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Apple Tax issue: “national sovereignty and revenue control” – eh? September 6, 2016

Posted by WorldbyStorm in Uncategorized.
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Reading the SBP was an entertaining experience this weekend.A range of views on offer, but most pitched towards the Government line, albeit with a further twist of euroscepticism on offer. So we get Tom McGurk who conducts an entirely imaginary conversation with Commissioner Vestager where she delights in ‘putting manners on you’. For him this is an issue of ‘national sovereignty and revenue control’. And for those who might take a different approach….

While some have tried to argue about the technicalities of the Commission’s case against Apple and Ireland, we shouldn’t’ be confused’.

Oh no. For…

Brussel’s intent is unmistakeable. It is determined to maintain a high-tax, high-spending social democratic model and in the process crush minnows like Ireland who date to make themselves more attractive to potential job-creators.

And this morphs into a paean of praise for the British…

It’s very early days yet, but who doesn’t envy those who have now taken back control of their own country and their own lives? Isn’t it interesting too that the fear factor, so predominantly involve during the Brexit referendum, has so far proved to be not much more than an illusion.

Well, given Brexit hasn’t actually started to happen it is indeed very early days yet. But it takes some brass neck to ignore the very likely potential ramifications of the Brexit. And ‘control’? If the rather mild sharing of sovereignty that membership of the EU entails upsets McGurk he must presumably find that of the GFA equally galling. And yet, and yet… Actually perhaps he might put aside time to reflect on that letter from Japan to the UK government at the weekend. Seems they’re unimpressed by an UK Outside the EU when they were previously sold by said UK the benefits of access to the single market. The Guardian suggested this may be but the first of many such letters from various states across the globe. Feel the control. Slipping away. 

Meanwhile I can’t help but notice this:

Whatever about the veracity or otherwise what Vestager had to say last week, her tone, her attitude and the overwhelming sense of authoritarian threat meaning from her was disturbing.

Ultimately he hopes for an Irexit (seeming to believe that the UK simply by lowering its corporate tax rate will become more attractive than this island, seemingly unaware that it is our membership of the EU that is part of the appeal for foreign ‘investors’). – and let’s be clear he’s not envisaging one based on social democracy, or anything very leftist. Best of luck with that Tom.

What’s odd though is how little that ‘veracity or otherwise’ concerns him. In the course of his column he pays literally no attention whatsoever to what the state of our tax affairs in this state actually is. He just takes it as read that it is entirely correct for Apple (and other multinationals) to conduct their affairs and this state with them in the way they do.

But then I guess if one believes that the EU is a social democratic holdout, rather than a somewhat more complex beast perhaps I shouldn’t be so surprised.

Oddly it is Noel Whelan, of all people, who provides a salutary argument against this line:

They [Government politicians, industry representatives and Revenue spokespeople now responsible for persuading the Irish people on this issue are closeted in groupthink] are also seeking to crudely stoke up the suggestion that the European Union is infringing on Irish sovereignty. They fail to appreciate that most Irish people have a problem with the notion that Ireland used its sovereign tax-collecting powers to make or tolerate an arrangement which enabled one of the wealthiest companies in the world to evade paying tax on so much of its earnings.

Eamonn Delaney is, if anything more heated than McGurk (and thinking about it Michael McDowell in the same edition is there or thereabouts ‘We have to fight once more for our independence’). For him ‘we can’t surrender to Brussel’s’ and on he goes. His economic approach can be summed up neatly, by himself, as follows:

Let’s face it. We all know there was a reason we welcomed Apple being in Ireland and why we have a low corporate tax rate. It is the lifeblood of our economy, and if that tax rate needed to be lowered even further, I’m sure we’d probably do it. After all a former finance minister(and visionary) Gerard Sweetman, cone proposed a zero per cent tax – zero per cnet! – for the Shannon development zone, so as to boost badly needed investment and job creation in the late 1950s and 1960s.

And he continues, apparently oblivious too to how things have changed:

This is how Sweetman and mandarin TK Whitaker kicked off our long-overdue industrialisation and economic regeneration. Without FDI we are doomed, and if the EU stops us using tax breaks to bring in multinationals, we may as well follow the Brexiters and leave the meddling Brussels superstructure immediately.

Hmmm… that seems a very simplified run-through of that history. And also, even giving him the benefit of the doubt, it doesn’t seem to occur to him that once said industrialisation is achieved, and regeneration, matters aren’t meant to proceed as if they hadn’t. Though even he must admit:

Not that we don’t have an over-reliance on FDI, but that is another story.

You don’t say. But notice how for him this is about jobs, not tax. Jobs, literally, at any cost, including tax. He actually seems to overstate the number of jobs too…

‘In reality we should let Apple keep their tax and stay in Ireland and continue providing tens of thousands of jobs, along with other MNC’s. Again being charitable perhaps he means Apple and other MNCs, but Apple didn’t employ tens of thousands in 2014, indeed 4,000 at most in Cork directly and ‘2,500’ more indirectly. That’s nothing to sniff at. But let’s not overstate matters either.

Anyhow, he’s not fussed by €13bn. No not at all. With remarkable, some would say rather tasteless loftiness, he dismisses this sum entirely;

Why do they think the solution to our shortfall sis spending more money? It is quite the reverse. For example, the more money that goes into our health service, it seems, the more the problems are compounded by further bloating management and bureaucracy and by reinforcing the vested interests and work practices of unions and consultants. It is efficiencies we need. We had billions sloshing around during the high-spending Tiger years and look where it go us. We are still paying for our largesse with uncompetitive costs and a welfare culture that has the highest number of households in the EU without an earner. That’s what easy money does – and a populist political culture to spend it.

If that seems a risible run-through of the economic collapse and crises… well, yeah, it is.

Anyhow, thankfully there are more measured voices on hand in the SBP. Voices like Sean Whelan who notes that…er ‘patriotism is the last refuge of the scoundrel’. I’ve often wondered at that line. Surely it often is the first refuge… and that’s not to diss the genuinely patriotic. He continues:

When it comes to the matter of corporation tax, beware the patriots – especially the patriots in expensive suits.

The Apple judgement is one of two hammer blows that have hit this country… the other was Brexit. In their response to the former, some have begun linking to the latter – the Commission is attacking Ireland’s corporation tax regime, so it’s time for us to have a referendum to leave like the British.

Indeed.

That is what some are presenting as the patriotic response. It is also deeply illogical. US multinationals are in riealnd for two main reasons – low taxes and unfettered access to the single market. Leaving that market to protect the tax regime will not keep the multinationals here and encourage more to come. They need to sell products and services into a richer market of 500 million people; they want to pay as little tax as possible. But they have to pay something somewhere.

And he makes a crucial point which others ignore, about the actual power relationships involved here.

Post-Brexit Britain might just about have the economic heft to lever a half-decent market access deal out of the EU: post-Irexit Ireland will not. Does anyone think low-tax FDI-hungry Britain will out so the Paddies get a good deal too?

All so that US multinationals can continue with tax practices that most citizens regard as unacceptable.

And he makes the point that if ‘the Commission suffers enough political and repetitional damage, the Eu as a whole could suffer economic damage as member states slug it out between themselves in a melee of protectionism and tax-cutting with no economic referee on the field. Is this in the Irish national interest?’. How others, like McGurk or Delaney face that prospect with any equanimity escapes me. Do they think that an Irish exit, even putting aside the fact our nearest neighbour would be trying to undercut us simply ‘cos it is in its best interest, wouldn’t have such knock on effects.

And he makes a further interesting point that in some ways the Commission has ‘won’ in so far as one of the largest MNCs has been named and to an extent shamed, and that this tightens the screws in regards to future regulation of this area. Of course, for us on the left that won’t be enough and nor should it be, but as an educative moment in regards to pointing up the manner in which our interests as working people diverge from the supposed ‘mainstream’ it has its uses.

And just on that, Stephen Kinsella, also in the SBP suggests that following on the distorted growth figures recently published, the fact that Apple’s impact on those and what ‘one company in one fiscal quarter can do to this state gives you a sense of the size of Apple and the scale of the kinds of tax avoidance Apple has been involved in. The authorities have just not been quick enough to close off these loopholes.’ But he also asks in light of the number of MNCs here, pharma and tech in particular, ‘how many other ‘Apples’ are out there?’. What an interesting question.

Comments»

1. baalthor - September 6, 2016

Also see D McWilliams effort in the Indo

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2. Gewerkschaftler - September 6, 2016

Extraordinary how people pay to buy newspapers that spout this kind of propaganda against the interests of 99% of their readership.

How many other Apples are there? 100s of Billions of Euros in back-taxes are owed to the public purses throughout the EU through the craven facilitation of the Irish State of corporate tax evasion / avoidance.

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3. Ian Paisley - September 6, 2016

So this is the famous “Irish Miracle”? Another drunkard scam turning Ireland into tax haven to screw America?

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WorldbyStorm - September 6, 2016

And the North only trotting after us keen to do same.

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4. CL - September 6, 2016

To maintain Irish sovereignty the Irish economy must be completely subjugated to the dictates of international capital.

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5. Paddy Healy - September 9, 2016

Paddy Healy 086-4183732
Is the OECD an independent expert international body which can be relied upon to deal fairly with the national interest of the Irish People in taxation and other economic matters? NO! Restoration of Sovereignty Required to deal with huge impending economic crisis in Ireland.

Full Discussion http://wp.me/pKzXa-ua

Fine Gael, “Endapendents”, Fianna Fáil, Labour are all supportive of the OECD Corporate Taxation Initiative: Base Erosion and Profit Shifting (BEPS). Even Sinn Féin included the following in its Dáil amendment rejecting the Government decision to appeal the Eu ruling on illegal state aid to Apple: (Sinn Féin) “strongly supports the ongoing work of the Organisation for Economic Co-operation and Development (OECD) and others to tackle aggressive tax planning and harmful tax practices and in combatting the negative impact of tax avoidance on the global economy and the developing world in particular;”

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CL - September 10, 2016

As Enda Kenny and Michael Noonan have stressed Irish sovereignty was restored when the Troika left.

The government is now engaged in another fight for Irish sovereignty; sovereignty will again be lost if Ireland is forced by the EU to accept the 13 billion from Apple.

Fianna Fail, in supporting the coalition in this national struggle, is displaying economic competence and maturity.

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6. Paddy Healy - September 10, 2016

28 of the 35 OECD Members in EU-US-UK Axis
OECD-23 of the 35 are either NATO Members or have other Mutual Defence treaties with the US. A further 5 including Ireland are members of EU only. Russia and China are not members. South Africa is not a member and there are no “third world” countries in membership
Full Discussion http://wp.me/pKzXa-ua
The proposition that the economic interest of the Irish people and of “third world” countries should be placed in the hands of such a body is, at best, foolhardy and, at worst, treacherous. Clearly, the big capitalist powers are using the OECD to enable them to “corner” a much bigger share of corporation tax in the now extremely globalised economy. The current EU Conference in Bratislava is furthering this agenda

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7. CL - September 10, 2016

“The Irish capitalist model has long placed multinational corporations at its heart. The state facilitates and enables these companies, giving them direct or indirect influence over many policy decisions. Government institutions primarily shape a favorable business environment by offering incentives — particularly the low tax rate — to would-be foreign investors.

All other policy domains — labor, education, governance, the welfare state — have become subordinate to the primary goal of attracting international capital….

the Irish state finds itself on the frontline of a historic shift in international capitalism. Capital has attempted to resolve the crisis of global neoliberalism by intensifying its logic — cutting wages, eliminating social services and labor protections, selling public enterprises, shrinking public employment, and relying on export surpluses. These measures have proved ineffective, and some ruling elites are looking toward a more regulated capitalism.”-
Terrence McDonough
https://www.jacobinmag.com/2016/09/ireland-tax-haven-apple-inversion-eu/

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8. CL - September 10, 2016

“Fianna Fáil Finance Spokesperson Michael McGrath has said that Ireland must deliver a firm message on tax policy to the European Union this weekend.

He has said that Finance Minister Micheal Noonan must reiterate that tax rates are a sovereign issue to be decided by each individual member state.”
http://www.irishexaminer.com/breakingnews/ireland/ff-call-on-noonan-to-defend-irelands-corporate-tax-rate-at-eu-meeting-753976.html

“Minister for Finance Michael Noonan said Labour’s proposal for a 3 per cent increase in the universal social charge (USC) for those earning €100,000 was rejected on the advice of the multinational sector.”-
http://www.irishtimes.com/news/high-earner-tax-dropped-due-to-fdi-1.752700

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9. Paddy Healy - September 10, 2016

CL, Thanks for the reference to Noonan. It has been clear for some time that the multinationals are dictating not only the Irish corporation tax system but also the personal tax system. I didn’t think that a minister for finance had said that so explicitly. Of course, FG did not only reject the Labour proposal to increase USC on those earning over 100,000 euro per year. Labour allowed Noonan to give back 125 million to the top 10,000 income recipients in the last budget. These have an average income of 595,000 Euro per year (PQ reply by Noonan to Seamus Healy). The native rich have,of course, been using the need to cosset the multi-nationals to protect themselves from equitable taxation for decades.
There is related material here; http://wp.me/pKzXa-ua
The key point is that the 26-county state has virtually no sovereignty. The corporation tax and personal tax systems are dictated by multi-nationals. State expenditure both current and capital, and state borrowing is controlled by the EU through the Fiscal Treaty.
Now that the big powers are moving to “corner” the lions share of corporate tax, the Irish rich and FG, FF, Lab are in a serious crisis.
What can they do? They are pretending that THE OECD BEPS process will save their economic policy. But OECD is controlled by the big western powers-a sort of civilian wing of NATO and of other US centred military alliances! Will they attempt to attract multi-nationals by lower wages?
The Irish National Question, which is essentially the right of the Irish people to sovereignty, is reasserting itself in a manner which very few anticipated. The national question is being simultaneously raised by the insistence of the British government on imposing cuts in the six counties.
The Connolly position is more relevant than ever for the Labour movement.

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10. Paddy Healy - September 10, 2016

IRELAND WITHOUT ALLIES ON CORPORATION TAX
“In November, the commission is expected to make another attempt to introduce a corporation tax regime for the whole EU.
The essence of it would be that profits tax would be distributed according to where sales are made – precisely the point made by Ms Vestager.

Any such system would reduce the attraction of Ireland’s low rate and international tax arrangements. How much it reduces them will depend on the details. There seems little doubt that Ireland’s already limited bargaining power to negotiate on those details has been eroded by the Apple case.
Unlike those historical analogies, this time there is no clear choice of allies for Ireland. “-Brendan Keenan Irish Independent 10/09/2016

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11. CL - September 10, 2016

“But, alongside this “real” economy, Ireland developed a fantasy one, based on exploiting accidental quirks in European and global markets. This helped fuel a local housing and finance bubble that exploded, causing long-term pain. But both before the financial bubble and afterward, Ireland’s primary global sales pitch was that the country offered multinational firms a twofer: you can get your tax avoidance and a qualified, English-speaking workforce all at the same time….
Ireland has done very well with this two-pronged plan, an economy built on the simultaneous provision of competitive work and legalistic, tax-avoiding fantasy….
In this moment of fear, it’s understandable that the Irish government is panicking over the Apple ruling, afraid it might be a further inducement for large foreign corporations to abandon the country and send it back to penury.”
http://www.newyorker.com/business/currency/how-apple-helped-create-irelands-economies-real-and-fantastical

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12. Paddy Healy - September 11, 2016

Prof Colm McCarthy Confirms Huge Crisis for 26-County Elite and mainstream Irish Political Parties after Apple Tax Ruling in the context of Brexit- Ireland isolated in the EU
Full Discussion http://wp.me/pKzXa-ua

As I pointed out on my blog some weeks ago, the UK has already announced a reduction of its corporation tax rate to 20% and the Adam Smith Institute has recommended a UK rate of zero after Brexit.
As pointed out by Colm McCarthy, this makes it more urgent for the EU to clamp down on anything resembling a tax haven such as Ireland
Colm may be exaggerating the common interests of the UK and Irish elites. The UK has come out in favour of the EU commission on the Apple Ruling. When the United States, the Franco-German Alliance and the UK come to a final decision on corporation tax in the OECD BEPS Process, the interests of the Irish elite will count for little.

Recovery of Irish sovereignty is the only protection for the Irish people

http://www.independent.ie/opinion/columnists/colm-mccarthy/ireland-has-no-special-place-in-the-affections-of-our-allies-in-europe-35039127.html

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13. CL - September 11, 2016

For Dan O’Brien the issue is hugely complex and he cannot make up his mind.

“the Apple tax/state aid case is massively complex,…

The anti-business brigade, who find the notion of companies making profits at all somehow objectionable, think it is a victory to be cheered from the rooftops. Personally, I am reserving judgment until the full findings are published.” Dan O’Brien, Sept 1,2016
http://www.independent.ie/opinion/columnists/dan-obrien/this-is-hard-ball-it-says-we-deprived-other-countries-taxpayers-of-money-35012196.html

However last April, O’Brien was not so confused:

“As for claims that not taking a challenge would undermine Ireland’s attractiveness more generally, I am unconvinced. The way the wind is blowing on tax avoidance has changed globally. Companies know this well.
It would seem, when all the factors are weighed, that the Irish state should not take a challenge to such a finding and take the back taxes.

As Apple is sitting on an off-shore untaxed cash pile estimated at more than $200bn, paying even one twentieth of that to the Irish exchequer would hardly dent the firm.

It would do quite a bit for the state’s finances.” O’Brien, last April.
http://www.independent.ie/opinion/columnists/dan-obrien/if-apple-is-forced-to-pay-billions-in-tax-the-government-should-accept-34613917.html

The issue is really not that complex. Vestager the Eu Commissioner has spelled it out clearly:

“Ireland has a very attractive corporate tax rate, and it’s not up to me or anyone in the Commission to question that,” Ms Vestager told France 24.
“Because Ireland is completely in their good right to say our corporate tax is going to be 12.5pc. It is very attractive. You’re in the single market, you have highly skilled employees … it’s a very good place to do business.

“It shouldn’t be the place to do tax avoidance.”

“Ireland gave Apple two tax rulings to allow them to book the huge majority of their profits in a head office that only exists on paper.

“It has no employees, no premises, no real activities and that of course makes no economic justification for no employees in no offices making huge amounts of money.”
http://www.independent.ie/irish-news/politics/ireland-shouldnt-be-a-home-to-tax-avoidance-says-vestager-35037626.html

(Note: Dan O’Brien also believes that neoliberalism does not exist)

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CL - September 11, 2016

But since no economic activity in Ireland generated the funds why should the tax accrue to Ireland? Germany, Austria and Spain have expressed their intention of receiving their share.

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