Cantillon: Transparency the first victim in tax debate

Radio debate makes mockery of the notion of transparency

Head of tax at PricewaterhouseCoopers Feargal O’Rourke

Head of tax at PricewaterhouseCoopers Feargal O’Rourke

 

The head of tax at PricewaterhouseCoopers Feargal O’Rourke wrote last week about the need for transparency on tax. “The defining feature of a company’s or a country’s tax strategy over the rest of this decade will be ‘transparency’,” he wrote.

His employer, PwC, alongside the World Bank, last November produced a report entitled Paying Taxes 2014 – the Global Picture . It put a figure for the tax paid by companies in Ireland at 12.3 per cent. It’s a figure that has provided succour to Government ministers and spokespeople looking to defend Ireland’s corporate tax regime from attacks within Europe and further afield.

In the same edition last week, a report by Trinity professor Jim Stewart was stated to put the corporate tax rate in Ireland at 2.2 per cent. Some difference. The following day, both men went head to head on the airwaves. What emerged made a mockery of the notion of transparency, and of both sides’ reports.

The PwC/World Bank report is based on a domestically-owned maker of ceramic flower pots with no cross-border operations – a long way from the multinationals, of whose tax bills it was being cited in defence. In fact, it is, if anything, a report on the cost of collecting tax, not the effective rate of tax.

The source of Prof Stewart’s data – the US Bureau of Economic Analysis – appears equally ill-suited to the task. It apparently assesses companies by where they are incorporated. Thus companies incorporated in Ireland but with no business activities here are included. Equally branches of multinationals are excluded from its calculations.

Of course, neither O’Rourke nor Stewart had thought – in the interests of transparency, you understand – to clarify these issues when using the figures in either report previously to bolster their arguments on tax.

Incredibly, we had the spectacle of O’Rourke turning to the trade union supported Nevin Institute for a “best guesstimate” of effective tax rates – around the 8 per cent level.

Ireland’s corporation tax regime is a critically important element of our economic wellbeing. It is and will continue to be under attack from rivals with less advantageous regimes. If transparency becomes the first victim of the battle, Ireland’s position ultimately will be weakened.

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