Role of Tax Havens in Tax Avoidance by Multinationals with Special Regard to Ireland

Abstract

Nowadays, many multinationals use tax avoidance strategies in order to minimise their tax liability. They often cooperate with governments providing them preferential treatment. These low-tax jurisdictions called tax havens pose a threat for world economy because they result in huge budgetary loss for countries. Even the European Union has its own tax havens which contribute to the loss of 250 billion euros annually. It is more than 2% of the Union’s GNP. Despite the apparent negative evidences, several member states’ tax system still contains favourable provisions for multinationals. Although, almost everybody would mention the Benelux states first, but many multinationals utilize the loopholes of the Irish tax system. In this regard, it is enough to refer to the Apple case where the European Commission ordered the recuperation of 13 billion euros from the company due to illegal state aid. Hence, we conducted a research based on academic literature and case-law. After a short introduction and dealing with the European Commission’s response to tax avoidance, we analyse the Irish tax system. The main goal was to demonstrate that Ireland – despite the denial of the respective authorities – was a tax haven. Our study proves that multinationals could use almost freely several tax optimisation strategies (e.g. Double Irish and Dutch Sandwich) up to now. Due to strong criticism and scandals the government had to amend the former tax regime, but it does not mean that preferential treatment is abolished. Ireland still should be considered a tax haven.