Since the closure of the Double Irish scheme in 2015, nearly $1 trillion in IP-related assets have been shifted into the Irish subsidiaries of US multinationals.
This transfer has driven an extraordinary boom in corporate tax revenues. But beneath the surface lies a central question: do these monetisation rights genuinely create the substance needed to justify the profits booked in Ireland?
Paschal Donohoe, the finance minister, says they do.
“The substance is located here,” he told the Business Post a few weeks ago. He argued that multinationals have moved IP rights to Ireland because of their long-standing presence, and that “it is in their interest to have the ideas behind their success located here as well.”
But this glosses over a deeper truth: what mostly resides in Ireland is not the intellectual property itself, but the rights to monetise it — financial instruments designed to reroute global profits with minimal local activity.
The closure of the double Irish — a structure that routed profits through paired Irish and Caribbean entities to avoid tax — was meant to end such games. But multinationals adapted.
The 2017 US Tax Cuts and Jobs Act (TCJA), combined with changes to Ireland’s capital allowances regime, created a new incentive to house IP-licensing rights in low-tax jurisdictions. Ireland became the jurisdiction of choice.
Instead of transferring ownership of ideas, patents or software, most companies began licensing monetisation rights to Irish subsidiaries. These rights are treated as intangible assets. They appear on Irish balance sheets, justifying the recording of profits that are often generated elsewhere.
Between 2014 and 2021, the book value of intangibles held by Irish entities nearly tripled — from $386 billion to $967 billion. Over the same period, corporate tax receipts surged.
In 2024, Ireland collected €28 billion in corporate tax, up from just €4 billion a decade earlier. These windfalls now prop up the Irish exchequer. But they rest on fragile accounting arrangements.
Substance on paper
This strategy hinges on a powerful accounting technique. In Irish tax and general law, patents and licences are treated as distinct assets because they can be independently owned, transferred, or valued.
A multinational can therefore hold the underlying IP in the US while assigning the right to monetise it elsewhere to an Irish subsidiary. The US parent retains control of R&D, while the Irish entity books international income, claims the profits, and pays little tax —often due to amortisation deductions and inter-company charges.
Multinationals argue that this creates real substance. Irish subsidiaries participate in cost-sharing, manage IP licensing, employ local staff, and hold board meetings in Dublin.
But in practice the scale of profits booked often far exceeds the substance of local operations. Take AbbVie Manufacturing Management Unlimited Company: in 2023, it booked $5.1 billion in revenue with just 79 employees. Profits were wiped out by amortisation and related-party expenses, resulting in a tax loss.
These arrangements run counter to the spirit of international tax reform. The OECD’s post-Beps guidelines introduced the Dempe framework, requiring that profits from IP be aligned with the functions of development, enhancement, maintenance, protection and exploitation. Legal ownership alone no longer suffices.
But multinationals have adapted. Irish subsidiaries now “tick the boxes” for Dempe compliance — formalising functions, creating paper trails, and engaging in cost-sharing arrangements.
They mostly licence and monetise the IP while real development and enhancement happens in California or Shenzhen. The innovation hasn’t moved. What’s in Ireland is legal scaffolding, not substance.
Successive Irish governments have encouraged this model. Under the capital allowances regime, companies can deduct the cost of acquiring intangible assets from their taxable income.
What makes Donohoe’s claim of substance particularly difficult to sustain is that it directly contradicts the Irish government’s own legal argument in the Apple state aid case.
Then, Ireland insisted that Apple’s profits should not be taxed in Ireland because the value was created in the US. The economic activity in Ireland, the state argued, was not substantial enough to justify taxing those profits. That argument remains as valid now as it was then.
What has changed is not the economic activity, but the legal form. IP monetisation rights now sit in Irish-resident entities, supported by modest staffing and legal scaffolding. But the underlying innovation, strategy, and risk-taking still reside elsewhere. Ireland is not the source of these profits — it is the place they are booked.
Mirage of prosperity
In 2022, Irish-registered companies reported nearly €200 billion in pre-tax profits — up from €65 billion in 2014. These numbers have transformed the Irish exchequer but distorted the country’s economic statistics. The gap between GDP and GNI* — Ireland’s adjusted metric that excludes foreign-owned IP flows — now exceeds €200 billion.
No other country has had to invent a new income measure to filter distortions caused by multinational tax.
In 2023, Ireland’s GDP per capita soared to $106,460, making it one of the richest countries in the world — on paper. Most Irish citizens know this is a fiction. It reflects the accounting structures of foreign firms, not the income of Irish households or the output of domestic industry. The GNI* gap alone disproves the minister’s claim that profits booked in Ireland reflect meaningful substance.
Now, the ground is shifting, the Trump administration has explicitly attacked this model. Howard Lutnick, the US commerce secretary, has labelled Ireland’s tax regime a “scam”.
This is no longer a quiet dispute over accounting practices. It is a direct confrontation over who gets to tax the value created by US multinationals.
What is at stake here is not just fiscal risk or the durability of Ireland’s tax boom. It is the definition of substance. The Irish government claims that licensing rights and corporate presence amount to sufficient substance. But most of these rights are financial instruments, not the products of real economic activity in Ireland. The legal structures are elaborate. The balance sheets are large. But the value is created elsewhere.
Ireland’s IP boom is not fake. The assets exist. The taxes have been paid. But in economic terms, it is a mirage. These are not Irish profits. They are profits parked in Ireland. What the model offers is not sustainable growth or prosperity, but a temporary share of global rent flows, dependent on favourable politics and creative accounting.
Substance is not something that appears on a balance sheet. It is what links income to real work, real productivity growth, and real innovation. By that measure, Ireland’s model fails. It does not lift real wages for most of the population. It rewards Ireland’s willingness to be a sink location for global profits. That is legal. But it is not substance.
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