The “Double Irish”, tax avoidance, on-shoring of assets and Ireland’s miraculous 26% growth rate

THE closure of the controversial “double Irish” and efforts to shut down other international tax avoidance schemes had a significant impact on the extraordinary 26% growth figure recorded in the Irish economy this year.

Documents obtained from the Central Statistics Office (CSO) and the EU suggest that “on-shoring” of assets by enormous multinationals are one of the key reasons behind the increase.

The growth rate – announced in July – has been dubbed “leprechaun economics” by Nobel Prize-winning economist Paul Krugman.

Details of the companies responsible for the colossal GDP increases are being closely guarded with plans to “suppress” some economic statistics that are routinely published.

Figures that would normally be included in CSO estimates will not now be made available because it might identify some of the multinationals involved.

The disclosures were made at a high-level meeting between officials from the Central Statistics Office, the Department of Finance and the Irish Fiscal Advisory Council in July.

A report of that meeting – which has been obtained under FOI – reveals the CSO believe some of the increase is being fuelled by firms juggling their assets because of a clampdown on tax avoidance schemes.

The documents make specific reference to the notorious “double Irish” scheme under which global companies avoided billions in taxes by channelling money through Irish companies.

They also refer to other tax avoidance strategies – commonly referred to as BEPS [Base Erosion and Profit Shifting] – which are being tackled as part of international efforts to shut them down.

The admission that Ireland’s tax avoidance schemes are one of the driving forces behind the inflated GDP figures are likely to cause further difficulty for the government.

Ireland’s controversial tax strategies are already under the microscope after the EU Commission ordered tech giant Apple to pay back around €13 billion in unpaid taxes.

At the meeting in July, the Central Statistics Office attempted to answer a long list of questions that had been posed about the 26% figure.

They explained that the impact of the changes had come about in the first quarter of this year.

They said: “Other circumstances arise over the course of the year to affect company decisions e.g. the ongoing issue of BEPS and the pending closure of the ‘double Irish’ scheme.”

They go onto explain: “The ‘on-shoring’ of intangibles [assets like licensing agreements, trademarks, patented technology] is likely to continue, reflecting the influence of BEPS.”

At the time of the revelations, there was significant discussion of producing a separate more realistic set of GDP figures that would exclude the inflated increase.

However, the CSO said they could not suggest how this might be done “without breaching confidentiality”.

They said: “The CSO can confirm that the increase is mainly driven by MNEs [multi-national enterprises].”

In answer to another question, they said the main drivers of the increases were “company relocations” and that aircraft leasing – considered a significant factor back in July – was actually of “lesser significance”.

They explained that forthcoming statistical publications would have to be less detailed to protect the companies involved.

“Some of the sector detail in the CSO’s Estimate … scheduled for publication by end-year, will need to be suppressed,” they said.

“There are primary and secondary confidentiality issues to consider in what level of sector detail to provide, to prevent other companies in a given sector from being able to identify the data of competitors.”

This emphasis on protecting the multi-nationals was repeated in correspondence with Eurostat, the official EU statistics body, in documents released following a separate information request.

An official from the CSO described it as a “primary concern and challenge … in managing this difficult set of revisions”.

An internal Eurostat briefing note also again described the “on-shoring” of assets by multinational companies as the driver of the growth.

Assistant Director General of the CSO Jennifer Banim said in a statement: “The revisions published were based on hard data and attributable to the globalisation activities of a very small number of companies.

“However, the CSO is bound by strict confidentiality rules which means that we were limited in our ability to fully explain the revisions and obliged to suppress certain details such as the number of entities involved.”

They said they could not perform their job unless individuals and companies trusted them with “sensitive information” and were legally prohibited from disclosing data obtained in confidence.

Some of the CSO documents:

And the Eurostat note, both internal and external:

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