John Bruton wrote to Alan Dukes in 1984 about a new US tax arrangement.
State Papers

Fine Gael ministers discussed US corporations paying 'little or no tax' here in the 1980s

A letter from John Bruton to Alan Dukes has been released to the national archives.

JOHN BRUTON TOLD his cabinet colleague Alan Dukes in 1984 that US corporations relocating due to a new tax incentive would only consider Ireland if they “have to pay little or no tax”.

The 1984 letter from the then commerce minister to finance minister also told Dukes that facilitating such a move would not set a dangerous precedent for future tax law. 

The memo was released to the National Archives as part of the 30-year rule and also showed how the IDA sought legal and tax advice on the operation of such a system. 

The letter was dated 21 November 1984 and was sent following changes to legislation that made it advantageous for US companies to establish Foreign Sales Corporations (FSCs) in European centres.

The new rules were slated to begin in January 1985. 

The law change meant that US sales companies could escape tax on some of their profits in the US by running part of their business through a foreign-based company, even if the exports were not moved through the foreign country in question.

The system is reminiscent of the controversial system Apple employed in Ireland where the multinational based two subsidiaries in Ireland, Apple Operations International (AOI) and Apple Sales International (ASO) – paying little or no tax on profits in Ireland or the US. 

In his letter to Dukes, Bruton stated that making Ireland available to such operations would attract US manufacturers that have no operations here and also encourage those who already have to “broaden” their activities here. 

Bruton acknowledged in the letter that becoming an FSC base would not have much direct benefit to Ireland’s economy. 

“While the direct economic benefits from FSCs may be limited, I believe that it would be in the best interest of industrial development generally to do our utmost to encourage such corporations to locate here,” he said, before adding:

In order to retain the maximum tax advantage, US corporations will wish to locate FSCs in a country where they will have to pay little or no tax. Therefore unless FSCs are given favourable tax treatment in Ireland, they will not locate here.

In a letter written a month later from officials within the IDA to the Revenue Commissioners, one official outlined that the US FSC company would carry out few functions in Ireland.

“The FSC would have an office in Ireland at which a copy of the company’s accounting books and records would be maintained. No functions other than writing up and maintenance of records would be carried out by the office which would not receive any income other than the reimbursement of its costs,” the IDA letter stated. 

The issue of Ireland’s tax practices involving multinationals has been the subject of criticism in recent years with the country even labeled as a ‘tax haven’

Successive governments have defended Ireland’s tax regimes for multinationals and the State is fighting a landmark EU ruling from 2016 that Ireland gave illegal state aid to Apple

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