In fact, it is something of a triumph that Finance Minister Noonan has been able to announce tax cuts this time around given the state Ireland was in just four years ago. And mischievous Ireland hasn’t completely caved in by relinquishing the Double Irish. The “Knowledge Development Box” announced in the Budget will almost certainly be considered a “harmful” tax measure by either the OECD or the EU, or both. Let the fun and games begin!