Leprechaun Economics

Leprechaun Economics or Tax Haven Capitalism?

Last month the Irish government posted GDP growth figures of 26.1%. This figure is unheard of in Western economies which usually register no more than 3% growth. The cause of this miraculous expansion was a new set of accountancy rules that shifted €300 billion of foreign owned assets into Ireland as economic growth.

For example, AerCap registered its fleet of International aircraft to Ireland, increasing the value of Irish ‘owned’ assets by €35 billion.

Why would foreign companies want to do such a thing?

Because Ireland allows these multinationals to do commercial activity in other countries before paying minimal taxes on it here. To put this more simply – Ireland is a glorified Tax Haven for the rich and powerful.

At the start of the year, the leaked Panama Papers showed the effects of such tax dodging on vulnerable citizens. Instead of resources being used to fund social services they are moved around the global to avoid any taxes.

To put the scale of this problem in context, the Tax Justice Network estimates that between $21 and $32 trillion has been stashed away globally without paying tax.

If the global rich were made to pay even 20% on this vast fortune, it would amount to more than €4,000 billion – or enough to solve world hunger for every person for roughly 135 years.

The fact that the Irish elites are so willing to play this role speaks volumes about their solidarity with the global poor. It also has an important effect here, as the state has to pay an extra €280 million to the EU next year as Ireland has become richer on paper.

This GDP increase may be an accountancy trick, but the cost is real. The €280 million could be used to hire more than 13,000 nurses or 11,000 teachers for example.

Tax Inversions

One way that foreign companies get to register for tax in Ireland is through so-called ‘Inversions’. These involve foreign companies buying Irish assets to register here for tax purposes.

Back in April, Pfizer, the US pharmaceutical giant, called off its merger with Dublin based Allergan after the US authorities changed their own rules to block the transaction. The deal would have relocated Pfizer’s headquarters to Ireland, shaving billions off its tax bill there and adding a tiny bit to it here.

Responding to the move, President Obama said Ireland is providing “one of the most insidious tax loopholes out there.”

Michael Noonan is not nearly so concerned. Writing in the Sunday Business Post, Noonan suggested that “our laws simply cannot prevent tax inversions”. He went on to state that any attempt to stop them would “have unintended consequences for substantive Irish operations” and that “these transactions are entirely driven by tax issues in other jurisdictions”.

None of this is remotely plausible. When the elites here feel that their interests are being threatened they move heaven and earth to fight their own corner. The example of Apple is a case in point. An EU investigation into Apple’s tax deal with the Irish state could reveal between $8 and $19 billion in underpaid taxes.

Any decent government would be falling over itself to claim these resources, but the Irish rich really don’t want them. To accept this money would be to accept the charge of being a tax haven, potentially scaring off new international business. Unlike Bermuda or the Cayman Islands, Ireland’s unique selling point as a ‘tax haven’ rests on the mirage that it really isn’t one.

Once this pretence is rumbled there will be little advantage remaining for a global elite who can stash their cash in off shore accounts for less than half the price that Ireland charges. .

For this reason the Irish state has already spent €670,000 disputing the fact that we might be owed anything. As Enda Kenny repeatedly suggests – this is a great little country in which to do business

CORBYN: LEFT IN BRITAIN IS ON THE MOVE

Last week, nearly 10,000 people attended an outdoor rally in Liverpool to support Jeremy Corbyn’s bid to retain the leadership of the labour Party. The day before 2,000 turned up in Leeds and before that again another 3,000 attended a rally in Hull. Membership of the British Labour Party has shot up to nearly 600,000.

All of this is a testimony to the appeal that real left wing politics has today. In the nineties the Labour Party was captured by Tony Blair’s ‘Third Way’ politics which proclaimed that the ‘class war was over’ and that the party had to adopt an overt pro-market position. In short, the type of politics which still dominates the Irish Labour Party and its main union backer, SIPTU.

(Labour’s new leader, Brendan Howlin has criticised Corbyn while its former TD, Pat Rabbitte has denounced him as ‘essentially Trotskyist in his disposition’. Meanwhile SIPTU’s President, Jack O’ Connor, claimed that unions should not be an ‘antagonistic voice’ to management but should rather seek to ‘minimise employer hostility’.)

Corbyn represents a shift away from this type of failed policy and that is why he is so popular with Labour Party members. He campaigns on policies that are not entirely dissimilar to People Before Profit’s own platform.

• He will bring in legislation to force companies with more than 250 workers to both recognise and automatically negotiate with unions.
• He will raise corporation tax to fund the abolition of student fees. Currently, the average student in Britain leaves college with £44,000 in debt after paying annual fees of £9,000.
• He will establish a national investment fund to help create jobs.
• He wants to ban zero hour contracts and change company law to stop directors taking out huge sums for their pensions while sacking workers.

But having a political programme is one thing – having the means to carry it out is another.
Jeremy Corbyn’s big problem is the apparatus of the Labour Party. The vast majority of its MPs hate him, precisely because he represents a break with the political consensus that upholds the British elite. The full time officials in the party have done everything to gerrymander the vote on the leadership election by disbanding local branches that are too radical and excluding members who joined in the last seven months before voting.

They want to replace Corbyn with Owen Smith, a former lobbyist for Pfizer and a figure who uses a mild left rhetoric to cover his more right wing instincts. For example Smith’s programme to address the concerns of those who voted for Brexit is to suggest that there are too many immigrants in some areas.

This is why the re-election of Corbyn will only be the first step in the revitalisation of left wing politics in Britain. It may lead to a split off of the Blairite wing of the Labour Party – or, if they remain, a continual campaign to undermine Corbyn.

Moreover, if Corbyn’s is facing such opposition before coming to office, one can only imagine the difficulties that stand in his way if he was ever Prime Minister. The BBC and even the supposedly soft left newspapers like the Guardian and Mirror are already running a smear campaign against him. If he ever got to lead a government, the full might of British capitalism would be deployed to undermine his policies.

This is why the advance of the left will need to move beyond the Labour Party membership to engage the mass of workers and encourage them to fight for themselves. This will mean the creation of a different type of party to the current Labour Party.

In the past Labour occasionally adopted a left rhetoric while staying ever loyal to the power structures of British capitalism and its imperialist ambitions.

That no longer fits with the current situation. What is now needed is a party rooted in struggle, promoting ‘people power’ and workers action as the way to win. How such a radical left party will emerge in Britain will become a key question after this leadership election is over.