There is, rightly, intense scrutiny on the tax tactics used by uber-profitable multinationals to reduce their taxes, and on the facilitatory role that Ireland plays within that system. Under this new Trump administration, our seduction of multinationals through sympathetic tax policies has become a highly political issue. 

But away from the public glare of multinational tax policy, there is also another game – one that involves high net worth Irish taxpayers seeking to reduce their bills through various complex schemes, strategies and structures.

Many of these schemes operate on the margins, taking advantage of weaknesses or loopholes in legislation. For officials in the Department of Finance and the Revenue Commissioners, it is almost a game of “cat and mouse”, or “loophole whack-a-mole”, where, when one nifty scheme is shut down, another ingenious effort pops up.

The sums of money involved are far less than what is involved in multinational tax structuring. 

But the symbolism of pursuing errant schemes is arguably greater.

And, as in the case of the Liberty Syndicate, it is much more complex and much more contested. 

In 2020, I first reported on the syndicate, although back then, information was scarce, documents were heavily redacted, and I did not even know it was officially dubbed the Liberty Syndicate. 

I reported at the time that 32 individuals claimed to be a collective trading in futures, commodities and securities through offshore structures housed in the British Virgin Islands in 2009 and 2010. 

However, the reality was something altogether different. 

As it turned out, the worse the fund performed, the better the syndicate did, as they could transform a small upfront investment into a huge artificial loss that could then be used to wipe hundreds of thousands of euro off their tax bill.

Filings with the authorities would later show that one participant in the scheme, an accountant, made a net trading loss of €10,121 from his involvement. However, due to the success of the scheme, this appeared as a tax-adjusted loss of €207,301 in his tax return.

It would later transpire, as the battle over the scheme moved from the Tax Appeals Commission to the High Court to the Court of Appeal, that some 231 individuals invested in 27 separate Liberty Syndicates. 

Based on initial settlements and factoring in interest and penalties, the total quantum at stake across the 27 syndicates is likely to be in the region of €55 million to €60 million.

It is, without question, one of the largest and most sophisticated tax schemes in a generation. 

The syndicate registered on my radar in recent days, when the Tax Appeals Commission published a host of further decisions in relation to the remaining cases. 

The decisions, which found in favour of the Revenue Commissioners, were a formality. The issues have been thrashed out in higher courts for some time, with the Court of Appeal eventually settling the issue in Revenue’s favour. But it was symbolic nonetheless, as it was the final element of this long-running battle.

Because I have covered it for some time, the details have almost become blasé to me. But when you step back, assess the detail, and the sheer audacity of what was being done, the Liberty Syndicates remain a remarkable story. 

The scheme centred on complex transactions to acquire dividends from a company located in the British Virgin Islands, financed by an offshore lender in order to generate a tax advantage in the form of losses. It was, according to one financial trader who formed part of the collective who gave evidence before the Tax Appeals Commission, “not for the faint-hearted”.

According to documents later filed before the Court of Appeal, one investor, Brendan Thornton, had entered into a syndicate formed for the purposes of trading in financial instruments on a pooled basis and that “the trading strategy of the syndicate is to take advantage of short-term opportunities to make trading profits by acquiring various financial instruments or income sources with a view to realising them to make a profit in a short space of time”.

Documents provided to potential syndicate members stated that people who wished to participate in the syndicate must be resident or ordinarily resident in Ireland for tax purposes, that the opportunity would be best suited to higher-rate taxpayers, and that the initial capital contribution would not be returned.

The syndicates bought and sold various investments, of which the largest was the purchase from a British Virgin Islands company of the right to receive a dividend from a second British Virgin Islands company.

Some 90 per cent of the funds contributed by members of the syndicate were used by a company called Candle Maze to acquire the right to receive dividends from Astratide Limited. The purchase was also funded by a limited-recourse loan from a company called Burgos Investments, also located in the British Virgin Islands.

When you strip it all back, the worse the investments did, the better it was for the investors. 

In the case of Thornton, who was one of two test cases brought to the High Court and the Court of Appeal, his €25,000 investment allowed him to reduce his tax bill by €267,051.

Revenue investigated the scheme and determined it was designed purely to generate tax losses.

The tax authority also determined that there was no real trade. 

An internal Revenue briefing later obtained by The Currency stated: “The purchase of the British Virgin Islands dividend(s) were complex transactions to acquire dividends from a particular British Virgin Island company, financed by a loan from a British Virgin Island lender [Lender limited] carried out in order to generate a tax advantage for the participants of the Collective, in the form of tax losses. All of the objective facts point towards the transaction having been put in place for tax purposes to secure a tax advantage through generating a loss.”

The dispute has been ongoing for some time. In December 2019, the Tax Appeals Commission issued determinations in respect of 32 appeals concerning the Liberty Syndicates.

Originally, all 32 determinations were the subject of requests to state a case to the High Court on a point of law. The remaining Liberty appeals were stayed pending the outcome of the case stated procedure. Some of the 32 appellants dropped out before the case stated was heard by the High Court. Ultimately, it was agreed that the High Court would hear two appeals as lead cases, including that of Thornton. 

The High Court issued its judgment on July 1, 2022. Both sides appealed it to the Court of Appeal – Revenue won the substantial point, but appealed a crucial element over which company owned the dividends. 

The Court of Appeal ruled fully in favour of the authority. 

And that is why the Tax Appeals Commission has issued the raft of judgments in relation to the remaining cases. 

Finally, the matter is settled. But it is still 15 years after the investments were made, and saw massive sums being deployed in the lengthy legal battle. 

Yes, we need to focus on the tactics employed by multinationals. But we need to look at the schemes being marketed to high net worth investors also. 

Elsewhere this week…

We were delighted to launch our new podcast series, Arts Matters. Presented by Alison Cowzer and supported by HLB Ireland, it delves into the intersection between business and the arts. There are seven episodes in the series, and the first episode is an interview with the singer, songwriter and chair of IMRO, Eleanor McEvoy. 

With a career spanning nearly four decades and 15 albums, McEvoy remains one of Ireland’s most passionate musical voices. But she is also a fierce advocate for creators’ rights and a seasoned entrepreneur.

Last week, we were the first to report on the comments by the businessman Denis O’Brien about working from home. The story has sparked a major public debate. You can read our exclusive here.

There are several live WRC cases taken by former Digisure (Ireland) Ltd staff who claim they were not paid wages for six months last year. The fintech’s founder told the commission that it intends to make everyone whole in the coming weeks as held-up funds are released to the company. Niall had the story.

The electronics firm Zagg spent a year chasing employee Dermot Keogh through the courts, claiming he violated his contract and misused company data. A judge found in the Irishman’s favour. Jonathan unpicked the detail.