Minister for Communications, Marine and Natural Resources Noel Dempsey yesterday denied that Irish companies were doing anything wrong by channelling some of their revenues through operations in the Netherlands.

His comments came after the Mail on Sundayreported that three State companies, the ESB, An Post and Aer Rianta, had avoided paying corporate tax in Ireland by moving more than €90 million through the accounts of Dutch holding companies.

Opposition politicians called for an investigation into the practice, which they say is costing the exchequer millions, but Mr Dempsey said that as far as he could tell the companies weren't doing anything illegal.

"This is a mechanism that is used by companies that operate abroad to avoid heavy tax payments," he said, adding that it is a legitimate way of doing business.

The Mail on Sundayreported that the ESB, An Post and Aer Rianta all have so-called mailbox companies in The Netherlands, which don't employ any people and are located there purely to reduce corporate tax liabilities. All three companies yesterday acknowledged the operations, but said there is nothing untoward about their existence.

"It is a mechanism used by companies that operate abroad and have a policy of reinvesting their profits," said a spokesman for the ESB. "In order to maximise your investment you use the mechanism." He said the revenue was fully aware of the practice, which is mentioned in its annual report.

Taxation has become a hot topic of late after it was revealed that several companies, including internet search engine Google, were channelling revenues made outside of Ireland through the country to benefit from the low corporate tax rate. Last year U2 moved part of its business to the Netherlands to pay less tax.