Ireland is among the countries singled out by a new report by the International Monetary Fund (IMF), appearing alongside the Caymen Islands and Luxembourg.
The Irish economy was hit hard by the 2008 global financial crisis, with many financial institutions struggling in the years that followed and the country's financial place in the world being severely degraded. The country's economy has rapidly grown since then as a result of massive foreign investment, but Ireland has come under fire for its low rates of corporation tax and for letting major tech firms avoid tax.
A new IMF report has named Ireland as a well-known tax haven alongside other countries such as Singapore, the Cayman Islands, and Switzerland. The report also singles out Luxembourg as a major tax haven, reportedly aattracting as much foreign direct investment as the US or China but with a population of only around 600,000 people.
The report detailed the issues surrounding 'phantom FDI' in which investment in a country amounts to "empty corporate shells" with no real business activities and are made primarily to reduce tax outgoings elsewhere. It's estimated that almost 40% of global FDI (around $15tn) is phantom FDI, a figure that jumps to almost two thirds for Ireland.
Ireland's corporation tax system offers a low rate of 12.5% for companies and an even lower 6.25% for revenue relating to patents and intellectual property. Large companies can divert profit from other territories where they would pay higher rates of tax and pay Ireland's lower rate, in addition to taking advantage of incentives such as R&D tax credits.
Ireland's tax policies have helped the country regain its financial footing, however, turning Ireland into the EU's fastest-growing economy. On Friday, the country regained its 'AA' sovereign debt rating for the first time since the 2008 crash.
Sources: Based on Businessworld.ie and BusinessWorld.ie
