jump to navigation

Unleash the Creighton! All will bow before our ‘internationally recognised fair and just corporate tax regime’ (fingers crossed!). May 31, 2013

Posted by WorldbyStorm in Economy, European Politics, Irish Politics, US Politics.
trackback

Those of us who might have felt a degree of scepticism when presented with the contention by Joanne Richardson, CE of the American Chamber of Commerce Ireland (by the way, is that actually American, or US? It makes a difference) that ‘Ireland is not – and has never been – a tax haven’, and whose scepticism was generated by the sense that this was a semantic distinction resting on a definition that included imposition of a single tax rate but variability in terms of what is actually taxed, will hardly have been dissuaded from that stance by the news today that another US based corporation, Boston Scientific paid an effective tax rate of 4% in 2011.

As the IT puts it:

Boston Scientific’s accounts for its main Irish subsidiary note that if corporation tax of 12.5 per cent was levied, it would pay $177 million in Irish tax. However, the actual tax the group was legally obliged to pay was lower for a number of reasons, including “different tax rates on overseas earnings”, according to the accounts.

And it’s not the only one. Not by a long shot. Novell, Symantec and Microsoft, amongst others were able to avail of such arrangements.

In many cases the multinationals also have substantial operations here under the control of fellow Irish subsidiaries, the profits of which are subject to Irish tax, with the links between the two forming part of an increasingly popular global tax structure called the “double Irish”. The net effect of the structure is that multinationals can route tax-free profits through Ireland to offshore havens paying only a small amount of tax here.

Richardson’s thesis while technically correct managed to miss that point entirely:

Ireland’s 12.5 per cent tax rate, while low, is not subject to any arbitrary adjustments and it applies equally to all corporations with a taxable presence in the jurisdiction. Not many countries can say the same.

And it was particularly entertaining to see her attempt to roll that very specific definition of a ‘tax haven’ into view:

They are: having no taxes or only nominal taxes; a lack of transparency; an unwillingness to exchange information with tax administrations of OECD member countries; and the absence of a substantial activity requirement. None of these criteria applies to Ireland.
Furthermore, in December 2012, Ireland became one of the first countries in the world to sign an agreement with the United States to improve international tax compliance and implement Fatca (Foreign Account Tax Compliance Act). This type of agreement is now being hailed as the emerging international standard for the automatic exchange of tax information.

…while, oddly enough, not engaging with the ‘double Irish’ or the possibility of variability in application in the slightest. That’s quite some omission given the nature of the current debate.

So unsurprising then that one should read in the news today (again from the IT) that:

Minister of State for European Affairs Lucinda Creighton travelled to Washington yesterday to rebut the assertion that Ireland was a tax haven for US multinationals.
The Minister said that Ireland had a statutory corporate tax rate that was “not negotiable” and that the Irish authorities “don’t cut special deals for any company”.

There’s a certain sense of a scrabbling for purchase on the decks as this particular ship tips over in the water. It’s not that I think that matters will change radically in one way or another, but the current mood music in relation to matters tax internationally is one that does not favour this jurisdiction’s approach across the last two or three decades.

In a way this is a perfect inversion of the Irish exceptionalism argument, that somehow Ireland by dint of its small open economy is unable to implement measures that otherwise are normative in economic matters (though notably it’s only the more – shall we say – progressive measures where problems arise).

There ain’t no such thing as exceptionalism in a global economy, particularly when one has friends like Apple who are willing to spill the beans – from their position of pure self-interest – something that should have been factored in from the start, and which only the most naive would ignore. If the broader climate shifts against these sort of tax regimes (to put it at its kindest) well then, so be it, all bets are off and everyone is trying to claw back what they can.

It is this that makes Richardson’s robust apologia so hard to comprehend. Is it really tenable to argue, as she does, that:

…we should not shy away from robustly protecting our competitive tax regime. We can stand firm in the knowledge that our tax regime is internationally recognised as fair and just.

When Ms. Creighton goes to Washington then it might just, could just, possibly be that the reality is anything but that ‘our tax regime [being] internationally recognised as fair and just’.

I raised the point in the last week or two that much of the damage comes not just from our neighbours in Europe (though they will be seething), or the US (and likewise) but from those companies which were not the beneficiaries of such largesse. And that very point is echoed in the assessment here from earlier in the week in the IT.

In politics this sort of thing is sometimes referred to as constructive ambiguity. No one is shown to be lying; everybody is confused and hopefully loses interest. The US and Irish public will probably lose interest. The same can’t be said for the OECD, France, Germany and those chief executives paying 12.5 per cent.

Too clever by half. Now in truth we’ve known about the ‘double Irish’ for quite a while, particularly on the left, but it does make one wonder what other dirty secrets of RoI financial (mis)management are there waiting to emerge as the crisis continues to shine an unflattering light on places that up until now were almost completely hidden from public view? And that’s before we get anywhere close to the other issue as to the supposedly sacrosanct nature – in Irish political debate – of a 12.5 % corporate taxation rate that is anything but…

[Donagh’s piece here on ILR addresses another very serious aspect about the supposedly ‘high-value’ jobs that MNCs are meant to bring…]

Comments»

1. EWI - May 31, 2013

Googling for that individual’s name brings up stuff to do with events and activities of the US Chamber of Commerce (and answering another question from above on the right name, incidentally). So the ‘we’ is actually the offshore tax haven operations of US multinationals.

Like

2. CMK - May 31, 2013

There’s a movie script in Lucinda’s trip to Washington. Get Armando Ianucci on board and you’d probably have the best Irish comedy ever.

The other amusing aspect has been watching the Irish elite contort itself as it vigorously insists that black is, in fact, to those who actually know about these things and who have studied them in the requisite depth, white.

I had to chuckle earlier this month when the American Chamber of Commerce in Ireland released a statement to say that industrial action in the wake of the rejection of Croke Park 2 would damage Ireland’s image abroad.

The same outfit then, within the space of a few weeks, are trying to pooh-pooh the notion that a committee of the PARLIAMENT of the United States of America are somehow misguided in its assessment that Ireland is a tax haven; one which is depriving the US of revenue. THAT, of course, won’t damage Ireland’s reputation.

It was also interesting to hear Enda Kenny try to infer that Carl Levin, Chair of the US Senate committee, hadn’t really understood the complexities of Ireland’s tax arrangements with Apple et al (as if Enda understood them).

Finally, there is one interpretation of this that is worth bearing in mind: an revenue clawed back by the US if the ‘double Irish’ is closed down etc, will probably go to funding drone strikes in Pakistan, Yemen and Afghanistan and/or some bomber that can fly round the world on a single tank of fuel and drop a nuclear bomb anywhere. Any funds accruing to the US authorities if the ‘double Irish’ ends are vanishingly unlikely to end up improving, to take one example, the lot of primary school kids in Chicago.

Not a reason not to scrap the ‘double Irish’ but a thought, nonetheless.

Like

WorldbyStorm - May 31, 2013

Great point re the contradictions between the line on these different issues.

Like

irishelectionliterature - May 31, 2013

I’d love to know what Google, Apple etc are getting in ‘R & D’ grants too. Of course the grants are open to all companies but theres a mini industry in ‘consulting’ when it comes to filling out the forms etc for ‘R & D’ grants.
Its just another figure to add to the ‘cost’ of these jobs here.

Like

CMK - May 31, 2013

The whole ‘tax haven’ debate has been surreal. The orthodoxy have had to attempt to deny the undeniable and they went ahead and still did it. ‘Evidence based policy making’ is, I believe, a big thing in political science. The evidence that Ireland is a tax haven is, as we know, overwhelming, but the wonks still insist that simultaneously bullying ordinary citizens for a couple of hundred in property tax can sit easily with a polity that lets multinationals escape their tax liability. But today I have had a masterclass in duplicity that made me realise that become a paid up member of the Irish elite you have to seriously believe some fucked up shit.

Like

doctorfive - June 1, 2013

They’re scalded. Trying to balance the interest of those who run the country with the reputation of the country.

We know who won in 2008 though.

Osborne & Cameron doing some of the early running would make you wonder if our old friends in banking are dragging the Multis (who in fairness are just trying to be good capitalists producing and sell something other then bullshit, just) down with them. Finance are of course hand in glove with whole operation but if there is to be even a whiff of FTT (and all the handwringing over regulation the other week) the banks are all for a bit of burden sharing as we know. Whatever can be recouped from Starbucks, Apple & Co will take some pressure off the City.

Citizens and services have been sucked dry. There wont be money to fund fuck all the way we are going and Governments need money from somewhere if the order of things is to remain. Swabian housewife could turn to tax before borrowing.

The other side is vampires were never going to let a compliant feast like Ireland out it’s clutches so easily. If we were to start striping away the massaging effect MNCs have on our exports, GDP etc the patient isn’t anywhere near as healthy as we like to present. That slow din of further recapitalisation in the background means we could be in Transylvania (Il stop now) for a while yet. Another kicking on the International stage would ensure any of the sympathy and good will is gone ahead of the next phonecall from Frankfurt. Caught harbouring the neighbourhood thieves will do the job.

Like

3. hjfoley - June 1, 2013

Reblogged this on misebogland.

Like

4. richotto - June 1, 2013

Is there a political party in the country openly and clearly advocating a tax rate in excess of 12.5%? Sf and the Greens buckled under media pressure before and just after the 2007 election. Sp and PbP representatives are noticibly quiet on their policy. The last contribution from Ciaran Allen for example on Vincent Browne only advocated that that the effective corporate tax rate should be held at 12.5%. Economists such as Jim Power are by contrast prepared to openly name a proposed higher rate of 15%.

Like

Jim Monaghan - June 1, 2013

The effective rate is actually lower. And this applies to the headline rate across the world.We have tax competition.

Like

richotto - June 1, 2013

Yes and that was understood by Ciaran Allen at the time. He was suggesting that if the effective rate was raised to 12.5% that would be sufficient. When pressed by Vincent Browne if he wanted to go futher than that extremely modest aspiration he refused to say so. I find that typical of the way the former ULA spokespeople are handling the issue like a hot potato and definitely not committing to anything over the 12.5%.

Like

Ciaran - June 1, 2013

Whether the rate is 12.5%, 15% or 50% is irrelevant. The problem is this country’s facilitation of sharp practice at best, the movement of the proceeds of international financial crime at worst. Our lack of enforcement is what attracts a lot of ‘investors’ to Ireland (not to mention the ‘accessibility’ and pliancy of our lawmakers). The lack of resources afforded to the Office of the Director of Corporate Enforcement – and this dates from before the financial crash when the public sector supposedly was being ‘bloated’ – is testimony to the lax regime that exists in this country.

Like

ejh - June 2, 2013

Yes and that was understood by Ciaran Allen at the time.

Is this Kieran?

Like

Ciaran - June 2, 2013

I think richotto is indeed referring to Kieran Allen.

For the record, I am not he!

Like

5. richotto - June 1, 2013

“Whether the rate is 12.5%, 15% or 50% is irrelevant. The problem is this country’s facilitation of sharp practice at best, the movement of the proceeds of international financial crime at worst.”
Sorry. Can’t agree with that. Mostly firms do pay the headline rate and the lowness of it constitutes a tax haven all by itself regardless of any further side deal deductions. Its succeeded so well in robbing investment from other EU states that most countries are now competing to reduce their corporate tax rate towards Irelands rate. The Uk’s I think is now down to 18% while it was over 30% ten years ago and even Germany has been forced to bend the knee on its corporate tax rate recently. The low rate on its own never mind the side deals is a massive issue of lost revenue to
European govts in which Ireland is THE major villan of the piece. I can’t understand why are the radical left parties are so extremely circumspect about this robbery of the tax base and by that I mean the tax haven headline rate?

something that would lend massive integrity to their case

Like

Ciaran - June 1, 2013

The robbery of the tax base is taking place via our indulgent attitude towards international tax ‘avoidance’.

Like

WorldbyStorm - June 2, 2013

+1 Ciaran

I’d just add that richotto while I agree entirely that the corporate tax rate should be significantly higher, a no-brainer I think from a left position from social democracy on out, it seems odd that you’d be attacking the ‘radical left’ on this matter when those who are actually in a position to do something – say as basic as about raising the actual level taken to its supposed rate of 12.5% – ie the LP aren’t actually doing anything of the sort.

I’m probably as critical as you of the ‘radical left’, and indeed all the Irish left in total, but let’s be clear where actual power as distinct from rhetoric lies and who can and cannot materially effect the situation.

Like


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: