Leprechaun economics is explained: it was bid to halt ‘double Irish’
FINALLY, the bizarre hike that showed our economy growing by 26%, announced in July, can be explained.
The apparent boost – dubbed ‘leprechaun economics’ by Nobel Prize-winning economist Paul Krugman – is down to moves by the tax authorities here to shut down international tax-avoidance schemes such as the ‘double Irish’.
Documents obtained from the Central Statistics Office and the EU suggest that one of the key reasons for the 26% boost was multinationals bringing assets ‘on-shore’ here.
These assets are likely to have been licensing agreements,
Companies involved a ‘closely guarded secret’
trademarks and patented technology.
At the time of the announcement it was suggested that the movements of assets was from the aviation industry, but the CSO downplayed the idea.
The disclosures were made at a high-level meeting between CSO officials, the Finance Department and the Irish Fiscal Advisory Council in July. However, just who are the companies who are responsible for the colossal GDP increases is being kept as a closely guarded secret. There are even plans to ‘suppress’ some economic statistics that are routinely published to keep their identity hidden.
Figures that would normally be included in CSO estimates will not now be published because it might identify some of the multinationals involved.
A report of that meeting, which has been obtained under Freedom of Information legislation, reveals the CSO believes some of the increase was fuelled by firms juggling their assets because of a clampdown on tax-avoidance schemes.
The documents make specific reference to the notorious ‘double Irish’ scheme under which global companies avoided billions in taxes by channelling money through Irish companies. They also refer to other tax-avoidance strategies, commonly referred to as BEPS [Base Erosion and Profit Shifting], which are being tackled as part of global efforts to shut them down.
The admission is likely to cause difficulty for the Government, in the wars after the EU Commission ordered Tim Cook’s Apple to pay €13billion in unpaid taxes.
At the meeting in July, the CSO officials attempted to answer questions on what seemed to be a massive boost to the economy, and they mentioned ‘the ongoing issue of BEPS and the pending closure of the “double Irish” scheme’.
They said: ‘The “on-shoring” of intangibles [assets like licensing agreements, trademarks, patented technology] is likely to continue, reflecting the influence of BEPS.’
At the time, there were calls for a separate more realistic set of GDP figures that would exclude the inflated increase, but the CSO officials said they could not say how this might be done ‘without breaching confidentiality’.
They said: ‘The CSO can confirm that the increase is mainly driven by MNEs [multinational enterprises].’
They said the main drivers of the increases were ‘company relocations’ and that aircraft leasing was of ‘lesser significance’. They added: ‘Some of the sector detail in the CSO’s Estimate... scheduled for publication by end-year, will need to be suppressed.
‘There are primary and secondary confidentiality issues to consider, in what level of sector detail to provide, to prevent other companies in a given sector from being able to identify the data of competitors.’ This emphasis on protecting the multinationals was repeated in correspondence with Eurostat, the official EU statistics body, in documents released following a separate information request.
An official from the CSO described it as a ‘primary concern and challenge… in managing this difficult set of revisions’. An internal Eurostat note also described the ‘on-shoring’ of assets by multinational companies as the driver of the growth.
Assistant Director General of the CSO Jennifer Banim stated: ‘The revisions published were based on hard data and attributable to the globalisation activities of a very small number of companies.’
‘Estimates will need to be suppressed’