For the second time in 14 months Ireland's corporate tax policy has faced critical public scrutiny, and attracted adverse international comment. Last year two members of a US Senate sub-committee claimed that Ireland was a tax haven that facilitated tax avoidance by multinational companies – specifically Apple. The charge was rejected by the Government, and dismissed by the company.
This week a US Congress report highlighted another American concern: the number of US companies that have moved their domicile overseas in order to lower their tax rate. Some 76 companies have done so since 1983, relocating their headquarters mainly to Ireland, the UK, the Netherlands and Switzerland. US companies have employed this strategy, known as corporate inversion, to acquire or merge with a foreign company, and so avoid paying America's high – 35 per cent – tax rate. Some Irish-based companies, largely in the pharmaceutical sector, have been acquired in this way. Last March, President Barack Obama announced plans to stop corporate inversions by year-end, and to cut the US corporate tax rate.
For Ireland, US companies' increased use of this controversial method of corporate acquisition could not have come at a less opportune time. The European Commission is to start a formal investigation into the State's tax dealings with Apple. And international concern about tax avoidance measures used by multinational companies has intensified.
The Department of Finance has initiated a public consultation process on Ireland's response to a more challenging international tax environment. Last October the Government published an international tax charter document, and closed a loophole that allowed Irish-registered companies a stateless status for tax residency purposes. However a more public, assertive and detailed statement of Ireland's tax policy and of the Government's attitude to aggressive tax planning and company inversions, from which the national economic benefits are mixed, is now needed.