Survival of the Richest

Ireland
Furthermore, it should be noted that the World Investment
Report 2016 highlighted that Ireland has recently risen
significantly in the global ranking of the top 20 investor
countries (rising to 5th place in 2015). 453
The spillover analysis includes an assessment of the
impacts of Irish tax treaties with developing countries,
and among other things concludes that: “The reduction
of withholding taxes on dividends, interest and royalties
under the tax treaties concluded by Ireland is not significant
compared to the domestic withholding tax rates of the Irish
tax treaty partners”. 454
This is not the conclusion reached by this report. In fact,
the analysis provided in Table 4 and Figure 2 shows that
the average reduction of tax rates between Ireland and
developing countries is 5.2 percentage points, compared
with the average of 3.8 percentage points among the
countries covered by this report. This is not only significant,
but in fact the highest reduction rate found among all the
countries covered by this report. 455
While both analyses include the full range of developing
countries (ranging from low-income – such as Zambia – to
upper middle-income – such as South Africa), one notable
difference is that the official spillover analysis is based on
a sample of seven treaties, 456 whereas the analysis in this
report includes all of Ireland’s treaties. 457
There are, however, some points of convergence between
the two analyses. The spillover analysis notes that “several
Irish tax treaties lead to a significant reduction of royalty
withholding tax in the source state. The reduction of source
state taxing rights regarding royalties under a number of
tax treaties concluded by Ireland (Morocco, Pakistan, the
1967 Zambia treaty) is more significant than is available
under many of the tax treaties concluded by the reference
countries with the same developing countries.” This finding
is confirmed by the calculations produced for this report.
However, what the calculations also show is that it is not
only on royalties that the Irish treaties reduce the tax rates
in developing countries. One important reason for this is
because the Irish treaties include relatively high reductions
on all income categories, whereas many of the other
countries covered by this report have large reductions on
some categories but not others. 458
Recent research by ActionAid Ireland 461 ranked three of
Ireland’s tax treaties with developing countries as ‘very
restrictive’ on the taxing rights of those countries, including
two treaties which were recently renegotiated – namely
those with Zambia and Pakistan. While the Spillover Analysis
includes “all Irish tax treaties with African and selected tax
treaties with Asian developing countries concluded before
1 September 2014”, the research by ActionAid covers both
renegotiated treaties and the treaty signed with Ethiopia
in November 2014, which are not included in the spillover
analysis and all score as ‘very restrictive’. 462
Harmful tax practices
According to a study on aggressive tax planning structures,
Ireland exhibits 10 indicators of harmful structures, which
makes it the country with the 14th highest number of indicators
in the EU. 463 One of these is an active indicator, namely the
Irish patent box or ‘Knowledge Development Box’ (KDB). 464 The
KDB provides an effective corporation tax rate of 6.25 per cent
to certain profits arising from intellectual property assets,
including patents and copyrighted software. 465
Ireland has a long history of issuing advance pricing
agreements (or ‘sweetheart deals’). An advance pricing
agreement which Ireland issued to Apple in 1991 became a
central element of the European Commission’s case against
Ireland concerning illegal state aid to Apple. 466 In August
2016, the Commission concluded that this agreement, as
well as another advance pricing agreement issued to Apple
in 2007, constituted illegal state aid. 467 As mentioned above,
the European Commission’s decision has been appealed to
the European Court of Justice. 468
In total, Ireland had eight advance pricing agreements
in force at the end of 2015 (compared to 10 at the end of
2014). This makes Ireland the country with the 14th highest
number of advance pricing agreements in the EU. 469
Another point of convergence between the spillover analysis
and this report is that Ireland still has relatively few tax
treaties with developing countries (28 in total), 459 albeit the
number of treaties has been increasing in recent years. 460
Survival of the Richest • 71