Sunday 13 October 2019

Karen Coleman: Tax loophole gives us whiff of a grubby salesman

An Irish flag flies next to an EU flag in front of the EU Commission headquarters in Brussels
An Irish flag flies next to an EU flag in front of the EU Commission headquarters in Brussels

Karen Coleman

LAST Tuesday, MEPs took their seats in the cavernous chamber of the European Parliament in Strasbourg to debate ways to tackle tax fraud and evasion and tax havens in Europe.

Almost simultaneously, government ministers in Dublin were fighting accusations that Ireland was a wild-west tax haven that facilitated the technology giant Apple to engage in multi-billion-dollar tax-avoidance schemes.

The ironic juxtaposition of both events could not have been more serendipitous for the naysayers in Europe who have long been snapping at Ireland's heels to raise its 12.5pc corporate tax rate. The sound of their gnashing teeth was almost palpable in the Parliament as Ireland was cited as a tax haven.

Up until now, Ireland has vigorously defended its sovereign right to set its own tax rates and laws when challenged by its resentful European neighbours. It is by no means the only EU state with laws that encourage tax avoidance. The Netherlands and Luxembourg enable equally questionable practices. But Ireland's significant dependence on American multinationals, who employ thousands here, puts us in a vulnerable position.

Our bailout predicament further weakens our credibility when we try to defend our dodgy tax rules.

The eye-watering stories of financial audacity by Apple's ingenious book-keeping teams are hard to defend, especially when Apple itself claims the State struck secret tax deals with it in 1980. While Apple's imaginative use of Ireland's tax loopholes makes it look like a corporate Gordon Gekko, they give Ireland the whiff of the grubby salesman who'd sell the family silver to keep the shillings coming in.

It's easy to imagine how, in 1980, the Government might have been persuaded by Apple to be flexible with its tax affairs in exchange for jobs. After all, we were on our knees economically, emigration was high, and – perhaps most pertinently of all – Charles Haughey was Taoiseach. It's not difficult to picture Haughey's beady little eyes closing in on a deal that might save his own political skin at a time when he was fighting fires to stay in power.

But what might have worked in 1980 is unacceptable today as the EU Commission vows to stamp out tax evasion and fraud and gets set to impose a raft of banking regulations that will impose much greater scrutiny of our financial operations.

Inevitably, the tax laws of member states will come under the spotlight, especially when they enable massive tax avoidance.

In the European Parliament, Ireland's detractors come from both left and right sides of the political spectrum. The capitalists from big countries like Germany and France want Ireland to raise its corporate tax rates to match theirs. They are envious of Ireland's ability to attract so many American companies and they want to impose uniform rates to stand an equal chance of enticing them to their own backyards.

The argument from the socialist side of the house is more compelling.

MEPs such as the German Green Party's Sven Giegold want a minimum corporate tax rate across the EU. Mr Giegold argues that all companies, big and small, should pay an appropriate contribution to the societies they are based in and to the countries whose workers make the products that generate their profits.

His argument is especially pertinent today for austerity-laden taxpayers like those of us in Ireland who are burdened with crippling taxes and charges while mega-rich companies like Apple and Google pay a fraction of their profits in taxes to the State. We could well do with more tax revenue from them, but of course we're afraid we'll scare them off by increasing the tax rate.

Ireland's stubborn refusal to introduce a Financial Transaction Tax (FTT) also irks our European colleagues. Proponents of an FTT say it is a fair way of getting financial institutions to contribute to European economies and to pay for the economic damage caused by their industry's reckless behaviour during the boom years. Ireland says it will not introduce an FTT unless Britain also endorses it.

It's easy to see why other European states might be getting weary of Ireland's petulant defence of its financial and tax policies. While there may be ample justification in keeping a low corporate tax rate, the facilitation of massive tax avoidance and the refusal to introduce a credible financial tax is less convincing.

While our Irish charm certainly wins us some friends in Europe, it will not be enough to satisfy our detractors if we continue to support laws that are both unjustifiable and unfair.

Irish Independent

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