Ireland has officially announced the phased abolition of its controversial “double Irish” tax scheme that has enabled multinationals such as Apple to dramatically cut down their tax bills.
The arrangement, which has drawn the wrath of the US Senate as well as the Republic’s EU partners, helped global corporations to move most of their taxable revenue from an operating firm in Ireland to an Irish registered firm in an offshore tax haven.
Bowing to pressure from international criticism, Irish finance minister Michael Noonan confirmed during his budget speech to the Dáil on Tuesday that the tax arrangement would be ended fully within four years.
Noonan told parliament: “These measures will enhance Ireland’s corporate tax regime and align it with best practice internationally. It will ensure that Ireland continues to be the home of the best and most successful companies in the world.”
However, he mounted a trenchant defence of Ireland’s low 12.5% corporation tax, which has been criticised by EU partners such as the French. Paris claims the rate is tantamount to state aid for multinational companies such as Facebook, Google and Apple, all of whom have their European bases in the Republic. Noonan said: “The 12.5% tax rate never has been and never will be up for discussion. The 12.5% tax rate is settled policy. It will not change.”
In a move to maintain Ireland’s reputation as a low-tax country for multinationals, Noonan introduced a “knowledge development” box to encourage corporations to conduct research and development in the Republic and be awarded with still generous tax breaks.
This was the first Irish budget since the global economic crash which saw some easing up of the austerity measures imposed by the International Monetary Fund and EU as the price for the multi-billion euro bail out that saved Ireland from national bankruptcy.
The finance minister boldly predicted that by 2016 – the year of the next general election and the symbolically important centenary of the 1916 Easter Rising – 2 million people would have jobs in the Republic.
Noonan was also bold in his projection for Irish economic growth by 3.9% for 2015, which is higher than the original 2.7% growth predicted back in April this year.
There was additional money for child benefit which was raised by €5 and up to €100 for every pensioner to help them pay for the almost universally loathed new water charges being introduced.
The top rate of tax was cut from 41% to 40% and extra spending of more than €2 billion on social housing. There were no increases in tax on beer, wine, petrol or diesel although an extra 40 cents has been put on a packet of 20 cigarettes.
Noonan pointed out that the country’s deficit of 2.7% of Irish GDP would now be lower than the 2.9% rate, which was Ireland’s required target. He added: “Many expected that we’d fail … the government did not fail. We exited the bailout. The public finances are under control. The Irish economy is growing at the fastest rate among developed countries. The rate of job creation in Ireland is one of the fastest in Europe.”
Henry McDonald in Dublin