EU Economy
Luxembourg Leaks: Irish Government's guff on tax system exposed; "Racket" needs to stop
By Michael Hennigan, Finfacts founder and editor
Nov 7, 2014 - 8:39 AM

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The ICIJ says secrecy was the norm in Luxembourg, where managers for global companies' subsidiaries were often instructed to not talk to reporters. Even outside Luxembourg, reporters sometimes ran into information roadblocks. ICIJ’s partners at the Canadian Broadcasting Corporation sent a public records request to Canadian officials asking for a copy of the Luxembourg tax ruling for a company controlled by the Canadian government. They received the tax ruling – with almost every line of the document blacked out.

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.

Kenny assured the group of business persons: “If you got a problem, you have an issue or anxiety or concern or a proposition or a proposal I want to hear it. My number is a public number you can call me anytime.”

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.

US-Ireland Tax Inversions 600,000+ staff: Kenny, Noonan met with top US corporate lawyers

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.

Although the branch immediately lent the money back to the Luxembourg company from which it got it, the transactions meant the money avoided being subject to a wealth tax in Luxembourg.

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.

Related tax links

Luxembourg confirmed as massive facilitator of tax avoidance

Apple says it may have to pay Ireland back tax; Foreign tax rate at 4.4%

Double Irish tax scheme axed; Conventional wisdom wrong again - Part 1

Replacing the Double Irish with Knowledge Development / Patent Box - Part 2

Ireland's small gain from Apple's possible EU tax probe payment

European Commission: Apple given special tax deals by Ireland

Apple's foreign tax rate tumbled after 2007 Irish 'advanced opinion'

G20 finance ministers reaffirm commitment to tax reform; Ibec takes Finfacts' advice

OECD & Tax: Everything grand in Ireland's Republic of Spin?

OECD proposes biggest reform of global business tax rules since 1920s

Finfacts submission to Department of Finance consultation on corporation tax reform

OECD BEPS Project submission from Finfacts: Ireland should embrace corporate tax reform

Irish corporate tax policy like property bubble driven by short-term interests

IMF explains “Double Irish Dutch Sandwich” tax avoidance

US company profits per Irish employee at $970,000; Tax paid in Ireland at $25,000

Estonia heads OECD tax competitiveness index; Ireland at 15, US at 32


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