Some multinational corporations are diverting profits made in developing countries to Ireland to avail of the low corporation tax rate here. By so doing they are robbing the countries in which they made their money of billions of euros in tax revenue.
Written by Dr Sheila Killian of the University of Limerick, the report details how companies use the technique of “transfer pricing” to allow subsidaries of a multinational company to artificially transfer profits made in one jurisdiction to be taxed in another country which has a lower tax rate.
The result is that companies registered in Ireland as having a small office and one or two staff are recording huge profits, which are subject to our low tax rate while the related company in a developing country where the money was actually made reports little to be taxed.
‘Driving the Getaway Car?’ explains how impoverished countries lose billions of euro through weak domestic tax collection capacities and through unjust international tax structures. Transfer pricing abuse is highlighted as a particular area of concern. This is when subsidiaries of the same multi-national company artificially set the prices of goods and services in order to minimise their tax bills, often through the use of secrecy jurisdictions, popularly known as tax havens. This illegal practice is very difficult to monitor and costs impoverished countries billions in lost tax revenue.
Author of the newly published book, Dr Sheila Killian, highlighted the fact that “Ireland’s tax model clearly does not do enough to protect vulnerable countries from tax revenue losses. Specifically, Ireland should adjust its transfer pricing regime to properly protect impoverished countries from losing tax revenue, and close domestic tax loopholes that may facilitate capital flight from impoverished countries“.
Social Justice Ireland supports these organisations’ call for action by Government to end this practice.
The full text of the report may be uploaded here.