The End of the Double Irish: Implications for US Multinationals and Global Tax Competition

The End of the Double Irish: Implications for US Multinationals and Global Tax Competition

Entitlements Social Security Tax Policy

The End of the Double Irish: Implications for US Multinationals and Global Tax Competition

Lysle Boller, Wanling Luo and Xiaoyue Sun · · 36 min read
The End of the Double Irish: Implications for US Multinationals and Global Tax Competition

After Ireland ended the Double Irish tax planning strategy in 2020, US firms with historical links to Ireland have shifted their intellectual property (IP) away from traditional tax havens to Ireland and the US to take advantage of tax incentives offered by both countries. This has coincided with a significant increase in Irish corporate tax revenue, particularly for less capital-intensive firms. Repatriation of foreign earnings to the United States has also increased, but fiscal benefits to the US have been offset by tax incentives passed under TCJA.


Key Points

  • We examine how US multinationals have adapted to changes in international corporate taxation in recent years. Our analysis centers on US multinationals with operations in Ireland, a country that has played a significant role in international corporate tax planning. We investigate the interplay between the phaseout of the “Double Irish” between 2015 and 2020 and modifications to international corporate taxation introduced by the TCJA.

  • Between 2021 and 2023, 31% of the gap between the US statutory tax rate and the effective tax rate for large, publicly traded US multinationals with Irish affiliates can be attributed to a tax incentive for US-domiciled IP, the Foreign Deemed Intangible Income (FDII) deduction, according to firms’ financial statement disclosures. The importance of FDII has been growing — this figure rises to 42% if we only consider data from 2023.

  • The tech sector has reported much larger FDII deductions than the pharmaceutical sector. In our sample, 38% of the statutory-effective tax gap is explained by FDII deductions in the tech sector, compared to only 12% for the pharmaceutical sector between 2021 and 2023. In contrast, 78% of the statutory-effective tax gap for pharmaceutical firms is explained by low effective tax rates on foreign income, compared to 44% for the tech sector during the same period. This may be driven by differences in tangible capital intensity across sectors in accordance with PWBM’s 2021 analysis of GILTI and FDII.

1. Historical Context: Growth in US Multinationals’ Use of Ireland

Prior to the Tax Cuts and Jobs Act (TCJA) of 2017, the US imposed a corporate income tax on foreign earnings of multinational firms at the same rate as domestic earnings.1 US multinationals had two options to avoid this tax: (i) they could claim a foreign tax credit for taxes paid to other countries or (ii) they could defer US taxation by holding earnings in a foreign affiliate instead of repatriating them to the United States.

Historically, Ireland served a major role in tax planning strategies of US multinational firms who aimed to defer US taxation of foreign income. Irish tax law has provided favorable tax treatment to corporations through a combination of attractive bilateral tax treaties and a relatively low corporate tax rate, which was lowered to 12.5% in 2003.2 As shown in Figure 1, a growing share of US multinationals have reported at least two Irish affiliates in their financial statements since 1996.3 Larger multinationals are more likely to report having Irish affiliates — by 2020, we find that over 60% of multinational assets and pretax income are generated by firms that have disclosed the existence of at least two Irish affiliates.

Figure 1: Share of US multinationals with Irish affiliates, 1994-2023

Source: PWBM based on annual Form 10-K filings from Compustat via WRDS.

After Ireland’s statutory tax rate was lowered to 12.5% in 2003, the aggregate foreign effective tax rate (ETR) of US multinationals with Irish affiliates diverged from the aggregate foreign ETR of other US multinationals. In contrast, the domestic tax rate of the two groups continued to closely track one another. Domestic income of the two groups has been taxed at a similar effective rate over the same period.

Figure 2: Effective tax rates of US multinationals with operations in Ireland, 1994-2023

Figure 2

Source: PWBM based on annual Form 10-K filings from Compustat via WRDS.
Note: We exclude years 2017 and 2018 from the domestic tax rate comparison to avoid distortions from the TCJA transition period.

In addition to its bilateral tax treaties and low corporate tax rate, Ireland historically allowed US multinationals to create hybrid entities that could be used to route foreign earnings to low-tax jurisdictions such as Bermuda. One type of tax planning strategy that became popular was the “Double Irish,” which used a combination of two Irish hybrid affiliates to shift profits while incurring minimal tax liability.4

In 2015, under pressure from the international community, Ireland instituted major policy reforms that restricted the creation of new Double Irish entities and started a five-year transition that eliminated tax benefits for existing Double Irish entities by 2020. At the same time, it passed a set of tax incentives to prevent capital flight that rewarded multinationals who transferred IP to the country. This transition period coincided with the passage of the Tax Cuts and Jobs Act (TCJA) of 2017, which effectively ended the worldwide system of corporate taxation, replacing it with immediate taxation of a portion of foreign income at a significantly lower rate.

The following timeline summarizes the key events and policies that shaped the role of Ireland in international corporate taxation between the mid-1990s and 2020.

Year(s) Event
1996-2003 Ireland lowers its corporate tax rate to 12.5%
1997 Treasury releases modified regulations that facilitate profit-shifting by US multinationals
1995-2015 Widespread adoption of Irish tax planning structures by US multinationals
2015 Ireland begins to phase out the Double Irish and creates new tax incentives for IP
2017 United States passes the Tax Cuts and Jobs Act (TCJA) lowering rates and ending deferral of US tax on foreign income
2020 Double Irish fully phased out
2. Phaseout of the Double Irish (2015-2020)
Transition from Conduit to Source

Although US multinationals with operations in Ireland have continued to benefit from lower foreign effective tax rates, there have been significant shifts in their behavior since the Double Irish started to phase out in 2015.

Irish balance of payments data shown in Figure 3 demonstrates a large increase in the current account surplus beginning in 2015 but no corresponding increase in Irish exports from customs data.5 Notably, no such discrepancy exists for imports. This discrepancy likely does not reflect economic shifts in Irish exports, but rather a change in where foreign earnings accrue. To retain foreign investment after the end of the Double Irish, Ireland passed a set of tax incentives meant to attract IP of multinational firms. Figure 4 suggests that this strategy was largely successful—after 2015, Irish balance of payments data revealed a surge in R&D services imports, likely caused by IP transfers to the country, which generated large increases in foreign earnings reflected in the current account.

Figure 3: Irish trade discrepancy, 2010-2024

Source: PWBM based on Ireland’s Central Statistics Office (CSO). Analysis builds on work originally conducted by Cole Frank.
Note: Balance of Payments (BoP) merchandise trade data are from CSO’s BPM6 series. Customs imports and exports data are from CSO’s TSM01 series.

Figure 4: Irish R&D services imports, 2012-2023

Figure 4

Source: PWBM based on Ireland’s Central Statistics Office (CSO). Analysis builds on work originally conducted by Cole Frank.
Note: Data from CSO’s BPQ19 series.

Windfall Irish Tax Revenue

Transfers of IP to Ireland have given way to remarkable growth in Irish corporate tax revenue. In 2023, Irish corporate tax receipts amounted to approximately 6% of US receipts, despite Ireland having a population of only 5 million people—less than 2% of the US population.6 This disparity is even more striking considering Ireland’s statutory corporate tax rate of 12.5%, which is significantly lower than the US rate of 21%. Moreover, the effective tax rate in Ireland is likely even lower than the statutory rate due to various tax incentives and exemptions.

Evidence suggests that shifts in Irish trade data and the windfall corporate tax revenue are primarily driven by US multinationals. Figure 5 shows that the growth in Irish corporate tax receipts has mainly come from foreign-owned corporate entities, with about half coming from the top 10 corporate taxpayers. Out of the top 10 Irish firms by revenue in 2023, only two were founded in Ireland—three were previously headquartered in the US and inverted their corporate residence to Ireland prior to TCJA. The remaining five are foreign affiliates of US-domiciled companies.7

Despite the impending rollout of Pillar Two, which Ireland has pledged to implement, Ireland forecasts that corporate tax receipts will continue to grow.

Figure 5: Irish corporate tax receipts, 2010-2023

Source: PWBM based on data from Ireland’s Department of Finance. This analysis builds on work by Sullivan.

Figure 6: Forecast of Irish corporate tax receipts, 2022-2026

Figure 6

Source: PWBM based on data from Ireland Department of Finance and Thomas Hubert via The Currency.

3. Intellectual Property Returns to the United States After TCJA

The phaseout of the Double Irish coincided with the implementation of TCJA in the United States, which introduced major reforms to US taxation of foreign income. While TCJA eliminated deferral of US taxation of foreign income, it also introduced lower rates on foreign income via: (i) the FDII deduction, which reduced rates on foreign-source income earned directly by US parents (ii) GILTI, a minimum tax on income earned foreign affiliates.8 GILTI and FDII served to roughly equalize tax rates on income generated by highly mobile intangible assets, reducing incentives for US firms to transfer IP to low-tax foreign jurisdictions.

TCJA had little noticeable impact on Irish trade statistics immediately after its enactment. After the full phaseout of the Double Irish in 2020, however, this data began to reflect major restructuring of US multinational activity. Royalty payments from Ireland to the United States, shown in Figure 7, grew from a negligible amount to over €114 billion in 2024, likely reflecting a significant degree of reshored IP.

Figure 7: Outbound royalty payments from Ireland, 2008-2023

Source: PWBM based on data from Eurostat. Analysis builds on work by Coffey (2021).
Note: “Offshore financial centers” is a grouping of 40 countries and includes all the major tax havens except Ireland, the Netherlands, and Switzerland.

To further examine this shift, we collected data from publicly traded firms’ effective tax rate reconciliation footnotes. This data provides information about the discrepancy between the statutory corporate income tax rate and the effective tax rate from firms’ financial statements. Figure 8 compares the US statutory rate and the aggregate effective tax rate for 30 large US multinational firms that have been linked to Ireland in press reports.9 Prior to TCJA, the aggregate effective tax rate of these firms ranged between 10 and 17 percentage points below the statutory rate depending on the year. TCJA lowered the statutory rate, which also reduced the aggregate effective rate for these firms, although the gap narrowed considerably.

Figure 9 examines how the aggregate gap, in dollar terms, has evolved over the same period. The ETR reconciliation data allows us to decompose this gap into different components. This analysis shows that prior to TCJA, the gap between the statutory and effective tax rate for these firms was primarily driven by low tax rates on foreign income. Although the foreign tax differential has continued to form a significant portion of the gap since TCJA, FDII has grown to form a roughly equal share of the discrepancy between statutory and effective rates. Between 2021 and 2023, for example, FDII deductions accounted for 31% of the gap. This figure rises to 42% if we only consider data from 2023.

A key question is whether the increased repatriation of earnings to the United States has generated more domestic tax revenue. Figure 10 shows that domestic income shares have grown for all types of US multinationals, with larger relative growth for US multinationals with Irish affiliates. At the same time, domestic tax shares have fallen especially for US multinationals with Irish affiliates, indicating that the growth in repatriated earnings has not led to a commensurate increase in domestic tax revenue.

Figure 8: Statutory vs. effective tax rate, 2009-2023

Source: PWBM based on data from 10-K filings accessed via SEC’s EDGAR database.
Note: We exclude years 2017 and 2018 to avoid distortions from the TCJA transition period.

Figure 9: Components of the ETR differential, 2009-2023

Figure 9

Source: PWBM based on data from 10-K filings accessed via SEC’s EDGAR database.
Note: We exclude years 2017 and 2018 to avoid distortions from the TCJA transition period.

Figure 10: Domestic Shares of Income and Tax, 2012-2023

Figure 10

Source: PWBM based on annual Form 10-K filings from Compustat via WRDS.
Note: We exclude years 2017 and 2018 to avoid distortions from the TCJA transition period.

Sectoral Divergence

A closer look at firm-level data shows that there is significant heterogeneity in the response to the changes in international tax policy in Ireland and the United States. The dominant US multinationals operating in Ireland predominantly come from the tech and pharmaceutical industries. Pharmaceutical firms with Irish affiliates have historically reported a larger share of their total earnings abroad when compared to tech firms as shown in Figure 11, even though the allocation of domestic and foreign sales is similar for both industries. This discrepancy has only become more pronounced since TCJA, with pharmaceutical firms reporting around 90% of their total earnings abroad in recent years. Tech firms, on the other hand, have seen their share of foreign earnings decrease to the point where they now report similar income and sales shares abroad.

This discrepancy has been mirrored by sectoral differences in the effective tax rate differential reported on firms’ financial statements. As shown in Figure 12, tech firms have claimed much larger FDII deductions, as a share of their statutory tax burden, when compared to pharmaceutical firms. Within industries, however, there is significant variation in the types of deductions claimed. Some tech firms, such as Apple and Microsoft, have not reported significant FDII deductions, indicating that they likely benefit more from keeping their IP abroad. In terms of the statutory-effective tax gap, tech firms report FDII deductions that account for 38% of the gap between 2021 and 2023, compared to only 12% for pharmaceutical firms. In contrast, pharmaceutical firms report a much larger share of their statutory-effective tax gap as a result of low effective tax rates on foreign income, at 78%, compared to 44% for tech firms.

Although financial statement data reveal sectoral differences in the FDII deduction, there is a relative lack of reporting of GILTI in this data. Although the effect of GILTI may be implicit in the foreign tax differential, Figure 13 uses tax data to compare deductions in the Manufacturing and Information sectors. Although this analysis focuses on aggregate foreign activity (instead of multinationals with Irish activity), it shows that the tech sector is also much more reliant on FDII relative to GILTI, with FDII income representing about half of total FDII and GILTI inclusions in 2021. One potential explanation for this divergence is that manufacturing firms, which includes pharmaceutical manufacturers, have foreign operations that are relatively more capital intensive and therefore more likely to benefit from GILTI’s tangible asset exemption.

Figure 11: Foreign sales and income shares by sector, 2013-2022

Figure 11

Source: PWBM based on annual Form 10-K filings from Compustat via WRDS.
Note: Shares are computed as a fraction of combined domestic and foreign aggregates.

Figure 12: FDII share of statutory tax burden for selected US multinationals, 2021-2023

Figure 12
Figure 12

Source: PWBM based on data from 10-K filings accessed via SEC’s EDGAR database.

Figure 13: FDII share of intangible foreign income in the manufacturing and information sectors, 2021

Figure 13

Source: PWBM based on data from IRS Statistics of Income data for the 2021 tax year.



This analysis was produced by Lysle Boller, Lorraine Luo, and Xiaoyue Sun under the direction of Alex Arnon and the faculty director, Kent Smetters. Mariko Paulson prepared the brief for the website.

  1. This tax system is typically referred to as a “worldwide” system, as opposed to a “territorial” system, which only taxes income earned within the country’s borders.  ↩

  2. US multinationals’ use of Ireland in tax planning predates the 2003 policy reform. Apple famously started using a Double Irish structure in the late 1980s.  ↩

  3. Throughout this brief we refer to “US multinationals with Irish affiliates” as shorthand for this proxy that we have constructed to flag potential users of the Double Irish. This sample comprises all publicly-traded, US-incorporated multinational firms in the Compustat annual 10-K database between 1994 and 2023 that have disclosed foreign affiliates in locations consistent with public information about Double Irish structures.

    To construct this proxy, we first construct an identifier for multinational firms. A firm is classified as a multinational corporation (MNC) if, in any firm-year, it satisfies at least one of the following criteria: (1) it reports non-missing and non-zero pretax foreign income (Compustat field pifo), (2) it reports non-missing and non-zero foreign sales according to Compustat segments data (Compustat field geotp is equal to 3), or (3) it reports non-missing and non-zero foreign tax expense (Compustat field pifo).

    After establishing the MNC sample, potential Double Irish users are identified by examining the geographic locations of subsidiaries reported in Exhibit 21 of Form 10-K filings. This data is compiled by Wharton Research Data Services (WRDS) and covers SEC filings from 1995 to 2019. Firms are classified as potential Double Irish users if they have at least two Irish subsidiaries for any year of the sample period.

    This sample also excludes firms classified as belonging to the oil and gas extraction industry, which are known to distort the aggregate distribution of taxes due to a lack of clarity over what constitutes foreign income taxes for concessions.  ↩

  4. A variant of the Double Irish that used an intermediate Dutch affiliate to avoid withholding taxes became known as the “Dutch Sandwich.”  ↩

  5. This trade discrepancy as well as other shifts in Irish balance of payments data has been highlighted by Cole Frank.  ↩

  6. The US collected about $420 billion in corporate income tax revenue in 2023 and about €23.8 billion.  ↩

  7. US firms listed in the top 10 include Apple, Google, Meta, Pfizer, and Dell.  ↩

  8. FDII stands for Foreign-Derived Intangible Income and GILTI stands for Global Intangible Low-Taxed Income. For a summary of these provisions, see PWBM’s 2021 analysis.  ↩

  9. The company sample includes firms identified by PWBM through a search for popular press mentions, including sources such as The New York Times, The Irish Times, The Wall Street Journal, Bloomberg, The Currency, and Barron’s, as users of the “Double Irish” structure. Additional firms are referenced in Brad Setser’s 2023 testimony to the U.S. Senate Finance Committee on international tax policy and Harris and O’Brien (2018).  ↩