Tax inversions behind Brazil’s move to place Ireland on tax haven list – Carthy
Sinn Féin MEP Matt Carthy has pointed to the growing number of corporate inversions for tax purposes as the likely reason for the Brazilian government’s decisions to place the Irish state on its list of tax havens this week.
“The Irish government urgently needs to take action on remaining tax avoidance schemes in light of Brazil’s decision to put our state on its list of tax havens, along with notorious black-listed jurisdictions like Panama, Monaco and the Isle of Man.
“While there is some speculation that the move follows the European Commission’s state aid ruling on Apple, the more likely reason for the blacklisting of Ireland is the growing number of corporate inversions for tax avoidance purposes, in addition to the aircraft leasing tax loophole.
“It is hardly a coincidence that this move comes just a month after the announcement by Brazilian company JBS – the world’s largest meat company with sales of 40 billion euro per year – that it intended to ‘relocate’ to Ireland through a corporate inversion. JBS, under investigation for fraud by the Brazilian authorities, has reportedly now decided against the Irish inversion.
“By placing Ireland on the tax haven list, profits moving from Brazil to Ireland will now be subject to a 25% tax instead of a 15% tax.
“These inversions only happen on paper. They don’t bring any meaningful economic activity to this state, they don’t create jobs, they don’t benefit the Irish people in any way. They allow multinationals to avoid paying tax in their home countries, and they allow them to avoid even paying the Irish tax rate through the use of intra-company transfers following an acquisition – for example through large intra-group interest payments.
“And they are the main cause behind the ludicrous 26% GDP growth rate figure, seriously damaging our business reputation and massively distorting data that is vital for economic decision-making. US President Barrack Obama has moved this year to try to restrict US multinationals from using the inversion scam.”
Carthy, a member of the European Parliament’s Panama Papers inquiry committee, continued: “In addition to encouraging inversions, the other Irish tax law that is likely to have led to Brazil’s decision relates to the Section 110 regime for Special Purpose Vehicles, which has allowed companies such as vulture funds to pay practically no tax on profits. Since 2012, this SPV regime has also aimed at attracting aircraft leasing groups to locate their headquarters in the Irish state – on paper, of course – where they use profit-stripping techniques to avoid paying tax.
“The head of the Brazilian aircraft industry association, Abear, has stated that 60% of Brazil’s air fleet is leased by companies ‘based’ in Ireland using this loophole. They too will now be subject to a 25% tax by Brazilian authorities.
“Brazil is one of the largest economies in the world and this move will have serious consequences for our trade with the BRICS state. The Brazilian move is the inevitable consequence of the Irish government’s head-in-the-sand approach on tax, and it will have a serious negative impact on all Irish companies doing business with Brazil and the Irish economy in general.
“The rest of the world is losing its patience with the Irish government’s insistence that it does not facilitate tax avoidance by multinationals.
"Will the Irish government now finally acknowledge that its tax policy is damaging the interests of the Irish people, the Irish economy and Ireland’s international reputation, and take action to end our role as a conduit in the global chain of tax avoidance?”