Government must act on tax loopholes exploited by multinationals, charity says

The Government must take immediate action to shut down tax loopholes exploited by multinational companies which are depriving developing countries of desperately-needed tax revenues, Christian Aid has said.

The charity said that schemes like the "Single Malt"-type arrangement used by the pharma giant Abbott, investigated by Christian Aid and revealed in The Irish Times on Wednesday, were hitting countries that are "already struggling to deal with the impacts of the pandemic on their overwhelmed health systems and struggling economies".

The investigation by Christian Aid shows Abbott apparently using a type of tax loophole similar to one the Government said it was ending in 2019.

The company books profits from around the world in its Irish companies before transferring them to Malta where it can avoid tax by the use of a complex system of allowances and inter-company transfers, Christian Aid says.

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Minister for Finance Paschal Donohoe had said an agreement on tax between the Irish and Maltese governments would be "the end of the so-called 'Single Malt'".

However, the scheme described in the Christian Aid report is similar to the “Single Malt” arrangements and appears to facilitate the avoidance of huge amounts of tax through transfers between subsidiaries and Maltese tax breaks.

In a statement, Abbott said it had “never used the ‘Single Malt’ structure that was eliminated by the Irish and Maltese governments in 2019”.

However, it does appear to use some type of Maltese structure to avoid tax, something which the company does not deny in the statement.

"Abbott is a responsible and transparent tax payer, paying all of its taxes owed in every country in which it operates around the world. We comply with all applicable local and international tax laws and regulations, including in Ireland, Malta and developing countries," it said.

“With businesses in more than 160 countries, our tax contribution is substantial and global in scope. We reject any implication that we’re not paying taxes in developing countries,” it said.

The company declined to say if the structure had been approved in advance by the Revenue Commissioners or the Department of Finance.

Department response

The Department of Finance said it was “not appropriate to comment on the tax affairs of individual businesses”.

However, it said: “It is relevant that the Revenue Commissioners entered into a Competent Authority Agreement with the Maltese Competent Authority to counteract ‘Single Malt’ arrangements that could otherwise result in double non-taxation.”

“It is important to stress that Ireland is fully supportive of international efforts to address aggressive tax planning,” the department said.

Sorley McCaughey, head of advocacy at Christian Aid, said the revelations underlined the need for the Irish Government to join international efforts to combat profit-shifting.

“How the Government can reconcile their commitment to development on the one hand and enable this kind of tax avoidance that robs poor countries of much-needed revenue is a question that absolutely needs to be answered,” he said.