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