Irish Finance Minister Michael Noonan has announced that he is abolishing the controversial “Double Irish” corporation tax structure that has allowed large multinationals like Facebook to legally divert profits from Ireland to countries that are considered tax havens.
Mr Noonan has told the Irish parliament that the tax scheme will be closed to new entrants next year and phased out by 2020, meaning that, from then, all companies in the Republic must be tax resident there.
However, he has defended Ireland’s 12.5 per cent rate of corporation tax, saying it is “not up for discussion”, and has been supported in his decision by none other than Bono, frontman of U2, who described the tax as bringing the country “the only prosperity we’ve known”.
The singer’s claims about low corporation tax delivering economic progress were made against the backdrop of an EU investigation into separate company tax avoidance strategies in the Irish Republic.
The European administration is demanding an end to schemes such as the double Irish, in which intellectual-property-heavy corporations like Apple use two Irish companies to lower their tax rate in Ireland.
Both Ireland and Apple, which teamed up with U2 last month to release the band’s latest album, deny any wrongdoing and there is no suggestion that Bono was defending the tax-avoidance schemes, which are separate from the 12.5 per cent corporation tax.
However, if the investigation finds that the company has been using Ireland as a haven for tax avoidance, then it could face a tax repayment order that could potentially run into billions of euros.
The Treasury is keeping a close eye on developments across the water and is poised to launch its own crackdown on “diverted profits”, with Chancellor George Osborne raising the issue at the Conservative party conference last month as part of his “fairer markets” agenda.
Sources: FT, BBC News