Government will have to scrap ‘double Irish’ system

The Government will be forced to scrap the tax arrangement known as the “double Irish” in order to avoid criticism of the country’s tax system, says one of the most senior tax experts in the country.

The tax consultant, who did not want to be named, claimed that the “double Irish” and another controversial tax mechanism known as the “Dutch-Irish sandwich” would be gone within 18 months.

This complex mechanism enables an Irish onshore company to make royalty payments to an offshore Irish company, which in the case of Apple is based in Bermuda. It has been the subject of much criticism.

A spokesman for the Department of Finance said, “International tax planning takes advantage of these differences in national systems and rules. The best way to combat such arrangements is for countries to work together — at EU and OECD level — to examine these structures and consider how international rules can be implemented to ensure fair levels of taxation. Ireland is fully supportive of international efforts in this regard and is an active participant in the OECD project on base erosion and profit shifting which seeks to deal with these issues.”

Ireland’s tax regime is currently the subject of intense scrutiny because of US Senate hearings into Apple’s tax affairs.

The “double Irish” among other arrangements has enabled Apple to avoid paying tax on roughly $44bn (€34.2bn) of taxable income. It has prompted a huge political backlash in the US with Ireland commonly depicted as a tax haven in the international media.

It was alleged in the Senate hearings that Apple had negotiated a 2% tax rate with Revenue. The department spokesman says this is incorrect.

“I cannot comment on the tax affairs of individual companies. To do so would breach taxpayer confidentiality and be against the law. But Ireland does not do special tax rate deals with companies.

“We do not have a special extra low corporation tax rate for multinational companies. Ireland’s tax system is statute based so there is no possibility of individual special tax rate deals for companies”.

“All companies in Ireland pay the standard 12.5% rate on their trading profits arising in Ireland and they pay a corporation tax rate of 25% on their Irish non-trading income.

“Reports of lower effective tax rates appear to arrive at their figures by running together the profits earned by group companies in Ireland and in other jurisdictions and incorrectly suggesting that Irish tax does or should apply to both.”

The senior tax consultant said Ireland does not have tax haven characteristics, which include secretive tax rules; a tax rate of 0%-5% and the ability to strike different rates with different companies.

“Ireland has a very transparent system. If it got rid of the ‘double Irish’ then it would take away much of the smell from the system and it would make it like most other jurisdictions.”