Prominent French economist Thomas Piketty has accused the Republic of Ireland of “capturing the tax base of others” through a tax system that attracts multinational companies to be based in the country.
The statements were made in response to new figures showing the unusually high level of corporate tax revenues compared to the size of the population, which were identified in Global Tax Evasion Report 2024 By the research body of the Paris School of Economics and the European Union Tax Observatory.
The report showed that Ireland earns €4,500 in corporation tax revenue per capita, which is five times the rate of France or Germany, and has increased five-fold since 2014.
“This is perhaps the clearest illustration of the fact that nothing serious has been done to combat tax evasion within the EU since 2008,” Professor Piketty wrote on social media in response to the Irish figures.
“If anything happens, the situation could have deteriorated,” he added. “Ireland gets an extra month of income by taking away the tax base for others!”
Fellow economist Gabriel Zucman, one of the report’s co-ordinators, said of Ireland: “It pays to withdraw profits from all over the world!”
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A Treasury spokesman said the research focused on links between corporate profits and wages in Ireland, which was “misleading”.
“This creates a misleading impression that corporate profits are or should be linked directly to wage levels and not to investment outputs in all income-generating activities such as investment in R&D, intangible assets, capital-intensive machinery and investment in employees.” He said in a statement.
“The paper appears to classify any such payments as profit shifting, which ignores that Ireland has substantial operations with hundreds of thousands of employees working for many of the world’s largest multinational companies who pay tax on these profits.”
“As a small, open and globalized economy, Ireland is home to many of the world’s largest multinational companies operating in sectors with a high level of profitability such as pharmaceuticals and ICT. This results in higher financial flows to and from Ireland,” the spokesman continued.
In addition, the spokesperson said that Ireland continues to modernize its tax law in line with international standards and agreements, is a “strong supporter” of the BEP process, and is in the process of implementing the first part of the OECD tax deal.
In the introduction to the report, Nobel Prize-winning American economist Joseph Stiglitz wrote that the report’s findings revealed that the OECD reforms had not achieved their goals.
This includes the so-called Base Erosion and Profit Shifting Initiative, which was intended to prevent multinational corporations from reducing their tax liabilities by moving their profits to areas with a lower tax rate.
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Professor Stiglitz writes that since the launch of the EPS initiative “the scale of the problem has skyrocketed”, while the OECD agreement to impose a minimum international corporate tax of 15 per cent on multinational corporations “has become toothless.” Largely due to a series of loopholes and “carvings”.
The report said that Ireland and the Netherlands were the “largest profit remittance destinations” and that more than $140 billion (€130 billion) had been “remitted to each in recent years.”
According to the study, Ireland and the Netherlands each accounted for about 15 percent of transferred profits in 2019.
Multinational companies benefit from lower royalty rates derived from intellectual property licensing, the report said, noting the Irish tax rate on royalties of 6.25 per cent since the introduction of the patent box system in 2015.
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Some of the country’s €4,500 per capita corporate tax revenue “may reflect the relocation of real activities to Ireland,” the report wrote.
However, “much of it may reflect higher profit shifting to Ireland, particularly due to the transfer of intangible assets following the erosion and profit shifting tax, the Tax Cuts and Jobs Act, and the introduction of the 6.25 per cent tax rate.”
“Whatever the reason, this increase demonstrates how tax havens, in the absence of tax coordination and minimum taxes, can generate large amounts of tax revenue by choosing very low tax rates.”
The Ministry of Finance has been contacted for comment.