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Dr Stephen Kinsella's article yesterday suggests we use excuses that Ireland isn't "exactly like a tax haven". Sorry, Dr Kinsella, but precision is what tax is all about. Tax haven has a precise, internationally recognised meaning. Tax havens need to meet four conditions.
First and most importantly, tax havens only apply nominal taxes or none at all. Ireland doesn't fit that one. True, our 12.5pc and 25pc corporation tax rates are low in comparison with other countries. But they are not nominal. Taking up to half of income from personal taxpayers, with a safeguard to ensure that for high earners at least 30pc must be taken along with USC and PRSI, is not nominal taxation. Taking 30pc of capital gains and inheritances while offering the most meagre reliefs is not nominal taxation. Taking VAT at 23pc, one of the highest rates in the EU, is not nominal taxation.
The second characteristic of a tax haven is a lack of clarity. How clear is the tax system to all those who pay tax? Is there favouritism, or anywhere to hide? Ireland is almost unique in that we publish, on a quarterly basis, the names, addresses and businesses of tax defaulters.
Thirdly, real tax havens don't exchange information about taxpayers efficiently with other governments. Ireland does.
The fourth sign of a tax haven is that its government doesn't insist that a taxpayer has a substantial presence in its territory. For Ireland, perhaps the severest test of this was conducted some years ago by the European Court of Justice in the case of Cadbury Schweppes. We passed the test.
The OECD definition of a tax haven I have referenced is there for a reason -- it is to ensure that there are fair lines of demarcation between those countries which play by the rules and those which don't.
Suggesting that Ireland is some type of tax haven does a disservice to our citizens and businesses who work hard to pay their taxes. It is a disservice to businesses that have invested and prospered here.
Expressions like "pigeon chested" and references to 'Fr Ted' shouldn't feature in any serious discussion of tax policy. It's simply too important for that.
We believe that it is legitimate to compete on taxation matters. It is an article of faith with the European Commission in the context of the single market that competition should also be possible on tax rates. The roadmap for the Single Market as set out in the Monti Report suggested that tax harmonisation should not be a goal of the EU. It is possible for countries to compete fairly for inward investment by reference to their tax policies.
If Irish tax competition were unfair, we would already be "trembling before the IRS", to use Dr Kinsella's expression.
Tax policy must be seen in the round -- there's more to corporate taxation than just rates. Successfully competing for Foreign Direct Investment doesn't make us a tax haven.
Brian Keegan is the Director of Taxation, Chartered Accountants Ireland
Irish Independent
