Corporate tax: defending the indefensible

Ireland’s 12.5 per cent tax rate can be justified only if it is real

 

If it had not been for the political drama and the Brexit negotiations, the big story this week would have been Ireland’s corporate tax regime. On Thursday, the Comptroller and Auditor General told the Dáil’s public accounts committee that eight of the 100 Irish-based multinational companies with the highest taxable income had effective tax rates of zero, and that some even managed to have negative rates – instead of paying corporation tax, they received rebates.

On the same day, the Nobel Prize-winning economist Joseph Stiglitz told The Irish Times that Ireland’s tax regime is “part of a corrupt global system, which is fuelling inequality and political extremism”. Earlier in the week, an Oxfam report claimed that Ireland qualifies as a tax haven under European Union criteria. And in between, Donald Trump specified Ireland as a jurisdiction from which he intends to lure back US multinational companies with his planned tax reforms.

All of this comes after revelations in the Paradise Papers took much of the shine off the Government’s claims that Ireland is taking the lead in clamping down on the most egregious tax avoidance strategies being deployed by the multinationals. Ireland has made a virtue of closing down schemes like the notorious Double Irish, but the C&AG’s figures undermine any claim to the high moral ground. However much we protest our innocence, we cannot pretend that the perception that Ireland is playing a game of beggar my neighbour with corporate taxation is both prevalent and, to some degree, justified. We cannot afford this damage to our global reputation.

There is a broad consensus that Ireland must defend its 12.5 per cent corporate tax rate. But that rate is defensible only if it is real. The great risk to Ireland is that we are trying to defend the indefensible. It is morally, politically and economically wrong for Ireland to allow vastly wealthy corporations to escape the basic duty of paying tax. If we don’t recognise that now, we will soon find that a key plank of Irish policy has become untenable.

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