Ireland is your favorite multinational corporation’s favorite country. Why? Over the last 25 years, the country has molded itself into a leading corporate tax haven, shielding businesses with subsidiaries in Ireland from worldwide taxation. Drawing on its EU and Organisation for Economic Co-operation and Development (OECD) membership (which allows it to sign crucial tax agreements with other Global North countries) and buoyed by an army of corporate lobbyists, the island nation has pursued a tax regime that maximizes foreign investment at the cost of everything else. The trade for Ireland was this: In exchange for helping companies dodge their global tax obligations, it received revenue and jobs to help boost short-term growth. In the long term, however, its choice has resulted in corporate dominance over Ireland’s politics and economy. The government has seemingly abandoned the interests of its citizens, arguing in court against receiving $14 billion in avoided taxes from Apple. Meanwhile, the boons of foreign investment are felt across the country, but only by the lucky class of foreign-employed workers, who make almost double the wages of their domestically employed counterparts. With new changes to the global tax regime and domestic inequality on the rise, it is time for Ireland to buck its current economic model and try something new.
Over the past 75 years, the Irish government has had a longstanding policy of attracting foreign direct investment with low taxes. For years, conservative commentators and business leaders raved about the “Celtic Tiger,” a nickname for the super-powered Irish economy of the 1990s and 2000s. Spurred by foreign investment, the country ascended from relative poverty to become one of Europe’s wealthiest nations. From 1987 to 2003, GDP jumped from 70 percent of the EU average to 136 percent, and unemployment dropped from 17 to 4 percent.
The Great Recession of 2007–2009 inflicted pain across Europe, but it killed the Celtic Tiger. Overreliance on US foreign investment in good times meant overexposure to the struggles of American firms in crisis, and Ireland found itself at the mercy of the International Monetary Fund (IMF) by 2010. A rescue package saved the country from bankruptcy, but the average worker lost about 10 percent of their income to IMF-imposed austerity. By 2012, the Irish economy began to grow again, but with the help of new methods to attract US corporations.
To understand the Irish economy post-2008, it suffices to understand the actions of one man: Feargal O’Rourke. Hailing from a center-right political dynasty and sporting a background as an accountant and former leader of PricewaterhouseCoopers Ireland, O’Rourke advocated exclusively for the tax interests of the companies he advised. Having gained power after the recession, O’Rourke brokered relationships between his clients (including Google, Facebook, and LinkedIn) and politicians, including his cousin, Finance Minister Brian Lenihan. Under O’Rourke’s guidance, Ireland spent the 2010s creating various accounting schemes allowing corporations to move profits from high-tax to low-tax countries at will. Apple, for instance, used Ireland to transfer almost $150 billion in global profits to Bermuda, one of the most notorious global tax havens, using the complexities of international tax law.
Corporate taxes are, in theory, fairly simple: Companies pay some of their profits as taxes to the country where they make those profits. Multinational corporations, however, are more confusing. How does one locate the “source” of profit when different business divisions are spread across continents? This is the weakness that O’Rourke and Apple exploited. Apple established multiple subsidiaries in Ireland, across Europe, and in Bermuda, funneling its European profits into zero-tax Bermuda by way of Ireland. Despite being little more than a mailbox, the Bermuda office “owned” the rights to all of Apple’s valuable intellectual property (IP), which it “licensed” to its Irish subsidiary—which, in turn, licensed the IP internationally. Conveniently, those licensing fees happened to sum to about the same amount as Apple’s worldwide profits. Since the Irish subsidiary paid nearly its entire profit to the Bermuda entity, it appeared on paper to have zero profits—meaning it had no taxable income. The result? For every million euros the company made in profit, it only paid 50 in taxes.
The specific loophole that Apple and others used, called the “Double Irish,” was closed after international backlash—but not before shielding almost $100 billion of annual revenue. O’Rourke, for his part, has not been deterred; with a steady stream of new loopholes, scores of tech and pharmaceutical companies are setting up Irish offices. Digital and intellectual assets are inherently mobile: Tax-averse companies can shift these assets nearly at will to minimize the tax bill. New avoidance vehicles used by giants like Google and Apple, such as the “capital allowance for intangible assets,” are so powerful that one IP transfer from Apple increased Ireland’s annual GDP by 26 percent.
What did Ireland get in return for selling out its economy to corporations and its politics to lobbyists? Not much. The two main boons of its tax scheme are jobs and revenue, but both fail to live up to the hype. Many corporations are merely checking the box when creating offices in Ireland. In 2008, then-Facebook executive Sheryl Sandberg extolled Ireland’s “world-class” talent pool when the company made the island its international headquarters but told friends in private that the operation would be “tiny.” These patchwork foreign jobs also mask deeper inequities in the Irish economy: Poverty rates and income inequality are both well above the EU average, and upward price pressure from foreign jobs has created a wildly expensive housing market. Further, the country has long suffered from a lack of infrastructure investment—despite the billions in corporate tax the country steals from its neighbors, Ireland has no metro system and an ancient energy grid. Political rot has also taken hold in the country. Given O’Rourke’s dictatorial power over tax decisions, little honest discussion about the country’s priorities is allowed. Instead, Irish ministers and their corporate allies regularly quash opposition to the country’s permissive tax laws. When opposition politicians questioned the latest harebrained tax scheme in the legislature, the ruling party condemned their concerns as irresponsible and unpatriotic. With lobbyists writing bills and the economy dependent on the accountants of American corporations, do Irish voters actually have a voice?
Ireland is now in a predicament entirely of its own making. Reliant as ever on multinational corporations for jobs, the country has failed to create an economy based on anything besides tax cuts. A reckoning is coming—and it is not for Ireland to decide when the storm hits. New international treaties have sought to set a lower bound on corporate taxes, which will limit the utility of a tax haven like Ireland. And, any cut to the US corporate tax rate (which Donald Trump has proposed) will cost Ireland billions of dollars and thousands of jobs. Beyond these practical challenges, there are moral concerns. Billions and billions of dollars have been stolen from governments worldwide—dollars that should be improving the lives of their people, not lining the pockets of shareholders. Ireland now faces a choice: Does it shift toward an economy that prioritizes its citizens and its global standing, or does it stay this short-sighted and self-destructive course?