A trilemma for Noonan on ‘double Irish’

What should we make of the latest signals on corporate tax? Although some observers have it that Minister for Finance Michael Noonan is on the cusp of dropping the “double Irish” scheme in the Budget, the word in the corridor is that there’s no decision yet. The matter has not even reached the Economic Management Council, the Cabinet subcommittee at which really big decisions are taken, much less the Cabinet itself.

There are three options. First is to do nothing, ignore the OECD’s demand for a speedy elimination of the “double Irish” and await action from other countries. Second is to move right away in the Budget, with new agreements under the scheme barred from 2015 while existing agreements are slowly phased out. Third is to signal change now for implementation later, ie from 2016.

The sense on the street, at least when debate started, was the Department of Finance favoured early intervention to scrap the “double Irish”. However, this ran into resistance in the business community. The force of objection had not been expected. The word thereafter was that Ministers were mindful of business concerns.

Next came the OECD’s actual proposals to stamp out base erosion and profit shifting – and a direct entreaty to Dublin that it would be better to move sooner than later. The message from Paris was unambiguous.

At the same time, however, no less a figure than Tánaiste Joan Burton suggested it might be better to wait until the OECD examination of BEPS schemes reached its formal conclusion at the end of 2015. On TV at the weekend, Minister for Jobs Richard Bruton was similarly cautious on unilateral action. His basic position is that it might be better to see how other countries respond. All that might suggest the Coalition is veering toward the wait-and-see option.

But consider the remarks of Ibec chief Danny McCoy, who met Noonan on Friday and declared afterwards that pre-emptive steps should be taken. This was in contrast to McCoy’s last public intervention. In July, he argued that the case for unilateral action was unproven and that most businesses in Ireland would prefer the Coalition to wait until the end of the BEPS process.

So why the change? Ibec’s reasons are for it alone to explain, although it would be unusual for such a body to publicly change its position on a sensitive topic to the effect that it was diametrically opposed to the Minister for Finance. If it is indeed the case that Noonan favours an early move then the Government is divided, for Burton and Bruton appear to have something else in mind.