The Double Irish arrangement was a
base erosion and profit shifting (BEPS) corporate
tax avoidance
Tax avoidance is the legal usage of the tax regime in a single territory to one's own advantage to reduce the amount of tax that is payable. A tax shelter is one type of tax avoidance, and tax havens are jurisdictions that facilitate reduced taxe ...
tool used mainly by
United States
The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...
multinationals since the late 1980s to avoid corporate taxation on non-U.S. profits. (The US was one of a small number of countries that did not use a "territorial" tax system, and taxed corporations on all profits, no matter whether the profit was made outside the US or not, in contrast to "territorial" tax systems which tax only profits made within that country.) It was the largest tax avoidance tool in history. By 2010, it was shielding US$100 billion annually in US multinational foreign profits from taxation, and was the main tool by which US multinationals built up untaxed offshore reserves of US$1 trillion from 2004 to 2018. Traditionally, it was also used with the
Dutch Sandwich BEPS tool; however, 2010 changes to tax laws in
Ireland
Ireland (, ; ; Ulster Scots dialect, Ulster-Scots: ) is an island in the North Atlantic Ocean, in Northwestern Europe. Geopolitically, the island is divided between the Republic of Ireland (officially Names of the Irish state, named Irelan ...
dispensed with this requirement.
Despite US knowledge of the Double Irish for a decade, it was the
European Commission
The European Commission (EC) is the primary Executive (government), executive arm of the European Union (EU). It operates as a cabinet government, with a number of European Commissioner, members of the Commission (directorial system, informall ...
that in October 2014 forced Ireland to close the scheme, starting in January 2015. However, users of existing schemes, such as
Apple
An apple is a round, edible fruit produced by an apple tree (''Malus'' spp.). Fruit trees of the orchard or domestic apple (''Malus domestica''), the most widely grown in the genus, are agriculture, cultivated worldwide. The tree originated ...
,
Google
Google LLC (, ) is an American multinational corporation and technology company focusing on online advertising, search engine technology, cloud computing, computer software, quantum computing, e-commerce, consumer electronics, and artificial ...
,
Facebook
Facebook is a social media and social networking service owned by the American technology conglomerate Meta Platforms, Meta. Created in 2004 by Mark Zuckerberg with four other Harvard College students and roommates, Eduardo Saverin, Andre ...
and
Pfizer
Pfizer Inc. ( ) is an American Multinational corporation, multinational Pharmaceutical industry, pharmaceutical and biotechnology corporation headquartered at The Spiral (New York City), The Spiral in Manhattan, New York City. Founded in 184 ...
, were given until January 2020 to close them. At the announcement of the closure, it was known that multinationals had replacement BEPS tools in Ireland, the ''Single Malt'' (2014), and ''Capital Allowances for Intangible Assets'' (CAIA) (2009):
US tax academics showed as long ago as 1994 that US multinational use of tax havens and BEPS tools had maximised long-term US Treasury receipts. They showed that multinationals from "territorial" tax systems, which all but a handful of countries follow, did not use BEPS tools, or
tax havens
A tax haven is a term, often used pejoratively, to describe a place with very low tax rates for non-domiciled investors, even if the official rates may be higher.
In some older definitions, a tax haven also offers financial secrecy. However, ...
, including those that had recently switched, such as Japan (2009), and the UK (2009–12). By 2018, tax academics showed US multinationals were the largest users of BEPS tools and Ireland was the largest global BEPS hub or tax haven. They showed that US multinationals represented the largest component of the Irish economy and that Ireland had failed to attract multinationals from "territorial" tax systems.
The United States switched to a "territorial" tax system in the December 2017
Tax Cuts and Jobs Act (TCJA), causing American tax academics to forecast the demise of Irish BEPS tools and Ireland as an American corporate tax haven. However, by mid-2018, other tax academics, including the IMF, noted that technical flaws in the TCJA had increased the attractiveness of Ireland's BEPS tools, and the CAIA BEPS tool in particular, which post-TCJA, delivered a total effective tax rate (ETR) of 0–2.5% on profits that can be fully repatriated to the US without incurring any additional US taxation. In July 2018, one of Ireland's leading tax economists forecasted a "boom" in the use of the Irish CAIA BEPS tool as US multinationals close existing Double Irish BEPS schemes before the 2020 deadline.
Double Irish
Concept and origin (1991)
The Double Irish is an IP–based BEPS tool.
Under OECD rules, corporations with
intellectual property
Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, co ...
(IP), which are mostly technology and life sciences firms, can turn this into an
intangible asset
An intangible asset is an asset that lacks physical substance. Examples are patents, copyright, exclusive franchises, Goodwill (accounting), goodwill, trademarks, and trade names, reputation, Research and development, R&D, Procedural knowledge, ...
(IA) on their balance sheet, and charge it out as a tax-deductible
royalty payment
A royalty payment is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or ...
to end-customers.
Without such IP, if Microsoft charged a German end-customer $100, for
Microsoft Office
Microsoft Office, MS Office, or simply Office, is an office suite and family of client software, server software, and services developed by Microsoft. The first version of the Office suite, announced by Bill Gates on August 1, 1988, at CO ...
, a profit of about $95 (as the cost to Microsoft for copies of Microsoft Office is small) would be realised in Germany, and German tax would be payable on this profit. However, if Germany allows such an intangible asset, Microsoft can additionally charge Microsoft Germany $95 in IP royalty payments on each copy of Microsoft Office, reducing its German profits to zero. The $95 is paid to the entity in which the IP is legally housed. Microsoft would prefer to house this IP in a tax haven; however, higher-tax locations like Germany do not sign full tax treaties with tax havens, and would not accept the IP charged from a tax haven as deductible against German taxation. The Double Irish fixes this problem.
The Double Irish enables the IP to be charged-out from Ireland, which has a large global network of full bilateral
tax treaties
A tax treaty, also called double tax agreement (DTA) or double tax avoidance agreement (DTAA), is an agreement between two countries to avoid or mitigate double taxation. Such treaties may cover a range of taxes including income taxes, inheritance ...
. The Double Irish enables the hypothetical $95, which was sent from Germany to Ireland, to be sent on to a tax haven such as Bermuda without incurring any Irish taxation. The techniques of using IP to relocate profits from higher-tax locations to low-tax locations are called base erosion and profit shifting (BEPS) tools.
There are many types of BEPS tools (e.g. Debt–based BEPS tools); however,
IP–based BEPS tool are the largest group.
As with all Irish BEPS tools, the Irish subsidiary must conduct a "relevant trade" on the IP in Ireland. A "business plan" must be produced with Irish employment and salary levels that are acceptable to the Irish State during the period the BEPS tool is in operation. Despite these requirements, the effective tax rate (ETR) of the Double Irish is almost 0%, as the EU Commission discovered with Apple in 2016.
Most major U.S. technology and life sciences multinationals have been
identified as using the Double Irish. By 2010, US$95 billion of U.S. profits were shifted annually to Ireland,
which increased to US$106 billion by 2015.
As the BEPS tool with which U.S. multinationals built up untaxed offshore reserves of circa US$1 trillion from 2004 to 2017,
the Double Irish is the largest tax avoidance tool in history. In 2016, when the
EU levied a €13 billion fine on Apple, the largest tax fine in history,
it only covered the period 2004–14, during which Apple shielded €111 billion in profits from U.S (and Irish) tax.
The earliest recorded versions of the Double Irish-type BEPS tools are by Apple in the late 1980s,
and the EU discovered Irish Revenue tax rulings on the Double Irish for Apple in 1991.
Irish state documents released to the Irish national archives in December 2018 showed that
Fine Gael
Fine Gael ( ; ; ) is a centre-right, liberal-conservative, Christian democratic political party in Ireland. Fine Gael is currently the third-largest party in the Republic of Ireland in terms of members of Dáil Éireann. The party had a member ...
ministers in 1984 sought legal advice on how U.S. corporations could avoid taxes by operating from Ireland.
The former Irish
Taoiseach
The Taoiseach (, ) is the head of government or prime minister of Republic of Ireland, Ireland. The office is appointed by the President of Ireland upon nomination by Dáil Éireann (the lower house of the Oireachtas, Ireland's national legisl ...
,
John Bruton
John Gerard Bruton (18 May 1947 – 6 February 2024) was an Irish Fine Gael politician who served as Taoiseach from 1994 to 1997 and Leader of Fine Gael from 1990 to 2001. He held cabinet positions between 1981 and 1987, including twice ...
, wrote to the then Finance Minister
Alan Dukes saying: "In order to retain the maximum tax advantage, US corporations will wish to locate FSCs in a country where they will have to pay little or no tax. Therefore unless FSCs are given favourable tax treatment in Ireland, they will not locate here."
Feargal O'Rourke,
PwC
PricewaterhouseCoopers, also known as PwC, is a Multinational corporation, multinational professional services network based in London, United Kingdom.
It is the second-largest professional services network in the world and is one of the Big Fo ...
tax
partner in the
IFSC (and son of Minister
Mary O'Rourke, cousin of the 2008–2011 Irish Finance Minister
Brian Lenihan Jnr) is regarded as its "grand architect".
Basic structure (no Dutch sandwich)

While there have been variations (e.g. Apple), the standard Double Irish arrangement, in simplified form, takes the following structure (note that the steps below initially exclude the Dutch sandwich component for simplicity, which is explained in the next section; ''
Chart 1'' includes the Dutch sandwich):
This structure has a problem. The pre–
TCJA U.S. tax code allows foreign income to be left in foreign subsidiaries (deferring U.S. taxes), but it will consider BER1 to be a
controlled foreign corporation (or "CFC"), sheltering income from a
related party transaction (i.e. IRL1). It will apply full U.S. taxes to BER1 at 35%.
To get around this, the U.S. corporation needs to create a second Irish company (IRL2, or A), legally
incorporated in Ireland (so under the U.S. tax code it is Irish), but which is "managed and controlled" from Bermuda (so under the Irish tax code it is from Bermuda). IRL2 will be placed between BER1 and IRL1 (i.e. owned by BER1, and owning IRL1). Up until the 2015 shut-down of the Double Irish, the Irish tax code was one of the few that allowed a company to be legally incorporated in its jurisdiction, but not be subject to its taxes (if managed and controlled elsewhere).
The U.S. corporation will
"check-the-box" for IRL1, declaring it a foreign subsidiary selling to non–U.S. locations. Then the U.S. tax code will ignore IRL1 from U.S. tax calculations. However, because the U.S. tax code also views IRL2 as foreign (i.e. Irish), it also ignores the transactions between IRL1 and IRL2 (even though they are related parties). This is the essence of the Double Irish arrangement.
Note that in some explanations and diagrams BER1 is omitted (the
Bermuda black hole); however, it is rare for a U.S. corporation to "own" IRL2 directly.
Elimination of Dutch sandwich (2010)
The Irish tax code historically levied a 20%
withholding tax
Tax withholding, also known as tax retention, pay-as-you-earn tax or tax deduction at source, is income tax paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the ...
on transfers from an Irish company like IRL1, to companies in
tax havens
A tax haven is a term, often used pejoratively, to describe a place with very low tax rates for non-domiciled investors, even if the official rates may be higher.
In some older definitions, a tax haven also offers financial secrecy. However, ...
like BER1. However, if IRL1 sends the money to a new Dutch company DUT1 (or S), via another
royalty payment
A royalty payment is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or ...
scheme, no Irish withholding tax is payable as Ireland does not levy withholding tax on transfers within EU states. In addition, under the Dutch tax code DUT1 can send money to IRL2 (an Irish company that is legally incorporated in Ireland, and thus the US-tax code regards it as foreign, but is "managed and controlled" from, say, Bermuda and thus the Irish tax code also regards it as foreign) under another royalty scheme without incurring Dutch withholding tax, as the Dutch do not charge withholding tax on royalty payment schemes.
This is called the
dutch sandwich and DUT1 is described as the "dutch slice" (sitting between IRL1 and IRL2).
Thus, with the addition of IRL2 and DUT1, we have the "Double Irish dutch sandwich" tax structure.
In 2010, the Irish government, on lobbying from PwC Ireland's
IFSC tax partner,
Feargal O'Rourke,
relaxed the rules for sending royalty payments to non–EU countries without incurring Irish
withholding tax
Tax withholding, also known as tax retention, pay-as-you-earn tax or tax deduction at source, is income tax paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the ...
(thus ending the dutch sandwich), but they are subject to conditions that will not suit all Double Irish arrangements.
Controversial closure (2015)
The 2014–16 EU investigation into Apple in Ireland (see below), showed that the Double Irish existed as far back as 1991. Early U.S. academic research in 1994 into U.S. multinational use of tax havens identified ''profit shifting'' accounting techniques.
U.S. congressional investigations into the tax practices of U.S. multinationals were aware of such BEPS tools for many years.
However, the U.S. did not try to force the closure of the Double Irish BEPS tool, instead it was the EU which forced Ireland to close the Double Irish to new schemes in October 2014.
Nevertheless, existing users of the Double Irish BEPS tool (e.g. Apple, Google, Facebook, Microsoft, amongst many others), were given five more years until January 2020, before the tool would be fully shut-down to all users.
This approach by successive U.S. administrations is explained by an early insight that one of the most cited U.S. academic researchers into tax havens, and corporate taxation,
James R. Hines Jr., had in 1994. Hines realised in 1994, that: "low foreign tax rates
rom tax havensultimately enhance U.S. tax collections".
Hines would revisit this concept several times,
as would others,
and it would guide U.S. policy in this area for decades, including introducing the "
check-the-box For United States income tax purposes, a business entity may elect to be treated either as a corporation or as other than a corporation. This entity classification election is made by filing IRS tax forms, Internal Revenue Service Form]8832 Absent f ...
" rules in 1996, curtailing the 2000–10 OECD initiative on tax havens,
and not signing the 2016 OECD anti-BEPS initiative.
By September 2018, tax academics proved U.S. multinationals were the largest users of BEPS tools,
and that Ireland was the largest global BEPS hub.
In December 2018,
Seamus Coffey, the Chairman of the
Irish Fiscal Advisory Council
Irish Fiscal Advisory Council (Fiscal Council; ) is a non-departmental statutory body providing independent assessments and analysis of the Irish Government's fiscal stance, its economic and budgetary forecasts, and its compliance with fiscal rul ...
, told ''
The Times
''The Times'' is a British Newspaper#Daily, daily Newspaper#National, national newspaper based in London. It began in 1785 under the title ''The Daily Universal Register'', adopting its modern name on 1 January 1788. ''The Times'' and its si ...
'' in relation to the closure of the Double Irish that "A lot of emphasis has been put on residency rules and I think that emphasis has been misplaced and the changes didn't have that much
f aneffect". On 3 January 2019, ''
The Guardian
''The Guardian'' is a British daily newspaper. It was founded in Manchester in 1821 as ''The Manchester Guardian'' and changed its name in 1959, followed by a move to London. Along with its sister paper, ''The Guardian Weekly'', ''The Guardi ...
'' reported that Google avoided corporate taxes on US$23 billion of profits in 2017 by using the Double Irish with the
Dutch sandwich extension.
Apple's €13 billion EU fine (2016)

By 2017, Apple was Ireland's largest company, and post
leprechaun economics
Leprechaun economics () was a term coined by economist Paul Krugman to describe the 26.3 per cent rise in Irish 2015 Gross domestic product, GDP, later revised to 34.4 per cent, in a 12 July 2016 publication by the Central Statistics Office ( ...
, accounted for over one quarter of Irish GDP growth.
Apple's use of the Double Irish BEPS tool to achieve tax rates <1%, dates back to the late 1980s,
and was investigated by the U.S. Senate in May 2013,
and covered in the main financial media.
On 29 August 2016 the
European Commissioner for Competition
The Commissioner for Competition is the member of the European Commission responsible for Competition (economics), competition. The current commissioner is Teresa Ribera (Spanish Socialist Workers' Party).
Responsibilities
The portfolio has r ...
concluded Apple had received
illegal State aid from Ireland.
The commission ordered Apple to pay €13 billion, plus interest, in unpaid Irish taxes on circa €111 billion of profits, for the ten-year period, 2004–2014.
It was the largest corporate tax fine in history.
Apple was not using the standard Double Irish arrangement of two Irish companies (IRL1 in Ireland, and IRL2 in Bermuda). Instead, Apple combined the functions of the two companies inside one Irish company (namely, Apple Sales International, or ASI), which was split into two internal "branches". The Irish
Revenue
In accounting, revenue is the total amount of income generated by the sale of product (business), goods and services related to the primary operations of a business.
Commercial revenue may also be referred to as sales or as turnover. Some compan ...
issued ''private rulings'' to Apple in 1991 and 2007 regarding this hybrid-double Irish structure, which the EU Commission considered as illegal
State aid
State aid in the European Union is the name given to a subsidy or any other aid provided by a government that distorts competition. Under European Union competition law, the term has a legal meaning, being any measure that demonstrates any of the ...
.
Single Malt
Concept and origin (2014)
In an October 2013 interview, PwC tax partner
Feargal O'Rourke (see above),
said that: "the days of the Double Irish tax scheme are numbered".
In October 2014, as the EU forced the Irish State to close the Double Irish BEPS tool,
the influential U.S.
National Tax Journal published an article by Jeffrey L Rubinger and Summer Lepree, showing that Irish based subsidiaries of U.S. corporations could replace the Double Irish arrangement with a new structure (now known as ''Single Malt'').
If the Bermuda–controlled Irish company (IRL2) was relocated to a country with whom (a) Ireland had a tax treaty, (b) with wording on "management and control" tax residency, and (c) had a zero corporate tax rate, then the Double Irish effect could be replicated. They highlighted Malta as a candidate.
The Irish media picked up the article,
but when an Irish
MEP notified the then Finance Minister, Michael Noonan, he was told to "
put on the green jersey
"Put on the green jersey" is a phrase to represent putting the Irish national interest first. The phrase can be used in a positive sense, for example evoking feelings of national unity during times of crisis. The phrase can also be used in a nega ...
".
Basic structure
The Single Malt is also an IP–based BEPS tool, and as a small variation of the Double Irish, required little additional development, except choosing specific locations with the necessary specific wording in their Irish bilateral tax treaties (e.g. Malta and the UAE); thus the basic structure is almost identical to the Double Irish with often a Maltese company replacing BER1 in the earlier example.
Discovery (2017)
A November 2017 report by
Christian Aid, titled ''Impossible Structures'', showed how quickly the Single Malt BEPS tool was replacing the Double Irish.
The report detailed Microsoft subsidiary LinkedIn, and Allergen's schemes and extracts from advisers to their clients.
The report also showed that Ireland was behaving like a "
Captured State", and for example had opted out of Article 12 of the
2016 OECD anti-BEPS initiative to protect the Single Malt BEPS tool (it was also later pointed out in September 2018, that Malta had similarly opted out of Article 4 of the initiative to enable it to be the recipient of the Single Malt
).
The then Irish Finance Minister
Paschal Donohoe
Paschal Donohoe (born 19 September 1974) is an Irish Fine Gael politician who has served as President of the Eurogroup since July 2020 and Ireland's Minister for Finance (Ireland), Minister for Finance since January 2025, and previously from 201 ...
said that it would be investigated;
however, questions were raised regarding the Irish State's policy of addressing corporate tax avoidance.
In September 2018, ''
The Irish Times
''The Irish Times'' is an Irish daily broadsheet newspaper and online digital publication. It was launched on 29 March 1859. The editor is Ruadhán Mac Cormaic. It is published every day except Sundays. ''The Irish Times'' is Ireland's leading n ...
'' revealed that U.S. medical device manufacturer
Teleflex, had created a new Single Malt scheme in July 2018, and had reduced their overall effective corporate tax rate to circa 3%.
The same article quoted a spokesman from the
Department of Finance (Ireland)
The Department of Finance () is a Department of State (Ireland), department of the Government of Ireland. It is led by the Minister for Finance (Ireland), Minister for Finance.
The Department of Finance is responsible for the administration of ...
saying they had not as yet taken any action regarding the Single Malt BEPS tool, but they were keeping the matter, "under consideration".
Partial closure (2018)
In November 2018, the Irish Government amended the Ireland–Malta tax treaty to prevent the Single Malt BEPS tool being used between Ireland and Malta (it can still be used with the UAE for example); however, the exact closure date of the Irish Single Malt BEPS tool with Malta was deferred until September 2019.
On the same day that the closure was announced, ''The Irish Times'' reported that
LinkedIn
LinkedIn () is an American business and employment-oriented Social networking service, social network. It was launched on May 5, 2003 by Reid Hoffman and Eric Ly. Since December 2016, LinkedIn has been a wholly owned subsidiary of Microsoft. ...
(Ireland), identified as a user of the Single Malt tool in 2017 (see above), had announced in filings that it had sold a major IP asset to its parent, Microsoft (Ireland). Earlier in July 2018, Ireland's ''
Sunday Business Post
The ''Business Post'' (formerly ''The Sunday Business Post'') is a Sunday newspaper distributed nationally in Ireland and an online publication. It is focused mainly on business and financial issues in Ireland.
Founding to Irish financial crisi ...
'', disclosed that Microsoft (Ireland) were preparing a restructure of their Irish BEPS tools into a
CAIA (or Green Jersey) Irish tax structure.
Rediscovery (2021)
In September 2021, ''The Irish Times'' reported that US pharmaceutical firm
Abbott Laboratories
Abbott Laboratories is an American multinational medical devices and health care company with headquarters in Abbott Park, Illinois, in the United States. The company was founded by Chicago physician Wallace Calvin Abbott in 1888 to formulate k ...
was still using the Single Malt tool to shield profits on its
COVID-19 testing kits.
Capital Allowances for Intangible Assets (CAIA)
Concept and origin (2009)
The Double Irish and Single Malt BEPS tools enable Ireland to act as a ''confidential'' "
Conduit OFC" rerouting untaxed profits to places like Bermuda (e.g. it must be ''confidential'' as higher-tax locations would not sign full tax treaties with locations like Bermuda), the Capital Allowances for Intangible Assets (CAIA) BEPS tool (also called the Green Jersey), enables Ireland to act as the terminus for the untaxed profits (e.g. Ireland becomes Bermuda, a "
Sink OFC"). The CAIA uses the accepted tax concept of providing
capital allowances for the purchase of assets. However, Ireland turns it into a BEPS tool by providing the allowances for the purchase of ''
intangible assets
An intangible asset is an asset that lacks physical substance. Examples are patents, copyright, franchises, goodwill, trademarks, and trade names, reputation, R&D, know-how, organizational capital as well as any form of digital asset such ...
'', and especially ''
intellectual property
Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, co ...
'' assets, and critically, where the owner of the intangible assets is a "connected party" (e.g. a Group subsidiary).
For example, in Q1 2015, Apple used the CAIA tool when its Irish subsidiary purchased US$300 billion in intangible assets from an Apple subsidiary based in Jersey.
The CAIA tool enabled Apple to write-off the US$300 billion price as a capital allowance against future Irish profits (e.g. the next US$300 billion of profits Apple books in Ireland are free of Irish tax). The CAIA ''capitalises'' the effect of the Double Irish or Single Malt BEPS tools, and behaves like a
corporate tax inversion of a U.S. multinational's non–U.S. business. However, the CAIA is more powerful, as Apple demonstrated by effectively doubling the tax shield (e.g. to US$600 billion in allowances), via Irish interest relief on the intergroup virtual loans used to purchase the IP.
While Apple's CAIA had an ETR of 0%, some have an ETR of 2.5%.
In June 2009, the Irish State established the ''Commission on Taxation'', to review Ireland's tax regime, and included
Feargal O'Rourke, the "grand architect" of the Double Irish tool.
In September 2009, the commission recommended that the Irish State provide
capital allowances for the acquisition of
intangible assets
An intangible asset is an asset that lacks physical substance. Examples are patents, copyright, franchises, goodwill, trademarks, and trade names, reputation, R&D, know-how, organizational capital as well as any form of digital asset such ...
, creating the CAIA BEPS tool.
The 2009 Finance Act, materially expanded the range of intangible assets attracting Irish capital allowances
deductible against Irish taxable profits.
These "specified intangible assets" cover more esoteric intangibles such as types of general rights, general know-how, general goodwill, and the right to use software.
It includes types of "internally developed" group intangible assets and intangible assets purchased from "connected parties". The control is that the intangible assets must be acceptable under GAAP (older 2004 Irish GAAP is used), and auditable by an Irish
IFSC accounting firm, like PwC or Ernst & Young.
In the 2010 Finance Act, on the recommendation of the
Department of Finance's ''Tax Strategy Group'', the CAIA BEPS tool was upgraded, reducing the amortisation and "clawback" period from 15 to 10 years, and expanding the range of intangible assets to include "a broader definition of know-how".
In the 2011 and 2012 Finance Acts, the ''Tax Strategy Group'' made additional amendments to the rules regarding the acquisition of intangible assets from "connected parties", and the "employment tax" users of the CAIA BEPS tool must pay.
The 2012 Finance Act removed the minimum amortisation period for the acquired intangible assets, and reduced the "clawback" to 5 years for CAIA schemes set up after February 2013.
The first known user of the CAIA BEPS tool was by ''
Accenture
Accenture plc is a global multinational professional services company originating in the United States and headquartered in Dublin, Ireland, that specializes in information technology (IT) services and management consulting. It was founded in 1 ...
'', the first U.S.
corporate tax inversion to Ireland in 2009.
By March 2017, Bloomberg would report that Ireland had become
the most popular destination for U.S. corporate tax inversions in history,
and would have the largest ''
Medtronic'' (2015), 3rd-largest ''
Johnson Controls'' (2016), 4th-largest ''
Eaton Corporation
Eaton Corporation plc is an American-Irish-domiciled multinational power management company, with a primary administrative center in Beachwood, Ohio. Eaton has more than 85,000 employees and sells products to customers in more than 175 countr ...
'' (2012) and 6th-largest ''
Perrigo'' (2013) U.S. corporate tax inversions in history.
Basic structure
The CAIA follows the first three steps of the Double Irish, and Single Malt, basic structure (see above, except in this case the example is not a per-unit example, but for the entire sales of a ''block'' of intellectual property), namely:
The CAIA and Double Irish (and Single Malt) share the same basic components and techniques (e.g. an intangible asset needs to be created and significantly re-valued in a tax haven). The key differences between the CAIA BEPS tool and the Double Irish (and Single Malt) BEPS tools are noted as follows:
* CAIA '' capitalises'' the effect of the Double Irish in the Irish national accounts, leading to even greater ;
* While the ETR of the Double Irish is close to zero, the Irish State has from time-to-time capped the level of allowances under CAIA to 80%, giving an ETR of 2.5%;
* By providing the inter-group finance to purchase the intangible asset (step vi. above), the tax avoided by CAIA is almost twice that of the Double Irish;
* While the loophole behind the Double Irish has been closed, CAIA is a more established tax concept internationally, although only for ''tangible'' assets.
As with all Irish BEPS tools, the Irish subsidiary must conduct a "relevant trade" on the acquired IP.
A "business plan" must be produced with Irish employment and salary levels that are acceptable to the Irish State during the period capital allowances are claimed. If the Irish subsidiary is wound up within 5 years, the CAIA intangible capital allowances are repayable, which is called "clawback".
Marketing of the CAIA BEPS tool
Irish BEPS tools are not overtly marketed, as brochures showing near-zero effective tax rates (ETR) would damage Ireland's ability to sign and operate bilateral tax treaties (i.e. higher-tax countries do not sign full treaties with known tax havens). However, in the Irish financial crisis, some Irish tax law firms in the
IFSC produced CAIA brochures openly marketing that its ETR was 2.5%.
Apple's "leprechaun economics" (2015)
The EU Commission's 30 August 2016 findings against Apple's hybrid–Double Irish BEPS tool, Apple Sales International (ASI), covered the period from 2004 to end 2014 (see above). The EU's August 2016 report on Apple, notes that Apple had informed the commission at the start of 2015 that they had closed their hybrid–Double Irish BEPS tool.
In January 2018, Irish economist
Seamus Coffey, Chairman of the State's
Irish Fiscal Advisory Council
Irish Fiscal Advisory Council (Fiscal Council; ) is a non-departmental statutory body providing independent assessments and analysis of the Irish Government's fiscal stance, its economic and budgetary forecasts, and its compliance with fiscal rul ...
, and author of the State's 2017 ''Review of Ireland's Corporation Tax Code'',
showed Apple restructured ASI into the CAIA BEPS tool in Q1 2015.
During Q1 2018, Coffey and international economists,
proved Ireland's 2015 "
leprechaun economics
Leprechaun economics () was a term coined by economist Paul Krugman to describe the 26.3 per cent rise in Irish 2015 Gross domestic product, GDP, later revised to 34.4 per cent, in a 12 July 2016 publication by the Central Statistics Office ( ...
" GDP growth of 33.4%, was attributable to Apple's new CAIA BEPS tool.
Coffey noted the significance of Apple's endorsement of the CAIA BEPS tool, given Apple's status as one of the longest users of the Double Irish BEPS tool, and one of the largest users of BEPS tools worldwide.
In January 2018, there was further controversy over Apple's CAIA BEPS tool when Coffey pointed out that it is prohibited under Ireland's tax code (Section 291A(c) of the Taxes Consolidation Act 1997), to use the CAIA BEPS tool for reasons that are not "commercial bona fide reasons", and in schemes where the main purpose is "the avoidance of, or reduction in, liability to tax". In addition, it was realised in hindsight, that changes former Finance Minister Michael Noonan made in the Irish 2015 Finance Budget, was to ensure the ETR of Apple's CAIA tool was reduced to zero.
In June 2018, Apple's post Q1 2015 BEPS tax structure in Ireland was labelled " the Green Jersey" by the EU Parliament's GUE–NGL body and described in detail.
Microsoft's Green Jersey (2018)
In December 2017, the Irish Government accepted the recommendation of Coffey that corporation tax relief for the Irish CAIA BEPS tool be capped at 80% for new arrangements, to restore the CAIA's effective Irish corporate tax rate (ETR) back to 2.5%. This was enacted in the 2017 Finance Budget, but only for new CAIA BEPS schemes (e.g. Apple's 2015 CAIA scheme would not be affected). Given the dramatic take-up in the CAIA tool in 2015, when the cap lifted (e.g. the ETR was 0%), Irish commentators challenged Coffey's recommendation. He responded in a paper in late 2017.
In July 2018, it was reported that Microsoft was preparing to execute another "Green Jersey" CAIA BEPS transaction. which, due to technical issues with the TCJA, makes the CAIA BEPS tool attractive to U.S. multinationals. In July 2018, Coffey posted that Ireland could see a "boom" in the ''onshoring'' of U.S. IP, via the CAIA BEPS tool, between now and 2020, when the Double Irish is fully closed. In May 2019, it was reported Microsoft moved $52.8bn of IP assets to Ireland. In January 2020, ''The Irish Times'' speculated that Google Inc., was also considering using the CAIA BEPS tool.
Effect of BEPS tools on Ireland's economy
In June 2018, academic tax researcher Gabriel Zucman
Gabriel Zucman (born 30 October 1986) is a French economist who is currently an associate professor of public policy and economics at the University of California, Berkeley‘s Goldman School of Public Policy, Chaired Professor at the Paris Sch ...
(''et alia'') estimated Ireland was the world's largest BEPS hub, and also the world's largest tax haven. In September 2018, Zucman and Wright showed that US corporates were the largest users of BEPS tools, representing almost half of all BEPS activity. The concentration of BEPS activity impacted Ireland's economy in a number of ways:
Distortion of Irish GDP/GNP
An " artificially inflated GDP-per-capita statistic", is a feature of tax havens, due to the BEPS flows. In February 2017, Ireland's national accounts became so distorted by BEPS flows that the Central Bank of Ireland
The Central Bank of Ireland () is the national central bank for Ireland within the Eurosystem. It was the Irish central bank from 1943 to 1998, issuing the Irish pound. It is also the country's main financial regulatory authority, and since 2 ...
replaced Irish GDP and Irish GNP with a new economic measure, Irish Modified GNI*. However, in December 2017, Eurostat
Eurostat ("European Statistical Office"; also DG ESTAT) is a department of the European Commission ( Directorate-General), located in the Kirchberg quarter of Luxembourg City, Luxembourg. Eurostat's main responsibilities are to provide statist ...
reported that Modified GNI* did not remove all of the distortions from Irish economic data. By September 2018, the Irish Central Statistics Office (CSO) reported that Irish GDP was 162% of Irish GNI* (e.g. BEPS tools artificially inflated Ireland's GDP by 62%). In contrast EU–28 2017 GDP was 100% of GNI. Irish public indebtedness changes dramatically depending on whether Debt-to-GDP, Debt-to-GNI* or Debt-per-Capita is used (''Per-Capita'' removes all BEPS tool distortion).
Concentration of US multinationals
Tax academics show multinationals from countries with "territorial" tax systems make little use of tax havens like Ireland. Since the UK changed its tax regime to a "territorial" system in 2009–12, Ireland has failed to attract corporates from any other jurisdiction except the US, one of the last "worldwide" tax systems. By September 2018, US–controlled corporates were 25 of Ireland's 50 largest companies, paid 80% of Irish business taxes, and directly employed 25% of the Irish labour force, and created 57% of Irish value-add. The past president of the Irish Tax Institute stated they pay 50% of all Irish salary taxes (due to higher paying jobs), 50% of all Irish VAT, and 92% of all Irish customs and excise duties. The American-Ireland Chamber of Commerce estimated the value of US investment in Ireland in 2018 was €334 billion, exceeding Irish GDP (€291 billion in 2016), and exceeding the combined investment of US investment in the BRIC countries. The US multinational subsidiaries in Ireland, are not simply used for booking EU sales, in most cases, they handle the entire non–US business of the Group. Apart from US corporates, and legacy UK corporates (pre 2009–12), there are no foreign corporates in Ireland's top 50 firms. Academics say Ireland is more accurately described as a "US corporate tax haven", and a shield for non–US profits from the historic US "worldwide" tax system.
Disagreement on Irish ETRs
One of the most contested aspects of Ireland's economy is the ''aggregate'' "effective tax rate" (ETR) of Ireland's corporate tax regime. The Irish State refutes tax haven
A tax haven is a term, often used pejoratively, to describe a place with very low tax rates for Domicile (law), non-domiciled investors, even if the official rates may be higher.
In some older definitions, a tax haven also offers Bank secrecy, ...
labels as unfair criticism of its low, but legitimate, 12.5% Irish corporate tax rate, which it defends as being the ''effective'' tax rate (ETR). Independent studies show that Ireland's ''aggregate'' effective corporate tax rate is between 2.2% to 4.5% (depending on assumptions made). This lower ''aggregate'' effective tax rate is consistent with the ''individual'' effective tax rates of US multinationals in Ireland, as well as the IP-based BEPS tools openly marketed by the main Irish tax-law firms, in the IFSC, with ETRs of 0–2.5% (see " effective tax rate").
Effect of the Tax Cuts and Jobs Act (TCJA)
US corporate tax haven (to 2017)
In June 2018, tax academics showed that Ireland had become the world's largest global BEPS hub, or corporate-focused tax haven. In September 2018, tax academics showed that US multinationals were the largest users of BEPS tools. In 2016, leading tax academic James R. Hines Jr., showed that multinationals from "territorial" tax systems, the system used by almost all global economies bar a handful but which included the US, make little use of tax havens. Hines, and others, had previously quoted the example of the U.K., who transitioned from a "worldwide" system to a "territorial" system in 2009–2012, which led to a reversal of many UK inversions to Ireland, and turned the U.K. into one of the leading destinations for U.S. corporate tax inversion
A tax inversion or corporate tax inversion is a form of tax avoidance where a corporation restructures so that the current parent is replaced by a foreign parent, and the original parent company becomes a subsidiary of the foreign parent, thus mov ...
s (although Ireland is still the most popular). A similar case study was cited in the switch by Japan in 2009 from a full US "worldwide" tax system (e.g. very high domestic tax rate, partially mitigated by a ''controlled foreign corporation'' regime), to a full "territorial" tax system, with positive results.
As discussed in , Hines had shown as early as 1994, that under the U.S. "worldwide" tax system, U.S. multinational use of tax havens and BEPS tools, had increased long-term U.S. treasury returns. Academics point to these facts as the explanation for the extraordinary in Ireland's economy, and the equal failure of Ireland to attract non-U.S. multinationals or any multinationals from "territorial" tax systems. While Ireland sometimes describes itself as a "global knowledge hub for selling into Europe", it is more accurately described as a U.S. corporate tax haven for shielding non-U.S. revenues from the historical U.S. "worldwide" tax system.
U.S. change to a territorial system (post 2017)
In December 2017, the U.S. Tax Cuts and Jobs Act (TCJA), the U.S. changed from a "worldwide" tax system to a hybrid–"territorial" tax system, to encourage U.S. multinationals to relocate functions back from tax havens. In addition, the US, as the UK had done in 2009–12, aimed to become a favoured destination for foreign multinational to relocate. In their October 2017 report on the proposed TCJA legalisation, the U.S. Council of Economic Advisors
The Council of Economic Advisers (CEA) is a United States agency within the Executive Office of the President established in 1946, which advises the president of the United States on economic policy. The CEA provides much of the empirical resea ...
, quoted Hines' work on tax havens, and used Hines' calculations, to estimate the quantum of U.S. investment that should return as a result of the TCJA.
As well as switching to a hybrid–"territorial" tax system, the TCJA contains a unique "carrot" and a "stick" aimed at U.S. multinationals in Ireland:
In March–April 2018, major U.S. tax law firms showed that pre the TCJA, U.S. multinationals with the IP needed to use Irish BEPS tools, would achieve effective Irish tax rates (ETR) of 0–2.5% versus 35% under the historical U.S. system. However, post the TCJA, these multinationals can use their IP to achieve U.S. ETRs, which net of the TCJA's 100% capital relief provisions, are similar to the ETRs they would achieve in Ireland when the TCJA's new GILTI provisions are taken into account (e.g. ETR of circa 11–12%). In Q1 2018, U.S. multinationals like Pfizer announced in Q1 2018, a post-TCJA global tax rate for 2019 of circa 17%, which is close to the circa 15–16% 2019 tax rate announced by past U.S. corporate tax inversion
A tax inversion or corporate tax inversion is a form of tax avoidance where a corporation restructures so that the current parent is replaced by a foreign parent, and the original parent company becomes a subsidiary of the foreign parent, thus mov ...
s to Ireland, Eaton, Allergan, and Medtronic.
Early implications for Ireland (2018)
As the TCJA was being passed in December 2017, the new corporate tax provisions were recognised by the Irish media, as a challenge. Donald Trump had "singled out" Ireland in 2017 speeches promoting the TCJA, and Trump administration economic advisor, Stephen Moore, predicted "a flood of companies" would leave Ireland due to the TCJA. Leading U.S. tax academic, Mihir A. Desai in a post–TCJA 26 December 2017 interview in the ''Harvard Business Review
''Harvard Business Review'' (''HBR'') is a general management magazine published by Harvard Business Publishing, a not-for-profit, independent corporation that is an affiliate of Harvard Business School. ''HBR'' is published six times a year ...
'' said that: "So, if you think about a lot of technology companies that are housed in Ireland and have massive operations there, they're not going to maybe need those in the same way, and those can be relocated back to the U.S.
In December 2017, U.S technology firm Vantiv
Worldpay is an American multinational financial technology company and payment processor, payment processing company. Worldpay provides payment and technology services to merchants and financial institutions globally generating 40 billion trans ...
, the world's largest payment processing company, confirmed that it had abandoned its plan to execute a corporate tax inversion
A tax inversion or corporate tax inversion is a form of tax avoidance where a corporation restructures so that the current parent is replaced by a foreign parent, and the original parent company becomes a subsidiary of the foreign parent, thus mov ...
to Ireland. In March 2018, the Head of Life Sciences in ''Goldman Sachs
The Goldman Sachs Group, Inc. ( ) is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered in Lower Manhattan in New York City, with regional headquarters in many internationa ...
'', Jami Rubin, stated that: "Now that .S.corporate tax reform has passed, the advantages of being an inverted company are less obvious". In August 2018, U.S. multinational Afilias
Afilias, Inc. was a US corporation that was the registry operator of the .info, .mobi and .pro top-level domain, service provider for registry operators of .org, .ngo, .lgbt, .asia, .aero, and a provider of domain name registry services f ...
, who had been headquartered in Ireland since 2001, announced that as a result of the TCJA, it was moving back to the U.S.
However, in contrast, it was reported in May–July 2018, that U.S. tax academics and tax economists were discovering material technical flaws in the TCJA that incentivise the U.S. use of tax havens like Ireland. Of particular note was the exclusion from the GILTI tax of the first 10% of profits on overseas tangible assets, which incentivises investment in tangible assets abroad. However, a more serious concern, was the acceptance of capital allowances, both tangible and intangible, as deductible against GILTI taxation, which would enable U.S. users of the CAIA BEPS tool to convert their Irish ETR of 0–2.5%, into a final U.S. ETR of 0–2.5%. In May–July 2018, Google and Facebook announced large expansions of their Dublin office campuses in Ireland.
A June 2018 IMF country report on Ireland, while noting the significant exposure of Ireland's economy to U.S. corporates, concluded that the TCJA may not be as effective as Washington expects in addressing Ireland as a U.S. corporate tax haven. In writing its report, the IMF conducted confidential anonymous interviews with Irish corporate tax experts. In July 2018, it was reported that Microsoft was preparing to execute Apple's "Green Jersey" CAIA BEPS transaction. In July 2018, Seamus Coffey, Chairperson of the Irish Fiscal Advisory Council
Irish Fiscal Advisory Council (Fiscal Council; ) is a non-departmental statutory body providing independent assessments and analysis of the Irish Government's fiscal stance, its economic and budgetary forecasts, and its compliance with fiscal rul ...
and author of the Irish State's 2016 review of the ''Irish corporate tax code'', posted that Ireland could see a "boom" in the ''onshoring'' of U.S. IP, via the CAIA BEPS tool, between now and 2020, when the Double Irish is fully closed.
In February 2019, Brad Setser from the Council on Foreign Relations
The Council on Foreign Relations (CFR) is an American think tank focused on Foreign policy of the United States, U.S. foreign policy and international relations. Founded in 1921, it is an independent and nonpartisan 501(c)(3) nonprofit organi ...
wrote a ''New York Times
''The New York Times'' (''NYT'') is an American daily newspaper based in New York City. ''The New York Times'' covers domestic, national, and international news, and publishes opinion pieces, investigative reports, and reviews. As one of ...
'' article highlighting material issues with TCJA in terms of combatting tax havens.
Multinationals that used Irish BEPS tools
This is not a comprehensive list as many US multinationals in Ireland use "unlimited liability companies" (ULCs), which do not file public accounts with the Irish CRO.
Double Irish
Major companies in Ireland known to employ the Double Irish BEPS tool, include:
Single malt
Major companies in Ireland known to employ the single-malt BEPS tool, include:
* Microsoft (LinkedIn), using Malta
* Allergan (Zeitiq), using Malta
* Teleflex, using Malta
* Abbott Laboratories
Abbott Laboratories is an American multinational medical devices and health care company with headquarters in Abbott Park, Illinois, in the United States. The company was founded by Chicago physician Wallace Calvin Abbott in 1888 to formulate k ...
, using Malta[
]
Capital allowances for intangible assets
Major companies in Ireland known to employ the capital-allowances for intangible assets (CAIA) BEPS tool, include:
* Apple Inc.
Apple Inc. is an American multinational corporation and technology company headquartered in Cupertino, California, in Silicon Valley. It is best known for its consumer electronics, software, and services. Founded in 1976 as Apple Comput ...
, started in 2015 with the leprechaun economics
Leprechaun economics () was a term coined by economist Paul Krugman to describe the 26.3 per cent rise in Irish 2015 Gross domestic product, GDP, later revised to 34.4 per cent, in a 12 July 2016 publication by the Central Statistics Office ( ...
affair
* Accenture
Accenture plc is a global multinational professional services company originating in the United States and headquartered in Dublin, Ireland, that specializes in information technology (IT) services and management consulting. It was founded in 1 ...
, started in 2009
See also
* Criticism of Google
* Criticism of Apple Inc.
* Criticism of Facebook
* Taxation in the Republic of Ireland
* Corporation tax in the Republic of Ireland
* EU illegal State aid case against Apple in Ireland
* Corporate tax haven
Corporate haven, corporate tax haven, or multinational tax haven is used to describe a jurisdiction that multinational corporations find attractive for establishing subsidiaries or incorporation of regional or main company headquarters, mostly due ...
* Tax haven
A tax haven is a term, often used pejoratively, to describe a place with very low tax rates for Domicile (law), non-domiciled investors, even if the official rates may be higher.
In some older definitions, a tax haven also offers Bank secrecy, ...
* Leprechaun economics
Leprechaun economics () was a term coined by economist Paul Krugman to describe the 26.3 per cent rise in Irish 2015 Gross domestic product, GDP, later revised to 34.4 per cent, in a 12 July 2016 publication by the Central Statistics Office ( ...
Apple BEPS tool in Ireland
* Modified gross national income
Modified gross national income (also Modified GNI or GNI*) is a metric used by the Central Statistics Office (Ireland) to measure the Irish economy rather than Gross national income, GNI or GDP. GNI* is GNI minus the depreciation on Intellectual ...
replaced Irish GDP/GNP
* Green jersey agenda
* Feargal O'Rourke architect of Ireland's BEPS tools
* Matheson (law firm) Ireland's largest U.S. tax advisor
* Qualifying investor alternative investment fund (QIAIF) Irish tax-free vehicles
* Section 110 SPV debt-based BEPS tool
* Conduit and Sink OFCs
Conduit OFC and sink OFC is an empirical quantitative method of classifying corporate tax havens, offshore financial centres (OFCs) and tax havens.
Traditional methods for identifying tax havens analyse tax and legal structures for base eros ...
analysis of tax havens
* Ireland as a tax haven
* Panama as a tax haven
* United States as a tax haven
* James R. Hines Jr., leader in academic research on tax havens
* Dhammika Dharmapala, leader in academic research on tax havens
* Gabriel Zucman
Gabriel Zucman (born 30 October 1986) is a French economist who is currently an associate professor of public policy and economics at the University of California, Berkeley‘s Goldman School of Public Policy, Chaired Professor at the Paris Sch ...
, leader in academic research on tax havens
Notes
References
External links
* {{cite news, last=Drucker, first=Jesse, date=13 May 2010, title=U.S. Companies Dodge $60 Billion in Taxes With Global Odyssey, url=https://www.bloomberg.com/news/2010-05-13/american-companies-dodge-60-billion-in-taxes-even-tea-party-would-condemn.html, url-status=dead, work=Bloomberg
Bloomberg may refer to:
People
* Daniel J. Bloomberg (1905–1984), audio engineer
* Georgina Bloomberg (born 1983), professional equestrian
* Michael Bloomberg (born 1942), American businessman and founder of Bloomberg L.P.; politician a ...
, archive-url=https://web.archive.org/web/20100701072642/https://www.bloomberg.com/news/2010-05-13/american-companies-dodge-60-billion-in-taxes-even-tea-party-would-condemn.html, archive-date=1 July 2010, access-date=21 February 2019
An illustration of the "Double Irish Dutch Sandwich"
Australian Broadcasting Corporation
The Australian Broadcasting Corporation (ABC) is Australia’s principal public service broadcaster. It is funded primarily by grants from the federal government and is administered by a government-appointed board of directors. The ABC is ...
.
International taxation
Taxation in the Republic of Ireland
Corporate tax avoidance
Corporate taxation in the United States
Economy of the Republic of Ireland