Ireland’s tax deals help fuel global inequality: Joseph Stiglitz

Nobel Prize economist says Ireland a ‘fiscal paradise’ and austerity was badly managed

Joseph Stiglitz, the Nobel Prize-winning economist: “People are seeing globalisation as a venue by which rich corporations like Apple and Google can effectively escape taxation while hard-working citizens in France or Germany continue to pay high taxes.” Photograph: Sasha Maslov/New York Times

Joseph Stiglitz, the Nobel Prize-winning economist: “People are seeing globalisation as a venue by which rich corporations like Apple and Google can effectively escape taxation while hard-working citizens in France or Germany continue to pay high taxes.” Photograph: Sasha Maslov/New York Times

 

Ireland’s controversial tax deals with companies such as Apple and Google are part of a corrupt global system, which is fuelling inequality and political extremism, including the rise of Donald Trump in the US, according to Nobel Prize-winning economist Joseph Stiglitz.

The Columbia University professor described Ireland – along with Singapore Panama, the Cayman Islands and Luxembourg – as a “fiscal paradise” where individuals and corporations can “park money” and avoid paying taxes.

“The point is people are seeing globalisation as a venue by which rich corporations like Apple and Google can effectively escape taxation while hard-working citizens in France or Germany continue to pay high taxes,” he said.

“It’s a very ugly picture of a set of rules designed to benefit corporations at the expense of ordinary citizens. Unambiguously, these rules feed into Trumpism,” he told The Irish Times.

In his new book, Globalisation and Its Discontents Revisited, the former chief economist of the World Bank revisits his original 2002 thesis that globalisation has been stage-managed in favour of advanced countries at the expense of developing ones.

Growing injustice

In his updated thesis, he argues that the process continues to play a central role in driving inequality and injustice – not only in the developing world, but for the majority of workers in advanced countries.

“Trump took advantage of this discontent, crystallised and amplified it,” Prof Stiglitz said.

He said Ireland’s decision to appeal the European Commission’s €13 billion tax ruling against Apple and the Government’s apparent slowness in retrieving the money have damaged the country’s reputation internationally.

While Ireland did not design the rules around corporate tax, it has applied them to suit its own ends without considering “the global consequences of everybody playing by those rules”, he said.

“The special deal done with Apple – in secret – is a kind of state aid. If you had made that offer to everybody, everybody would have jumped on the bandwagon – of an almost zero tax rate – and that would have totally eviscerated the tax base. Europe can no longer tolerate these kind of deals,” Prof Stiglitz said.

Everyone loses

“The consequences of this kind of tax competition is a race to the bottom and, in the end, everybody is a loser.”

He said most Americans believed that the European Commission’s decision on Apple’s tax arrangements was the correct one.

Although the commission says Apple’s tax deal with the Irish authorities broke EU state-aid rules, it does not claim that the tech giant sought to unlawfully evade paying its fair share of tax.

Prof Stiglitz, who also served as chairman of former US president Bill Clinton’s council of economic advisers in the 1990s, described Ireland’s austerity programme as “a badly managed episode” that forced many talented workers to leave and which resulted in a major underinvestment in the State’s university system.

He suggested Ireland needed to return to the fundamentals of investing in people, creating intellectual hubs and not relying so much on foreign multinationals – effectively following the Nordic model.

“Everybody respects competition that’s based on fundamentals, rather than trying to take advantage of badly designed tax rules,” he said.

Dishonesty of right

Asked why he thought much of the current economic populism was being driven by right-wing parties, Prof Stiglitz said: “They [the right] have a particular proclivity for dishonesty. They are untethered by reality. Trump has almost trumpeted the notion of alternative reality, alternative facts.”

He also thinks the right has been particularly successful in blaming others: “that’s a very attractive story and it’s particularly attractive in Europe where you face the problem of immigration,” he said.

While the process that brought about Brexit is similar to the rise of Trump in the US, he said the UK’s dynamic differed in its emphasis on immigration. He also said the tech revolution and the rise of robots would further promote inequality unless the rules governing trade and tax were changed.