Double Irish is dead, but the Double Dutch lives on
The 'Double Irish' is gone. But there is still lots of 'Double Dutch' around. You could be forgiven for being utterly confused about the changes that were announced in the budget around Irish corporate tax structures.
I don't mean that international tax law is complicated - well, it is, but not half as confusing as trying to interpret what various people have been saying about it for the last 12 months.
According to a US Senate committee, we have been acting like a tax haven. According to the European Commission, there is a case to answer on whether the tax position between Ireland and Apple subsidiaries constitutes illegal state aid.
The name of "Ireland" tripped off the tongue of US President Barack Obama just a few months ago when he was describing how companies could essentially re-invent their tax domicile by conducting controversial acquisitions called "inversions".
But the Irish government says we are not a tax haven. Our system is transparent and the Apple situation is not illegal state aid. So why did we announce two big tax-code changes in the last six months eliminating these tax tricks?
A leading expert with KPMG told an Oireachtas committee during the summer that the situation was kind of our own fault. "We shot ourselves in the foot. A great deal of the international press coverage arose as a result of international news agencies picking up on reports or articles by Irish persons."
Yet, a partner in KPMG, writing in the Irish Independent a few days ago, welcomed the new initiatives by the Minister for Finance. He said: "More importantly, it has highlighted how we can develop our own tax policy in future... by engaging in sensible tax policies which represent a significant departure from the tax-planning practices of the past."
Yet, just a few months ago, the Consultative Committee of Accountancy Bodies told the Department of Finance tax reform consultation that "harmful tax practices are simply not a feature of the Irish tax landscape".
So what is going on? It appears that, in a uniquely Irish way, accountants and lawyers lobbied government for many years to facilitate measures in the tax codes that would allow the Double Irish and inversions to take place.
In some cases, the loopholes were gaps that just arose, but were not closed down. These tax advantages were then marketed abroad by tax advisers, government and state agencies alike.
We did it partially to compete with other countries - and partially because we just thought we were being very clever. When international pressure comes on, the industry closes ranks and says there is nothing wrong.
The government had to make concessions, because it faced further reputational damage or a full-blown investigation into aspects of our tax code. Even if we came out of that investigation on top, the damage and uncertainty caused in the meantime would have been too great.
So, Minister for Finance Michael Noonan does the right thing, and makes two big concessions in the last six months. Even more intelligently, rather than just say the Double Irish is gone, he announces a consultative process and a detailed roadmap for potential investors about where Ireland's tax competitiveness is heading.
Then the tax advisory community jumps on board and commends him for his sterling work. A new Irish-style consensus emerges and we move on from the past.
So what happens now? Noonan has decided not to wait around and see what happens. He is cracking on with a new incentive scheme called the 'knowledge development box' - similar in concept to the British and Dutch patent boxes incentives. It won't be renegade like the Double Irish and will get the EU and OECD's blessing.
Foreign multi-nationals enjoying the benefits of the Double Irish will have time to reflect on what they want to do, and they will have certainty, quite quickly, about what the alternative on offer from Ireland will be.
We still don't really know what multi-nationals in Ireland will do. It is a risk, but one that probably had to be taken. And, on balance, it is simply the right thing to do.
Ireland has made a concession in response to international pressure. Now it is up to the OECD and the European Commission to insist that other countries follow suit. Traditionally in the EU, member countries didn't point the finger at neighbours about tax policies - people in glass houses and all of that.
But British Prime Minister David Cameron got stuck into us a few weeks ago. Now Ireland needs to capitalise on the moral high ground we have just climbed onto and insist that the Dutch and British tax equivalents be changed.
We don't want to be alone in doing the right thing, or else we will just suffer from it, as others continue to enjoy competitive tax advantages.
The future is now a little uncertain. Tax advisers will tell you that there won't be an exodus of foreign multi-nationals. But they are the same ones who, just a few months ago, said there was no need to change the rules.
Some tax experts believe the new approach advocated by the OECD could shave €1bn off Ireland's annual multi-national tax take.
It could also bring benefits if it levels the playing field. However, we might see poor transfer pricing and profit-shifting proposals lower Ireland's annual tax take from foreign-owned multinationals from €4bn to €3bn.
The impact on jobs is particularly hard to determine. Foreign multi-nationals employ 250,000 people here, but the vast majority should continue to keep their genuine economic activity here. It is the other doorway adornments of the brass variety, that might go.
Irrespective of the impact, Ireland is now entering a whole new ball game when it comes to foreign direct investment. Some tax advantages remain in place, but we will have to rely on other factors a lot more.
The UK has become the most attractive European location for global investment, moving up from 8th to 5th in the world rankings.
Noonan announced a consultation process on a new intellectual property tax package, similar to a patent box. Ten countries in Europe alone - including the UK, the Netherlands, France and Belgium - offer some kind of patent or innovation box which reduces tax bills on income generated from intellectual property.
The UK tax rate is 10pc. The Netherlands is just 5pc. Our package will have to be priced in that range to stand a chance of competing.
This is where other factors come into play if we are to compete successfully for jobs. We will have to offer foreign executives, bringing investment and jobs with them, lower tax rates than we pay.
We will have to put better business infrastructure in place. We will have to invest in our schools, our hospitals, our universities, culture and what the country has to offer.
This sounds like a better plan already.
Sunday Indo Business