Gateway to Europe: Ireland's Relationship with U.S. Multinational Corporations

Ireland’s relationship with U.S. FDI has been cultivated by successive Irish governments since the late 1960s when the first U.S. multinational corporations (MNCs) moved their European export operations to Ireland. U.S. MNCs were attracted to a package of investment incentives coupled with a strong labour force and proximity to continental Europe. These incentives continue to this day and include the headline rate of 12.5% corporation tax, a generous capital allowance programme and tax incentives to locate intellectual property in Ireland, as well as a young and educated workforce and a shared language. Due to the success of Ireland’s FDI attraction regime, Ireland has been considered a tax haven in the tax haven literature (Gravelle, 2015; Hines & Rice, 1994; Palan et al., 2010; Tørsløv et al., 2018; Zucman, 2015) since the influential Hines & Rice (1994) paper. This study considers Ireland’s inclusion as a tax haven and its relationship with U.S. MNCs through five case studies on the largest U.S. MNCs in Ireland: Apple, Microsoft, Pfizer, Facebook and Google. Through these case studies, which adopted a mixed methods approach to understand the operations in Ireland, the findings suggest that Ireland is used a tax haven for these U.S. MNCs. Through tax minimisation practices including intercompany transactions, transfer pricing, profit shifting and exorbitant deductions, these corporations reduced their worldwide tax burden by billions of dollars annually, with their Irish operations playing an important role in facilitating this tax avoidance. Ireland has been called a ‘Gateway to Europe’ in a number of different contexts, and this study concludes that in this context, ‘Gateway to Europe’ is a fitting title for the flow of funds between U.S. MNC’s European operations, their Irish operations and their U.S. parent companies.