Ireland ‘robbing’ European neighbours with low tax rate – Stiglitz

Nobel laureate says tariff by Apple didn’t confer advantage on Republic

Nobel laureate and economist Joseph Stiglitz.

Nobel laureate and economist Joseph Stiglitz.

 

Ireland was “robbing” its European neighbours by allowing Apple pay such a low effective tax rate, Nobel laureate and economist Joseph Stiglitz has said while, alongside other leading economists, calling on governments to set a minimum corporate tax rate of 25 per cent.

In response to a question from The Irish Times as to whether Ireland has received an advantage from its low corporate tax rate, Mr Stiglitz said: “I think Ireland did get some advantage by having a lower tax rate of 12.5 per cent. I didn’t think they had much of an advantage for zero or close to zero [tax rate] that they gave to Apple. That was a gift that was robbing their neighbours in Europe. ”

He said this example emphasises the need for global co-operation on corporation tax.

His comments came after the Independent Commission for the Reform of International Corporate Taxation (ICRICT), supported by Oxfam, issued a report listing five measures governments can introduce to tackle tax avoidance.

The report called for governments to apply a higher corporate tax rate to large corporations in oligopolised sectors with excess rates of returns. It also recommended that governments set an effective corporate tax rate of 25 per cent worldwide “to stop base erosion and profit shifting”.

The other measures include the introduction of progressive digital services taxes, the requirement for countries to report all corporations benefitting from state support and the publishing of data on offshore wealth.

The report comes as Fianna Fáil, Fine Gael and the Green Party committed in their programme for government to retain the 12.5 per cent corporation tax rate.

Aside from Mr Stiglitz, other economists backing the proposals include Thomas Piketty, a high-profile professor of economics at the Paris School of Economics; New Delhi-based economics professor Jayati Ghosh, and José Antonio Ocampo, an economics professor at Columbia University in the US.

Foot the bill

The report from ICRICT noted that the Covid-19 pandemic has led to “major structural increases in public expenditure to support health, incomes and employment. The question of who will ultimately foot the bill will need to be answered, but the economic burden must not fall disproportionately on disadvantaged groups and countries.

“The bottom line is that at a time when we are going to have to pay for new investment in the hospital system and public services. . . the view that nobody will have to pay for anything, which some politicians are trying to push, is simply not credible,” Mr Piketty said.

He added that hitting corporation tax alone would not suffice. “Corporate tax and a minimal tax rate of corporation tax of 25 per cent is useful if it is integrated into a global corporation tax system. In the end, what matters is the final tax rate paid by the individual based on his level of wealth.”

System

Mr Stiglitz noted that the taxation system that existed before the pandemic was not fair. “The big multinationals had devised ways of avoiding taxes...that distorted the economy,” he said.

“Among these inequities and distortions, the largest were associated with the internet companies, Apple and Google, ” he said, giving the example of their low effective tax rate being paid in Ireland.

“The pandemic has helped the very companies that have been the tax avoiders. The internet companies are the big beneficiaries,” he added.

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