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‘Strong evidence’ Ireland aiding EU banks’ tax-avoidance schemes

Ireland is one of the countries “leading the race to the bottom” in the facilitation of global tax avoidance, according to a new report from charity group Oxfam.

Oxfam said there “is strong evidence” that Ireland is aiding significant corporate-tax-avoidance schemes for European banks. In a report titled ‘Opening the Vaults’, researchers at Oxfam, in collaboration with the Fair Finance Guide International – an international civil society network initiated by Oxfam – found that “a disproportionate amount of profits of the top European banks are reported in Ireland”.

Oxfam stated that the average employee in European banks based in Ireland generated €409,000 profit, behind only the Caymans, Curacao and Luxembourg for the amount generated per employee. To illustrate the discrepancy between countries, the report highlights the cases of BBVA, Société Générale and RBS. BBVA employees in Ireland generated 225pc more profit than the average company employee, Societe Generale’s figure in Ireland was 433pc higher, while RBS employees in Ireland generated 149pc more than the bank’s average.

BBVA was found to have profits of €27m on turnover of €12m, with just four employees based in the country. The bank said its high profitability was down to “an extraordinary item” carried over from previous years. The report also found that 16 of the top 20 European banks operating here paid an effective tax rate of no higher than 6pc.

“The massive profitability levels of European banks in Ireland suggests that large profits may be reported in Ireland as a tax-avoidance strategy,” said Oxfam Ireland’s senior policy and research coordinator Michael McCarthy Flynn.

“This is creating little additional benefit to the Irish economy and tarnishing Ireland’s reputation,” he added. European banks were found to have profits in Ireland of €2.3bn from turnover of €3bn. The same banks were found to have profits of just €900m from the same amount of turnover in Sweden.

Five banks based in Ireland – RBS, Société Générale, UniCredit, Santander,and BBVA – were found to have profits higher than their turnover with the report stating it “potentially suggests that they are artificially shifting profits to Ireland”.

In addition, three banks – Barclays, RBS and Crédit Agricole – were found to have paid an effective tax rate of just 2pc in Ireland.

RBS explained that it had exceptional profits in Ireland in 2015 as a result of impairment write backs from earlier periods.

However, the report noted that had Ireland’s statutory tax rate of 12.5pc been applied to the €1.14bn of profits made by RBS in the country, the amount of tax paid would be equivalent to €142.5m instead of €22m.

Ireland “provides significant tax breaks for research and development, intellectual property and intangible assets, in addition to highly advantageous treatment of holding companies,” the report said.

It added that for every €100 of turnover recorded in Ireland, the banks took out €76 in profits.

A Government spokesman took issue with the report’s findings.

“We reject any allegations that Ireland is a tax haven. We only have and want real substantive FDI, the kind that brings real jobs and investment into Ireland,” he said.
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