Kinsella declined to be interviewed for this story because of his government advisory role. But his analysis is shared by many including the country’s Fiscal Council, a statutory body set up to monitor Irish fiscal policy.
Disappearing windfall
In April, the Fiscal Council warned the government not to use corporate windfalls to fund permanent spending, because of the risk they could “easily disappear.”
The source of these Irish corporate revenues is no mystery. What appear to be pharmaceutical exports or imports of digital services are in substance the effects of massive U.S. firms shifting their profits to Ireland, via intangible assets like intellectual property.
The data tells the story. Corporate tax receipts began surging in 2015, following OECD-led reforms that curbed some abuses elsewhere but left key loopholes intact.
As a result, many companies chose to anchor their royalty-generating assets in Ireland, where the tax on such income is a minuscule 6.25 percent. According to EU Tax Observatory research, Ireland is still leads the global rankings for corporate profit shifting.
“Ireland is both in a very privileged position and a very precarious position,” Regina Doherty, a former Irish government minister who is now a member of European Parliament with the center-right European People’s Party, told POLITICO last month.
Her party, Fine Gael, has been part of coalitions that governed Ireland through a series of shocks, including the post-2008 financial crisis, Brexit, and the pandemic — but the Trump shock may be the most serious of them all.
