Ireland undermines investment in South Africa

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Ireland is a classic secrecy jurisdiction. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so. Ireland does the latter – especially through the availability of unlimited companies where no information has to be filed on public record.

I an many others have argued that secrecy jurisdictions harm developing countries. And there is proof now that Ireland harms South Africa. This is from

Ireland's aggressively low corporate tax rate of 12,5% had resulted in massive capital outflows from SA over the past few years, a trend that caused concern among members of Parliament's finance committee yesterday.

They heard from Treasury officials that while total investments by Ireland into SA between 2005 and 2008 amounted to only R7,7bn, South African investments into Ireland totalled R175bn over the same period - a leakage of capital that, if invested domestically, would have helped ease unemployment.

South African companies operating in Ireland include AECI, Alexkor, Anglo Platinum, Coronation, Dimension Data, Datatec, Sasol, Investec, Old Mutual, and SABMiller, while Irish companies operating in SA include Independent News and Media, Guinness, Spectra Group, Howard Holdings and ESB International.

The terms of trade were also skewed, with SA exporting only R6,3bn to Ireland between 2005 and end-2009, but importing R25,4bn.

But Treasury officials said tax arbitrage was inevitable where tax rates differed. Historically, Ireland's corporate tax rate had been lower than most other countries.

The South African Revenue Service (SARS) was fighting hard against abuses such as transfer pricing, SARS senior manager of international development and treaties Ron van der Merwe said.

I’m sure SA is doing all those things, but nothing can overcome the fact that Ireland – by offering a tax rate so massively out of step with international norms – is deliberately undermining the tax effectiveness of a great many nations efforts to raise essential revenue.

What is worse – as I have shown in cases such as that of Google – Ireland doesn’t even collect tax as a result and is sinking ever more steadily into the mire as a result. This is its greatest sin – it is pulling the world’s tax systems down to the pitiful low level that it itself has reached, and seems indifferent to the consequences. But those consequences are severe – and the world’s poor are paying the price.