Luxembourg Leaks: The revelations this week by the International Consortium of Investigative Journalists (ICIJ) of the extent of Luxembourg's facilitation of corporate tax avoidance also exposes the Irish Government's guff on the tax system in recent years. The German vice chancellor said Thursday that the "racket" needs to stop.
It is not news that the tax system is not "very clear, very transparent" as Enda Kenny, taoiseach, has claimed; not always "rules based"; and the February 2014 claim by Brendan Howlin, public expenditure minister, that Ireland has no "brass plate companies" is a fantasy.
“The Irish tax rate on corporate business is very clear - it’s 12.5% - we don’t have any brass plate companies like others do have. The tax rate in Ireland is what it says on the tin,” Howlin said.
This of course was baloney and the Double Irish tax avoidance scheme is due to be abolished for existing companies after 2020.
We already knew that big foreign companies had access to ministers and their tax affairs were unlikely to get the same level of attention as a small indigenous firm.
Enda Kenny, taoiseach, gave a speech in Washington DC last March to members of the US Chamber of Commerce and he described his “close” relationship with the US Chamber, saying he meets with them regularly, and spoke only the previous to its president, Thomas Donohue, who has supported keeping a low corporate tax and for bringing down income taxes in Ireland.
We now know from the cache of about 28,000 documents that mainly came from the Grand Duchy's offices of PricewaterhouseCoopers (PwC) the Big 4 accounting and tax advisory firm, that both brass plate companies in Ireland and a number of big indigenous companies were able to take advantage of the Irish and Luxembourg's special tax regimes.
For example Glanbia, the leading Irish food company, was able to transfer €1bn to a letter box company in the Grand Duchy to avoid Irish tax.
Companies that have become "Irish" by opening an Irish holding company, to avail of the low headline rate of 12.5% are known as tax inversions in the US - most of them are brass plate companies and operational control remains elsewhere: See here.
Covidien which makes medical devices, became "Irish" in 2009 and according to The Irish Times, it arranged a $6.9bn tax related Ireland-Luxembourg loan.
In 2008 Shire, a British drugs company, became "Irish" in 2008 and opened a 1-person company. The Irish Times says it allocated $3.78bn in capital from Luxembourg as part of a scheme aimed at avoiding tax.
Sigmar Gabriel, vice chancellor of Germany and head of the SPD party warned in a newspaper interview published on Thursday that the region’s tax havens “deliver an ax blow to European solidarity.”
“This racket needs to stop as quickly as possible,” Gabriel told Süddeutsche Zeitung, a German daily.
Jean-Claude Juncker, prime minister of Luxembourg (1995–2013) and architect of the racket, is the new president of the European Commission.
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