Hardly the special treatment Quinn was looking for

Business Opinion:Here is a question that Seán Quinn can legitimately ask: why has the Government put a massive obstacle in the way of his efforts to get into the health insurance market? After all, in the process he will secure 300 jobs, ensure some semblance of competition and take a significant weight off the mind of some 500,000 members of Bupa.

Instead of welcoming him with open arms, the country's legislators rushed in the Oireachtas last week to pass a law that will actually charge him over €100 million for the privilege of providing health insurance.

It is cold comfort, but Mr Quinn now joins a very select group of businessmen who have been afforded such treatment. The other is Larry Goodman, but on that occasion our lawmakers rushed back from their holidays in a effort to save jobs by passing legislation to allow Mr Goodman's company avoid outright bankruptcy and go into examinership.

Mr Quinn's sense of injustice can only have been heightened when he read The Irish Times - as we are sure he does - on Friday. In it was a story about Sandisk, which is the latest in a long line of US companies whose use of the Irish tax system to their advantage has come to light.

Sandisk is a pretty typical example. In 2005 it channelled over half of its global revenues, some €762 million, through an Irish subsidiary that employed a handful of people. The explanation is, of course, that it was part of a strategy to reduce the group's global tax bill.

It is just one of a long list of companies, mostly US-based, that have done something similar, including most notably Microsoft and Google.

Most of them have received some direct assistance from the State, and all of them have benefited from what is euphemistically called Ireland's pro-business attitude. This translates in to a legislative and administrative framework that responds to and to a certain extent anticipates the tax needs of big multinationals.

While there may seem something unsavoury about all of this, certainly in the eyes of the US tax authorities, the reality is that Ireland is a small, open economy and must compete in every way it can. And financial services built around tax is one area where we have gained an advantage.

The benefits to the State are obvious. The companies that come here to cut their global tax bills still pay some tax here. In addition, they create jobs, the robustness and long-term value of which vary from company to company.

But in any case, the rights and wrongs of all this are somewhat irrelevant in the context of Quinn Group and Bupa. What does seem pertinent is the extent to which the Government will bend a twist to accommodate the needs of companies like Sandisk while Quinn Group has the full rigours of the law - and then some extra - applied in his case. It hardly seems fair. After all, Quinn Group pays corporation tax and creates jobs too.

While all this might indeed be grounds for annoyance, it is hardly grounds for surprise. The reason that Quinn Group got the treatment that it did was because it walked into the minefield that is the health insurance market.

Given what had gone before it seems scarcely credible that Quinn Group really thought they would be able to avoid taking on Bupa's future liability to make risk-equalisation payments to VHI.

But if they did, it is equally hard to understand why they did not complete the deal immediately before the Government could close the loophole which they had signalled they were going to avail of. Indeed, the fact that they did not move more quickly might indicate that Quinn Group was quite relaxed about the issue because they expect that the whole industry will be reformed long before the risk-equalisation payments due to VHI start to bite.

But looking at things as they stand, its hard to share Quinn Group's optimism. The Minister for Health already has two reports recommending substantial reform and a third is on its way from the group led by businessman Colm Barrington.

All of this seems to be pointing in the direction of breaking up or restructuring the VHI as a way of rebalancing risk between the various insurers and bringing about more competition. But it is clear, even at this stage, that this will be resisted by various vested interests, in the same way that pretty much every health reform has been frustrated.

Perhaps it is time for some of the brains and sweat that has been expended in making Ireland the destination of choice for tax-conscious multinationals was expended sorting out the health insurance market. Mr Quinn could not complain then.