We should be wary of facilitating companies to sidestep tax
During a visit here some years ago the Noble prize-winning economist Joseph Stiglitz gave a speech during which he made an obvious point. Because of globalisation, pay rates for labour in the western world are under pressure. This is why so many lower and middle income earners have seen their income levels all but remain static over recent times.
But globalisation has been a boon for capital. It has access to cheaper input prices, and wider markets.
Capital is making windfall gains. Applying the lessons from Ireland’s recent history, it should be subjected to more tax. It is both unfair and unwise that people should benefit disproportionately from conditions that are not of their making.
But the opposite is what is happening. More and more, capital is managing to free itself from being taxed. Money that should be used for social goods that could be used to counteract the effects of globalisation is being directed elsewhere.
Earlier this year the New York Times published an extended feature about US multinationals and their success in avoiding US corporation tax (“How Apple sidesteps billions in taxes”).
The article pointed out that just a mile and a half from Apple’s headquarters in the Silicon Valley, De Anza College, a community college that Steve Wozniak, one of Apple’s founders, attended from 1969 to 1974, is laying off teachers because of a funding crisis.
“I just don’t understand it,” said the school president, Brian Murphy. “I’ll bet every person at Apple has a connection to De Anza. Their kids swim in our pool. Their cousins take classes here. They drive past it every day, for Pete’s sake. But then they do everything they can to pay as few taxes as possible.”
Of course the point applies to all multinationals involved in aggressive tax avoidance.
As is almost always the case in such articles, Ireland came up for special mention.
Multinationals such as Apple, Google, Facebook etc can locate their profits in the jurisdictions where they pay the least tax. Most if not all such multinationals make particular use of Ireland.
Through structures linking Dublin to offshore locations such as Bermuda and the Cayman Islands, some of these companies are now even avoiding Irish corporation tax. All of which should cause Irish policymakers to take heed.
The disfunctionality outlined in the NYT article has the smell of something that is not sustainable.
Ireland has done well from multinational investment but it should be wary of allowing itself be used for aggressive tax avoidance that may well soon become the focus of political reform.