The clouding effect of international tax avoidance

Sheila Killian: In the Central Bank’s most recent Quarterly Bulletin, released today, Mary Everett does a good analysis of the impact of multinational investment in Ireland. It includes a really useful discussion of the difficulties in extricating the real underlying economic activity from the tax-based money-moving of multinational firms. There’s a particular focus on the Shire effect – the way some multinational firms moved their headquarters here in order to avoid adverse taxes elsewhere.

Everett notes that:
“While these types of companies have large balance sheets, their contribution to the local economy in terms of employment tends to be limited.”

While it’s well worth reading in full, one highlight to ponder is the depressing statistic that 15% of inward direct investment and 21% of outward direct investment moves between Ireland and Bermuda. Hardly a traditional trading partner, this is a strong indication of the sort of aggressive tax planning outlined here, and indicates that for all serious purposes, our GDP is a far less realistic measure of real economic activity than GNP.

Posted in: Fiscal policy • Fiscal policy • Fiscal policy • Taxation

Tagged with: GDP • tax avoidance • GNP • fdi

Dr Sheila Killian     @sheilakillian

Dr Sheila Killian is Assistant Dean, Research and Director, Principles for Responsible Management Education at the Kemmy Business School, University of Limerick. Her research addresses sustainability, accountability and the common good, with a focus on professional expertise, tax policy and business school education. She holds a PhD in taxation from UCD.

Prior to joining UL, Dr Killian worked as a tax advisor with Arthur Andersen, KPMG and Ernst & Young, and in air-finance and educational software development. A Fellow of the Institute of Chartered Accountants of Ireland, she is the author of Corporate Social Responsibility: a Guide with Irish Experiences (2012).