14 October 2014 - Christian Aid today praised the Irish government’s decision to phase out of the ‘Double Irish’ tax avoidance scheme as a landmark moment in the fight for tax justice. It warned, however, that plans by the government to introduce a ‘Knowledge Development Box’ tax allowance would be a retrograde step.
The ‘Double Irish’ is a tax avoidance strategy used by firms incorporated in Ireland such as Apple, Facebook, Google, Microsoft and Yahoo to pay minimal tax by transferring profits to Irish-registered firms based off-shore.
The Knowledge Development Box enables companies to pay a lower rate of corporation tax on profits earned from their patented inventions. A similar scheme called the ‘patent box’ was introduced in the UK last year.
“It is very positive that the government has taken the decision to phase out the Double Irish,” Sorley McCaughey, Head of Advocacy and Policy at Christian Aid Ireland, said today.
“Ultimately it has been hugely damaging to Ireland’s reputation and won us few friends. It is beyond time the government closed down it down.
“The Double Irish has come to symbolise all the elaborate tax avoidance schemes that multinationals and their advisers have engaged in. Many of these schemes have resulted in the poorest countries in the world losing billions every year in revenue that is rightfully theirs - Christian Aid puts the figure as up to US$160bn a year.
“There are many other changes that Ireland could make to improve our reputation globally – such as introducing a public register of the real owners of phantom companies – but doing away with Double Irish removes one of the most egregious examples of tax injustice”.
Mr. McCaughey added that the introduction of a knowledge development box scheme will amount to replacing one form of tax avoidance with another.
“Evidence from the UK suggests that the introduction of a patent box – which is essentially what the knowledge development box is – does not necessarily encourage innovation, and will instead engage Ireland in a fruitless ‘race to the bottom’ on tax,” he said.
The ‘patent box’ has been described as one of the reasons the UK is a target for US companies seeking to shelter offshore cash from high US corporate tax rates – a manoeuvre known as a “tax inversion”.
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