Tuesday 10 December 2019

Kenny rolls the dice on 'sweet' tax deal in risky game with very high stakes

Former Taoiseach Charles Haughey outside his Abbeville mansion, which was designed by James Gandon.
Former Taoiseach Charles Haughey outside his Abbeville mansion, which was designed by James Gandon.

Thomas Molloy

THE Government has played a high-stakes game from day one when it comes to the threat posed by this European Commission probe.

As the US Senate examined Apple's tax affairs in huge detail last year, Enda Kenny told anybody who would listen that there had been no special deal between Apple and the State.

The problem with that denial is that it related back to talks held in 1991 when Charlie Haughey ruled the country and deals of all kinds were made behind closed doors. Kenny is betting on Haughey. Anybody who was an adult back then will remember that Ireland was a very strange place indeed under the late Fianna Fail Taoiseach. The sort of place where a murderer could be found living in a flat belonging to the attorney general. It is not impossible to believe that there was some sort of special deal.

A sensible approach for Mr Kenny would have been to begin his own investigation into Apple's tax affairs. That's what open and transparent governments do. That's what the US Senate has done. That's what the European Commission is doing. Sometimes it feels like the only institution which doesn't want to get to the bottom of the state aid issue is the State itself.

The problem is that the more Mr Kenny wraps himself in the tricolour, the more damage we will endure if Brussels finds against us.

How can the word of the Irish Government have any meaning when it comes to tax issues if we are found to have mislead the two most important administrations in the world? A negative finding will mean that it is open season on our transfer pricing regime and perhaps on our corporate tax rate.

Yesterday, the authorities here were spinning that the matter was highly complex. That's true. But countries expect other countries to be on top of complex matters.

This probe comes at a very delicate moment in the country's "highly complex" financial affairs; tax avoidance measures such as the 'Double Irish' are under the microscope among the world's most powerful countries while so-called tax inversions which encourage US pharma companies to move here have been banned by the Obama administration.

We have, in short, never faced so many challenges on so many different tax fronts.

There are, however, reasons to be cheerful.

The first ground for optimism is the dysfunctional nature of the US political system. It is almost impossible to imagine a scenario where the Republicans and Democrats agree on anything, let alone reform of the US tax code.

The EU's failure to agree on much these days, especially taxation matters, is also good news for Ireland. Other countries don't like our system but they hate the idea of yielding more powers over taxation to Brussels.

A third ground for optimism is the reality that many big tech companies here are now deeply embedded in this country. They have invested billions in people and infrastructure over the decades. Some will leave but many are unlikely to leave because they will have few alternatives in Europe, especially if Britain leaves.

These are perilous times but all is not lost even if Kenny's roll of the dice goes awry.

Irish Independent

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