Wednesday 22 May 2019

Division over Apple is disastrous when those who oppose US firms will see crisis as an opportunity


Liz O'Donnell

Ministers returning to work after the summer break have had to hit the ground running. The European Commission's ruling that Ireland granted illegal tax benefits and state aid to Apple was a clock-stopper. Although expected, the amount, more than €13bn, sent shockwaves around the Irish and American business community. Notwithstanding the Government's denial of allegations of wrongdoing, there are inevitable claims that Ireland is a 'tax haven' for multinational companies like Apple. The Government and Revenue are emphatic that there was no sweetheart deal done and that all taxes due for Apple activities in Ireland were paid in full. Apple is to appeal the ruling.

But a fanciful notion has gained political traction from predictable quarters that Ireland should not appeal and instead pocket the tax due. The suggestion is to spend it on public services; pandering to the anti-austerity grievance in sections of the population.

Sinn Féin were first out of the traps in this vein, followed quickly by Anti Austerity and People Before Profit and, surprisingly, the Greens and Social Democrats, grandstanding on the moral high ground of tax compliance and accusing the Government of colluding with tax avoidance schemes and even of "economic treason".

It didn't take long for ministers in the Independent Alliance to follow suit. Shane Ross, Finian McGrath and Catherine Zappone stalled on Cabinet approval to appeal to the European Court of Justice. They want a clear statement on Irish multinational tax arrangements, and the Dáil recalled for maximum rumpus, before any decision is made. Again, they are behaving like the Opposition instead of government ministers.

So even before the new term starts, we have another stand-off between the Government and the Independent Alliance ministers. This one is much more serious in that it opens up a whole panorama of political discord over Irish industrial tax policy and uncertainty over a corporation tax regime which has been the economic engine for the creation of hundreds of thousands of jobs in Ireland by multinationals. It amazes me how easily some Opposition parties opportunistically attribute base motives to our own Government when national unity is needed.

For decades, there has been largely cross-party consensus on our corporation tax regime; the 12.5pc rate is a proven instrument of Irish industrial policy and of foreign direct investment. Ireland has closely guarded sovereignty on taxation policy, despite some EU member states and the Commission's open resentment. MEP and former minister of state at Finance, Brian Hayes, claims the Apple ruling is politically motivated and that the Commission has overstepped its mandate, essentially using competition law to challenge our sovereign taxation rules.

Domestically, the politics of this is tricky for the Government. To shore up confidence and restore certainty in our tax regime and revenue authorities it must robustly appeal the ruling. Division in the Cabinet on this is disastrous. But Independents are intrinsically ornery; feeling justified in breaking ranks with the Government on controversial issues if only to remain visible and relevant. In addition, they are uniquely vulnerable to opposition taunts; unaccustomed to taking the hard knocks of being in power and making unpopular decisions. But to foment discord over a serious fiscal issue such as this is contrary to the national interest. It demonstrates yet again an incapacity for collective Cabinet responsibility.

By coincidence, all of this drama was in play this week as a major gathering was hosted by the Irish Institute of Boston College in Dublin. The week-long programme of activities included an IDA-sponsored conference on Irish/ US business, a working lunch with Senator George Mitchell as keynote speaker on the 'US Ireland and UK relationship' and the launch of Norma Smurfit's fundraising initiative 'Ireland's Legacy'. The programme culminates tomorrow in the Aviva Stadium with an American Football game between Boston College and Georgia Tech.

The Senator Mitchell lunch was attended by the Irish and US ambassadors and leading Irish business leaders like Martin Naughton, chairman of global giant Glen Dimplex. Ambassador Kevin O'Malley, in unscripted remarks, spoke passionately about the ties of kith and kin that bind the US-Ireland relationship, noting his dismay at the coarsening of discourse circulating around the Apple tax ruling, with claims of 'tax havens' and 'tax cheats'. He stressed the US-Ireland business relationship goes way beyond favourable tax rates; it was about an educated innovative workforce, shared values and an inter-country friendship and solidarity derived from our diaspora.

Senator Mitchell too recalled the friendship and support of successive US administrations for Ireland. Both men appealed for calm and cautious reflection and for a defusion of any possible breach in the friendships which cement the US-Ireland relationship. A robust appeal to the European Court will buy time and park the issue for years and is Realpolitik. There may be place for a wider ethical debate on Apple's worldwide tax liability and where it should be paid. But Ireland is being caught in the crossfire between the European Commission and the US. If more tax is due by Apple, as claimed, Ireland's case is that it is not due to Ireland.

A highly charged political crisis over this will undoubtedly damage new foreign direct investment and may jeopardise existing jobs. For that reason, we need a strong, sure-footed Government. Instead we have a weak Government and a divided polity.

Moreover, there are political forces ideologically opposed to American multinationals and capitalism, for whom profit is a dirty word and whose objective is to disrupt the economic and political status quo. They will see this issue as a potential wrecking ball. They should be given short shrift in the national interest.

As Apple boss Tim Cook said, future foreign investment depends on a level of certainty on tax matters. Apple has enjoyed that for 37 years in Ireland and has grown 6,000 jobs.

Uncertainty is the enemy of investment and job creation. There is reason to believe the Commission has an agenda against Ireland's tax sovereignty.

Such a targeted assault by the Commission on a member state is ill-judged, particularly at a time of creeping anti EU sentiment and Brexit. It resurrects the question of whether Ireland is closer to Boston or Berlin. In this instance, Boston wins hands down.

Irish Independent

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