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No good reputation without taxation #AppleTax

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Wednesday 5 Oct 2016

As I joined a number of Irish colleagues in a meeting with EU Competition Commissioner Margrethe Vestager, in Strasbourg, this week, a very simple truth was foremost in my mind: a corporate tax regime that fails to claim a minimally fair amount of revenue from large corporations, be it by design or default, robs the fundamental workings of government of legitimacy, both at home and abroad, whatever about the complex details and context surrounding such matters.

When big multinational corporations are enabled to pay rates that amount to a very small fraction of one percent, the tone used to, say, challenge an EU Commission decision on the grounds that state aid provisions should not be used to govern sovereign tax matters should be very prudent. This is all the more so when it contrasts starkly with the meekness displayed in previous engagements when tax paid by citizens was at stake, instead of tax avoided by companies.

Likewise, the claim that the OECD’s base erosion and profit shifting initiative, started at the G20’s behest, is the right place to discuss these matters, omits half of the whole story.

That is a first step, but the EU needs to coordinate and harmonise its implementation across our member states, otherwise other gaps, sources of uncertainty and inefficiency as well as loopholes within the single market will arise.

We must also be mindful of the message sent to our home grown businesses, and those whose scale in Ireland does not enable them to set up obscure ownership structures and afford the best tax consultancies your untaxed profits can buy: the tax rulebook will apply to you in full, but there special ways and means open to special others.

There is something I must make clear: that we have had a very successful strategy to attract foreign direct investment is both undeniable and commendable.

This stems from a public-sector led industrial policy that has spanned decades and governments, and this is a positive and ongoing pillar of economic development and job creation in Ireland, which will continue to be nurtured.

This is also why I believe we do not need to collude in tax avoidance to make it a continued success, and indeed a fair taxation regime has now clearly become a requirement for it to be sustainable in the long term, as unfairness on an egregious scale will only remain hidden and disregarded for so long.

And talk of impotence in the absence of global solutions just shows us how fragile beggar-thy-neighbour policies are, as fears of a post-Brexit UK offering even sweeter deals emerge among our ranks.

The fact is, if we refuse to face and acknowledge this problem in an open and frank fashion, our talk that we can do nothing because there is no wider international consensus is not credible when we have long behaved as an obstructionist party ourselves.

The taxation proposals made by the European Parliament in early summer, which I alone voted in favour of, are a case in point.

The less constructively we engage, the less goodwill capital we will have to make the real case we have: that our historical and geographical context does warrant an advantageous but honest and straightforward corporate tax regime.

Ends

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