Caption: Eunice, 15, (right) and Millicent, 16, (centre) from Ghana were given bikes by ActionAid. This helps them travel to school safely. They used to walk for two to three hours to reach school. Due to Ireland’s tax policy, profits generated in Ghana are often moved to Ireland. This leaves Ghana with less money to spend on services for children such as education and public transport. Photo credit: Ruth McDowall/ActionAid

The case

In November 2020, the UN Committee on the Rights of the Child decided to examine the impact of Ireland’s international tax policy on the ability of countries in the Global South to raise revenue and fulfil their human rights obligations, in particular those that relate to children. This comes in response to a detailed submission from a coalition of Irish and Ghanian NGOs, including ActionAid Ireland.

The UN Committee on the Rights of the Child will assess whether Ireland’s tax policy undermines the ability of developing countries to raise revenue that could be spent on vital public services, including education and health care, which are both key human rights obligations.

While Ireland’s international tax strategy has been the subject of much international criticism, this is the first time that Ireland has been asked by the UN to defend the impact of its tax policy on human rights abroad.

The submission outlines how aspects of Irish tax policy allow large multinational companies to shift profits from developing countries to low-tax Ireland, depriving them of the essential revenue needed to deliver key public services that benefit children. Profit-shifting is particularly damaging to developing countries as they are more dependent on corporate tax income than richer countries.

​The submission

Irish tax policies criticised in the submission include:

• Allowing profit from sales made in countries outside of Ireland, including in developing countries, to be booked by an Irish company as though it took place in Ireland, therefore, depriving those countries of vital tax revenue.

• The tax relief and allowances on profits related to intellectual property, which allow Irish-based multinational companies to greatly reduce tax paid on profits, including those generated in developing countries. Since 2016, Irish trade statistics show flows of money for license fees and royalties associated with intellectual property from Africa and South and Central America. This indicates that Irish-based multinational companies are shifting profits from these regions. While the figures are relatively small, they are significant for the countries involved.

•  Ireland’s approach to negotiating double tax treaties with developing countries which has resulted in further taxable revenue flowing to Ireland at the expense of developing countries. In 2018, Ireland, Ghana’s largest source of foreign direct investment, negotiated a double tax treaty with the country. The treaty saw the withholding tax on royalty payments to Ireland cut from the domestic rate of 15% to 8% and rates on technical service fees cut from 20% to 10%, which undermines Ghana’s ability to raise tax revenues. The Irish government pursued this treaty despite being advised against doing so by the Department of Foreign Affairs, who pointed out that double tax treaties generally do not work in in the interests of developing countries.

Developing countries now lose at least $170 billion every year to tax avoidance. For example, an estimate for 2013 puts foregone tax revenue for Ghana due to corporate tax abuse at US$340m.

• According to a tool developed by researchers at the University of St Andrews, a US$340m increase in Ghanaian government revenue in 2013 could have prevented 170 child deaths.

• The Irish government has until October 2021 to respond to the concerns raised and a Minister will attend a formal review hearing in Geneva in February 2022.

Partners

The submission to the UN Committee on the Rights of the Child was made jointly by ActionAid Ireland, Christian Aid Ireland, Integrated Social Development Centre (ISODEC), Global Legal Action Network (GLAN), Oxfam Ireland, Tax Justice Network, Tax Justice Coalition.

Read the full submission here

Read the Irish Times article here