Hype on tax breaks pushes darker tales into background

Net Results: I don't know about you, but I am deeply disappointed to look out the window and see frost as I turn up the heat a notch. I'd thought, with all this media kerfuffle about our apparent national makeover as a "tax haven", that I'd be seeing palm trees gently waving in the trade winds as the (offshore) breakers roll in.

Haven schmaven! Let's have a little reality check, folks. Ireland is not only not a tax haven but, if anything, a destination with a joint taxation agreement that has come under greater mutual scrutiny and agreement by authorities on both sides of the Atlantic than any other single location in the world. I'll come back to this in a moment.

First, I want to consider the sabre rattling on the 12.5 per cent tax issue by heads of miscellaneous multinationals. Excuse me if I yawn here, but what exactly is newsworthy about yet another multinational technology company's chief executive offering the rote answer that they have given for years on the taxation question? Of course they would be "concerned" if taxes were to go up or other elements of the business environment in Ireland were to change (though they didn't get too worked up about the shift from 10 per cent to 12.5). Every executive at every press round table I've been to in the past few years gets asked the tax question. Everyone says the same thing, every year.

Steve Ballmer, Michael Dell, Larry Ellison, Andy Grove, this time Kevin Rollins, who, yes, has said this at least twice before. Yawn! I mean, what are they going to say? "Well, gentlemen and women of the press, we don't care if Ireland raises its taxes because even if they went up a few percentage points, heck, say 10 points, Irish rates still would not come close to the British corporate tax rate of 30 per cent, or the US at 35 per cent, which is actually more like 40 per cent when you add in state tax as well."

And let's not forget these same multinationals have large operations in, yes, Britain and the US. As they always say themselves, many factors go into the decision to base operations in a country and taxes are not the whole story. Otherwise, they all would have gone to zero-tax Singapore.

Now that we can be sophisticated enough to realise taxes are never the whole story, let's go back to the notion of Ireland as a "tax haven". I put this concept to some insiders here and in the US who have a good sense of what goes on at government and corporate levels and all confirmed the notion beyond ridiculous.

"Ireland would definitely not be considered a tax haven," laughed one in the US. "It's seen as a low tax region and an onshore, not offshore, region as well. And it's in Europe, with low corporate tax, a predictable regime and stable political environment, people speak English and it's in the euro. That makes Ireland extremely attractive for business and that's why companies and financial services base themselves there, to the benefit of the Irish economy."

The structures that allow companies to, on paper, move finances through Ireland are regularly the subject of discussion at top levels, say US experts. The Internal Revenue Service (IRS) may have made some noises about the process recently in the case of one company but the reality is that the IRS makes noises about lots of things that both companies and individuals do tax-wise. The US authorities do not see Ireland or the tax regime here as an issue, and an individual company under investigation is just that - an individual company required to justify how it has managed its money.

The tax amnesty which recently allowed US companies to repatriate money held in Ireland, is also not some oddball response to the Irish situation, but a regime of forgive-and-forget that the US government has done for decades with US companies operating abroad.

There have been several such amnesties, usually coming every decade or two, always at a time of general prosperity, but when the US needs cash. The US government offers to let US companies bring money back in at a reduced tax rate, and the cash floods in. That suits the US government, the IRS and the companies. Money enters the coffers for everyone and the next cycle of shoring up cash abroad begins.

Such amnesties do not take money out of the Irish economy because the money was never there in the first place. But because everyone knows such amnesties come regularly, and because Ireland has carefully arranged joint-taxation agreements with the US, it is beneficial to US companies to locate in Ireland and avail of this process.

And it has benefited Ireland as companies rarely just stick up a shopfront. They create jobs, pay taxes and, as we've seen in the case of giants like Microsoft, IBM, Intel, Bell Labs or Wyeth, stay here and put in ever more valuable jobs and more recently, research and development too. R&D operations are the most costly for companies and the least likely to be relocated, a strong sign that they mean to stay.

However, all the fuss over tax rates and tax havens - which seems entirely media generated to me, the end of year equivalent of the silly season - does have one consequence. It makes non-issues look like big issues which can deter investment and destabilise the business climate.

That is what is really worrying. The nation is full of serious and deserving technology sector stories that get little coverage and are a lot more constructive than the tax wheeze - such as why the Government virtually ignores the Irish software and services sector when awarding procurement projects?

Why does it not tackle the racism that makes the State an unwelcoming environment for workers from China and India who are producing the engineers we'll need to fuel a tech-driven economy?

Where is the seed capital for tech entrepreneurs who can't get their business idea off the ground? Why have we promoted a tech economy over a tech society when the latter is needed to keep the former healthy and vibrant?

Maybe some of those issues will make the front page soon, but I'm not holding my breath. "Tax haven" has a more dramatic ring for the headlines, doesn't it?

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