Ireland's tax treaties costing poorer countries, claims NGO
Published 19/04/2016 | 02:30
Ireland's tax treaties with poorer countries are some of the most restrictive in the world, limiting the taxing rights of those countries, an international NGO has claimed.
Action Aid said that globally, tax treaties cost developing countries billions every year.
In a report released yesterday, the body said it has ranked more than 500 treaties signed by lower income and lower to middle income countries, ranking them in terms of how restrictive they are to the poorer country's taxing rights.
"Alarmingly, Ireland's tax treaties with lower-income and lower-middle income countries rank as the joint most restrictive in the world, with two of the three treaties inforce considered very restrictive, and five of the six treaties Ireland has signed with developing countries ranked as very restrictive," the report said.
Ireland has double taxation agreements in place with 72 countries. These are designed to ensure that that income that has been taxed in one treaty country isn't taxed again in Ireland.
It said there were two model templates for negotiating tax treaties - the UN and OECD templates, with Action Aid favouring the former because, the body claims, it gives more rights to developing countries.
The report said that Ireland's most recent treaties signed with developing countries, which have not yet entered force, are considered very restrictive for those poorer countries.
"ActionAid is concerned that Ireland continues to negotiate provisions that give poorer countries a smaller slice of the tax pie than that suggested by the UN model, undermining developing countries ability to keep a fair share of tax," the report said.
"ActionAid is very concerned that Ireland's treaty with Ethiopia, which was only signed in 2014 ranks as a very restrictive treaty."
The report alleges that one company in Zambia was able to reduce its tax bill by an estimated $10.4 million between 2007 and 2012 as a result of Ireland's tax treaty with the country, and the establishment of what it described as a "letterbox" company in Ireland.
It said that since this happened, Ireland has changed its tax treaty with the country.
Tax treaties generally, the report said, rather than simply preventing double-taxation, may actually be facilitating double non-taxation.
The Department of Finance said positive efforts have been made by Ireland in recent years in the area of tax treaties, including a spillover analysis published in October. It said the analysis was broadly positive in respect of Ireland's treaty network.