Business Irish

Thursday 19 October 2017

OECD bid to end Ireland's 'tax haven' status is 'damp squib'

Professor Frank Barry says there is little interest in reforming corporate tax laws
Professor Frank Barry says there is little interest in reforming corporate tax laws
Peter Flanagan

Peter Flanagan

THE OECD's plan to clamp down on tax avoidance by foreign multinationals is a "damp squib" that is unlikely to get key support from the United States, a leading academic has said.

Trinity economist Professor Frank Barry said there was little interest from the United States in reforming tax laws that have seen Ireland and other countries accused of being tax havens and dozens of multinationals use Ireland to avoid paying billions of dollars in corporation tax.

Speaking at the Institute of International and European Affairs, Prof Barry said the system was unlikely to change any time soon.

"The US system of tax credits means that an American company does not pay the full level of corporation tax when it repatriates profits from overseas back to North America.

"What it does do is create something of a tax holiday for a firm. If a company is operating in a low-tax jurisdiction, such as Ireland, the company will pay the difference between the US and Irish rate when it brings profits home, so it is actually in the US government's interest for companies to be based in low-tax areas," he said.

The other reason why change was unlikely was because of the need to maintain US influence around the world, Prof Barry added. The thousands of American companies around the world are a form of "soft power", he claimed, and the State department was unlikely to agree with any changes to the tax code that could hurt that influence.

"The US tax code had been gridlocked since the Kennedy administration 50 years ago," he said.

"Many of the issues could be sorted out in one fell swoop if the US was to close down the tax havens in the Caribbean, but there isn't the political will domestically to do that," Prof Barry said.

"There is so much lobbying by multinationals, and so much opposition to reform from the Republican Party, that the chances of significant reform are small.

"Last week's OECD agreement is also likely to be a damp squib because it will not be supported by the most important country – the US," he added.

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