Ireland’s tax incentives are costing developing countries millions of euro according to a new report by the charity organisation ActionAid.
Titled ‘Mistreated’, the report examined more than 500 international tax treaties, revealing which ones most restrict poorer countries’ ability to raise taxes on multinational companies. When measured against other treaties internationally, Ireland’s treaties with developing countries are the joint-lowest scoring.
According to the report, 47% of Ireland’s foreign direct investment is said to be routed through shell companies.
ActionAid says that Ireland has three tax treaties that dramatically restrict lower income countries’ power to tax global companies doing business on their soil and therefore unfairly limits their country’s potential to collect tax revenue.
It discusses one example of this which occured between 2007 and 2012 when $10.4m was lost by the Zambian exchequer when a loophole allowed money to be passed through an Irish shell company. As per the report the money lost could have provided over 18,000 school places in the African state.
Siobhan McGee, CEO of ActionAid Ireland called for action to be taken to close any remaining loopholes.
Outdated and unfair treaties make it possible for multinational companies to significantly reduce the tax they pay in lower income countries.
We urge the Irish Government to adopt the UN Model as a minimum standard. And we urgently call for much greater transparency around how Irish treaties are drafted. This really matters because women and children in poverty pay the price when crumbling public services like schools and hospitals are starved of possible revenue.”
Zambia Sugar, a British owned company, previously owned up to paying “virtually no corporate tax” during this time due to “substantial capital allowances”.
ActionAid alleges that one of the tax avoidance mechanisms used by the company involved routing a loan through Ireland to avoid Zambian tax on interest charges.
While Ireland’s tax treaty with Zambia was renegotiated in 2015 and closed tax loopholes, the charity has labelled an updated version of the agreement as “very restrictive”.
You can read the report here http://www.actionaid.ie/publications/mistreated-report-irish-chapter