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 AllAfrica.com:
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.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Hi Richard,
As a UK resident and Director of San Serif Print Promotions Limited, could you explain why you chose to set up Eireann Game Manufacturing in Ireland?
@Noel Scoper
Of course
It was to secure tax advantages
And as a young man (27 at the time) I had not realised the abuse those supposed tax advantages caused – including in Ireland, which I witnessed
But my eyes were opened by a great many things I learned in my twenties and those insights informed my current position
I make no claims to be innocent with regard to offshore – but having learned about the (albeit sometimes entirely legal) abuse Ireland and offshore facilitate and the personal corruption (again, I’m not necessarily referring to illegality – just to the debasement of human behaviour) caused I did my very best thereafter to ensure I was neither a part of it or helped to prevent it
The role of the Big 4 in all of this was something else I learned a great deal about at the time
I cannot see that anything has changed
[…] I’ve noted this morning — South Africa is worried it is suffering transfer pricing abuse to exploit tax […]
@Richard Murphy
Richard,
100% to you for this admission. I guess as FD of San Serif Print Publishing Limited you were also paying royalties to Sans Serif in Barbados (Horn Abbot’s offshore company)? Is there anything link in the naming similarity?
@Noel Scoper
I was never FD of any San Serif company
I’m not sure there was ever a company called San Serif Print Publishing Limited – I don’t recall it. I do recall Promotions and Production but not Publishing – but again I was not involved with Serif for much of its existence
I will be quite honest – if Horn Abbot had a company of similar name in Barbados this is the first time I’ve heard of it
But I do know royalties were paid by Serif to Barbados – this was hardly a secret (I suspect)
With regard to my opinions I refer you to my previous answer
[…] Comments section here. […]
@Richard Murphy
Sorry, my typo, your CV states:
“San Serif Print Promotions Limited, European
Licence Holder of Trivial Pursuit, 1985 – 1991
(founder director, then consultant)
Started with two others — demonstrating my
commitment to combining the best of practice
and commerce. Quoted in 1988 as Serif PLC.”
The offshore aspects of Horn Abbot are shown here:
http://books.google.co.uk/books?id=jftapGDTmYUC&pg=PA241&lpg=PA241&dq=trivial+pursuit+site:books.google.com+serif&source=bl&ots=_q_dRMdnrR&sig=HuDYRE9Tyo0LLCbUgnppYIoHeks&ei=O9xbTIW4O4rfccz92d4B&sa=X&oi=book_result&ct=result&resnum=1&ved=0CBYQ6AEwAA#v=onepage&q=trivial%20pursuit%20site%3Abooks.google.com%20serif&f=false
As a founder director and the person who created the manufacturing operation for Europe and as the accountant, you must have been aware of the cash movement.
@Noel Scoper
My CV is correct
I was a director – from about June to September 1985 if I recall correctly, and then as a consultant.
I resigned in September 1985 on ethical grounds. But I admit I did not walk away entirely . These days I expect I would have done.
I never was accountant to Serif, ever. As far as I recall I was never a cheque signatory either. I always advised on commercial issues.
But as I’ve noted – I knew royalties were paid to Barbados. Of course I did. I was young. I thought it was Ok at the time. I changed my mind. Mature people do in the face of the evidence.
But as you note, my concern was, in any case, manufacturing.
For the record I also resigned from the Irish operation having established it – again on ethical grounds – but out of commitment to people I had engaged stayed as a consultant. They were eventually, in my view, failed by Serif when it transferred the whole operation to the UK – something I’d always feared they’d do when the grant environment allowed it. That helped form my experience of the inappropriateness of tax and related incentives as an incentive for business location – as Ireland is still finding to its cost.
You really are not going to find things to stick on me on this issue. I have always admitted I learned offshore at KPMG and then in commercial activities – of which this was the major one. I’ve never denied knowing how these things work. I’ve never denied my own past.
So you really are wasting your time. There is no dirt to be found.
@Noel Scoper
You’ve been watching too much Dutch football, Noel! Try kicking the ball instead of the man. This is risible.
@James from Durham
It’s got to be a weird day when even Tim Worstall agrees with you!
http://timworstall.com/2010/08/06/and-now-to-be-fair-to-richard-murphy/
@Richard Murphy
Hi Richard,
Thankyou again for your explanations. I am not looking for dirt, I respect fully anyone who argues their case and you argue hard and well. However, as you now seek to distance yourself from your startup companies, perhaps the text
“Richard is a serial entrepreneur, having directed more than 10 SMEs in sectors as diverse as IT, the toy industry and environmental auditing in both the UK and overseas.
In parallel with his practice career Richard has been chairman, chief executive or finance director of more than ten SMEs.”
that accompanies your articles should be changed.
Another quick question. When selling Murphy Deeks Nolan to Windsor Stebbing Marsh in 2000, I assume you made the CGT paid up to the level of income tax due at the time? You do ask this of today’s entrepreneurs.
Sorry for the questions, but you ask so much of others, perhaps you would offer the same of yourself.
@Noel Scoper
I agree – it should probably be in the past tense
But I can’t see hat it’s misleading
I’ve never said I won’t do another commercial operation
As for our other question – to the extent that consideration of the WSM deal was subject to income tax of course I paid tax at income tax rates – and some was for a variety of reasons
That due under CGT rules was paid under CGT rules at he rates then due – there is no voluntary tax payment box – despite what Tim Worstall says
My payments were therefore totally tax compliant – and not at the lower rates that would have applied if I’d deferred sale, I should note
What I did was exactly consistent with what I say – after all I’ve never asked for anyone to pay tax voluntarily at rates higher than those demanded
I have campaigned for rates to be increased
That’s different
And no – I don’t see any inconsistency – because there is none.
So, with respect – and since your assertion of not looking for dirt does seem to ring extraordinarily hollow, shall we leave it there?
@James from Durham
Richard’s openness is very welcome and incredibly honest. At the age of 25 I am looking to build a manufacturing plant in Europe, Ireland is attractive for tax purposes – I guess exactly the aim of their tax regime. I am told this is ethically wrong by someone who has done exactly this. Do you not find this, I hesitate to use the word, hypocritical?
@Richard Murphy
Hi Richard,
Thankyou for your time. It clearly seems you have had an epiphany around 2000.
I am looking to set up my own business in as tax compliant way as possible and Googling lead to your site. It seems a minefield though as the line between compliance and ethics is impossible to draw.
I struggle even with the difference between a Ltd company and an LLP. TRUK is an LLP but 99% is Richard Murphy. Obviously all TRUK income falls through to RM as tax, but can a partnership of ‘1’ really have limited liability, something I know you campaign against.
@Noel Scoper
Not in the slightest!
The wise person learns from the mistakes of others
I consider what I did mistaken – as did those who lost out in the end, I suspect
Changing one’s mind is not hypocritical – it’s wisdom! You’d be wise to note it
I am afraid your comment evidences considerably more immaturity than I think I showed at your age – I’d advise you in that case you wait a while before pursuing your plans
As for the epiphany – yes there was one – but not in 2000. About 1988, if I have to place it – but it was a process, not an event
As for the line between compliance and ethics – they are the same because tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.
And I have an LLP because the professional indemnity insurers of my accountancy practice asked me to sue a different (non self employed) structure from it – and an LLP was the best and most transparent option available. I never sought limited liability
But have I actually campaigned against limited liability anyway? Pragmatically we have it. I campaign against abuse of it – again, something quite different
If you’re going to succeed in management at your age your thinking has got to improve a lot – you seem unable to think yourself in another’s position – that’s bad news for any manager.
Sorry – but I’m genuinely worried for you.
Richard, on the contrary, Noel seems to demonstrate astuteness well beyond his years and I hope he does well in life. Also, I do hope he sets up his business in Ireland. If ireland can offer a corporate tax rate of 12.5% then good on Ireland. That’s where you and I are different. Where I think I’ve come to agree with you is that the company only deserves to benefit from this rate if it has a real presence Ireland – creating jobs, full management and control there, and no transfer pricing or other abuse takes place. If you’re going to take advantage of EU freedom of services, Ireland is a perfectly legitimate and attractive place to base a business.
@Freeborn Man
If he really locates a company in Ireland – as I did – of course he can pay Irish tax rates
But choosing location for a real company on that basis is pretty absurd
You have to make money to pay tax
Ireland remains remote
And it has high cost, an unstable economy and a work force that can’t afford to buy houses
I suspect it’s a very hard place to make money right now
For heaven’s sake – never let the tax tail wag the dog
Doing so is another sign of business immaturity
Yes, but as a base from which to sell a product cross border in the EU it is an easier place to be than say the uk, France or Germany and the tax rate is only 12.5%. Thats the big advantage of the EU. You can base your company in the most tax efficient jurisdiction and do business in the other countries. Perfectly legitimate, blessed by EU law and not abusive at all.
Richard
A fascinating insight to your historic utilisation of tax planning.
You give a perfect example of how you changed your outlook based on your experiences.
You don’t seen to find it very palatable to now be castigated for how you engaged historically in “tax abuse”, having changed your ways.
So tell me please – if you as an individual wish to have it recognised that you changed your ways, please explain why the Crown Dependencies should continue to be castigated for what went on on the 70s and 80s, and which they have done everything possible to try to completely eradicate.
If I called you a “tax abuser” and “an apologist for tax abuse” today, at every opportunity, you would understandably be offended because you know very well that you are no longer engaged in such activity. So maybe now when you see me reacting to your accusations that the Crowm Dependencies are still today dependent on illegal tax evasion activities, you may understand why I object.
What you used to do in the 1980s is clearly not what you are today. Similarly, what the Crown Dependencies were in the 70s and 80s is not what we are today.
Please judge us on what we are and do today, not what we used to be. People and attitudes do change, as you have yourself very clearly demonstrated.
@Rupert
This is completely absurd. It simply is not possible to make the comparison you claim to exist.
I have honestly admitted my limited past involvement in offshore and using Ireland’s low tax rates — and did not seek to hide when asked about them, in a spirit of transparency. I have also honestly expressed regret because I have made clear I learned from what I witnessed (and I’d stress: witnessed is pretty much the right term — these structures were created by and pretty much managed as far as I recall by members of the Big 4). That said — I had some idea of what was going on and although I did resign as a director of the companies on ethical grounds, at some personal cost, I did remain involved as a consultant — and as I make clear, I would not do that now. So sure, I have changed my behaviour.
Now let’s for a moment also be clear. Every single thing referred to in this exchange was as far as I know legal, disclosed and known of by Revenue authorities. The transactions and arrangements — whilst I think them unacceptable now — were as far as I know all legal. That’s unsurprising. They’re exactly the sort of thing you see these days, and involved what are considered normal royalty routing arrangements, normal acceptance of tax incentives to relocate business, and so on. I use the word ‘normal’ without condoning the practice — I use it to describe the activities considered commonplace and legitimate by the tax profession these days. I do not condone those as you know — but it’s hardly a big deal to confess participation in and regret for what were legitimate events well over 20 years ago when a young man and which I now understand so much better than I did then.
Now, you seek to draw comparison with what Jersey and Guernsey were doing back then. I presume you’re referring to blatant tax evasion, caseloads of cash, outright fraud and so on? Has anyone in those places been so honest to admit involvement in such things as a young man if they did indeed take part in them then? I have admitted what I did. Have you or your colleagues of my age who might have done such things done anything equivalent? I haven’t heard it. Those people should be going to prison if they did. So we only have silence. Why is that?
And have we heard expressions of remorse or regret from the island authorities or governments for past crimes to which they turned a blind eye? No, we haven’t.
And have we seen evidence of change? I have clearly evidenced my change of opinion. But have the islands in question? No. Secrecy remains. Offensive and internationally unacceptable tax regimes remain. Secret trusts remain. Total anonymity for offshore companies remains. A failure to engage in full information exchange remains. In other words there is no change at all. We just have the word of those involved that they have changed. But some involved will undoubtedly have been those who did also once accept the caseloads of cash, facilitated the tax evasion and much more — and none have shown any indication of change. Their methods have just got more sophisticated, that’s all, and a veneer of compliance (and it is only that in my opinion) has been laid over them. But nothing — nothing at all — has actually changed that I can see. TIEAs, the European Union Savings Tax Directive, all just represent token gestures. So people don’t use caseloads of cash now? Is that the only step forward you’ve made?
I am judging you by what you are today. I saw the willingness of people to sell tax abuse in the past. I’ve witnessed it in this century. And I see no change in culture (which remains “don’t get caught” — you just have to be more sophisticated to ensure you aren’t now). And I see no change in outcome — tax abuse and evasion continues.
that’s the reality.
That’s why I fight against it.
Like the parasites they are the offshore tax industry continues to eat at the structure of society, as it always has. Nothing has changed.
The onus is all on you.
@Freeborn Man
And undermine the tax system of other countries in the process – as South Africa points out
Which is where I started and from where you have not progressed
This comment has been deleted as it did not meet the moderation criteria for this blog specified here: http://www.taxresearch.org.uk/Blog/comments/. The editor’s decision is final.