Monday 5 December 2016

This time, the Commission is standing up for the small guy and the common good

To be seen as a fair-trading nation, we must be proactive and honest about changing our ways, writes Eamon Ryan

Published 04/09/2016 | 02:30

European Union competition commissioner Margrethe Vestager
European Union competition commissioner Margrethe Vestager

The European Commission has done Ireland a favour in its Apple tax ruling. Not because we are likely to get our hands on a massive pot of unexpected revenue - our final share will probably be a lot smaller, as other states claim the tax they missed out on.

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Apple CEO Tim Cook admitted this week that most of their research spending took place in the US, so that is where the profits and tax revenue will most likely end up.

No, the favour they have done is sending out a clear signal that the days of massive corporate tax avoidance are coming to an end. That process was already starting with the winding down of other tax loopholes but this judgment has brought the whole process into the limelight.

As it stands, European governments lose out on one trillion euro per annum in taxes through avoidance mechanisms exploited by multi-nationals. The public, quite rightly, will no longer tolerate this.

This process of change should not be a negative one for the Irish economy. Favouring tax justice does not mean we have to support full tax harmonisation.

We still need some mechanism to overcome the disadvantage of our peripheral island location. However, standing by our 12.5pc corporate taxation rate is a world away from justifying an effective 0.005pc tax rate.

Europe may be bitter about our competit-ive corporate tax rates but Ireland is not being singled out by this ruling. Holland, Belgium and Luxembourg have all been subject to similar judgements involving Fiat, Starbucks, BP and other companies.

What makes the Apple case different is the amount that has to be repaid. Some see that as a punitive measure but it is more likely a function of the massive profits the company was able to make. Those profits came for the most part from Apple's own ingenuity but they were also helped by the fact that they had a €200bn cash float, which gives them a real edge over their rivals.

The Green Party believes the Government should not be appealing the Commission's decision, which we see as fundamentally correct. I don't think we will win an appeal, and even if we do it could prove to be a pyrrhic victory. We would only be reinforcing Ireland's reputation as a tax haven, when we need to be seen as a fair-trading nation.

Whatever the legal arguments, it seems clear that Apple was one of only a few companies that was allowed to avail of this 'stateless' company structure.

While there were other elaborate offshore avoid tax avoidance measures, the exclusivity and unique structure of this loophole was the reason it was chosen as the real test case.

Those who argue that the Commission is infringing on our national sovereignty, ignore the fact that state aid rulings are an everyday factor in the work of most Government departments.

Usually the criticism is that the Commission does not sufficiently take into account social and environmental objectives and that their market approach only works out for the big guys.

But on this occasion the Commission is standing up for the smaller people and for the wider public good.

We still need to promote our country as a location for foreign direct investment. The economic strategy initiated by Lemass and Whittaker has served us well and we are a trusted country which is known for high quality in the work we do.

However we also know that our economic model has to change and that we need to start putting in place the training and enterprise supports that help the development of our local businesses.

Ironically, the Government's decision to appeal the Apple tax case could do more than anything else to damage our long-term reputation and hinder the transition we need to make.

It is a real contradiction to say we are making the appeal and say at the same time that 'Ireland will be taking the lead' on tax justice. We will end up instead under a cloud of suspicion, as legal wrangling goes on for years. It would have been far better to put our hands up now, admit what we did was wrong and gain some credit for being honest and proactive in changing our ways.

I welcome the fact that we are going to have a Dail debate on the issue next week. We also need more detailed investigations within the budget oversight committee and must see the full Commission ruling in advance of the debate, so we can see exactly what went on.

We also need to be mindful of this whole issue in the upcoming Brexit negotiations. Whatever outcome the UK authorities might expect, we have to make it clear that continuing corporation tax havens is no longer an option.

It is time for every country to set out where it stands on this issue. Unfortunately the message from Irish Government is that we want to be virtuous - but not just yet. That is the wrong signal to send to the rest of the world.

Eamon Ryan is leader of the Green Party

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