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How often is the 'Single Malt' tax loophole used? The government is finding out

Paschal Donohoe has asked officials to look into the ‘Single Malt’ after a report indicated that it could become the new ‘Double Irish’.

Image: Q77photo via Shutterstock

MINISTER FOR FINANCE and Public Expenditure Paschal Donohoe has said that his department is looking into how frequently a new Irish tax loophole is being used, and possible ways to curb it.

The loophole involves companies taking advantage of an arrangement between Ireland and Malta that allows companies to make sales and profits in one country and to be taxed in another.

According to a report by Christian Aid, this loophole, nicknamed the “Single Malt”, has replaced the “Double Irish” arrangement of avoiding tax.

Double Irish arrangement allowed multinationals to reduce the amount of tax they owe by moving their income from a high-tax country to a lower one. This was allowed to be done off the back of a gap in Ireland’s tax law, as it doesn’t have transfer pricing rules as countries like the US do.

That arrangement was banned in January 2015, but companies that did employ the practice were given a window of time between then and 2020 to find a new tax practice.

Christian Aid listed the Single Malt arrangement as part of their report Government’s 2015 Spillover Analysis, which looked at how gaps in tax codes are impact on developing countries.

Speaking to RTÉ’s News at One today, Donohoe confirmed that his department was looking into how often the loophole was being used in Ireland before considering taking action.

I’ve asked my officials to report back to me to give me an estimate of what kind of issue this is and options that are open to dealing with it.

“In essence this shows the continued challenge we have in relation to international taxation. We’ve made a number of changes in our tax regime here in Ireland to do with issues that can cause flows of money like this.

Other countries either haven’t changed or are planning to change in the future. Because of that a gap is created between two different tax codes that companies and organisations look to use to reduce their tax liability.

“And that is why the overall message in relation to tax reform that I’m giving here in the States and I’ve talked about at home, is the need for everybody to move in a coordinated manner. If Ireland makes the change, it is important that other countries are doing the same, otherwise gaps will exist in global tax code that will be used by particularly large organisations.”

Read: No plans to legislate against loophole that allowed 200 people to try avoid paying €500 million in tax

Read: Donald Trump: ‘I give the Irish a lot of credit. They never raised their taxes’

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