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Fintan O’Toole: Government seems determined to show world that Ireland is a rogue state

Government is defending the indefensible on corporation tax by placing State in company of tax havens and rogue state

You’ve heard of virtue signalling. But have you heard of the Irish variant: vice signalling? The Government seems determined to show the world that Ireland is a rogue state.

Last Thursday, 130 countries signed up to the Organisation for Economic Co-operation and Development’s (OECD) plan to limit tax dodging by multinational corporations, including a global minimum corporation tax rate of 15 per cent. It is a modest reform: the Biden administration wanted to impose a minimum global tax of 21 per cent on US companies.

Just nine of the 139 countries that took part in these talks refused to sign up to the 15 per cent proposal. One of the refuseniks is Ireland. The others include the European Union’s actual rogue state, Hungary, and two of the tax pirates of the Caribbean, Barbados, and Saint Vincent and the Grenadines.

To understand the company we are keeping, Barbados was placed on the Ecofin blacklist of tax havens in 2017 and Saint Vincent and the Grenadines was warned at the same time to get its house in order. (Ecofin is the EU’s committee made up of the finance ministers of all member states, including, of course, Ireland.)

Any successful organisation anticipates change and tries to get ahead of it. It sees what's coming and makes the best of it

This vice signalling is both immoral and stupid. Immoral because it marks Ireland as a willing enabler of a system of tax avoidance that robs other states of public resources and generates disastrous levels of inequality both between and within countries. Stupid because it is doomed to fail. We are, under both headings, defending the indefensible.

A recent study by the Czech economist, Petr Janský, found that multinationals shift $1 trillion (€840 billion) in profits annually from the countries where they are generated to tax havens or shelters. Within the EU, by far the most egregious enabler is the Netherlands.

But second on the list is Ireland, through which $28.1 billion (€23.7 billion) is siphoned. To put this in context, a comparable EU country, Denmark, accounts for $6.5 billion (€5.5 billion). Or to look at it another way, Ireland is on a par with Barbados and Jersey as a facilitator of corporate tax fugitives.

These are not abstract numbers. Profit shifting alone deprives national exchequers of $600 billion (€507 billion) a year. A study for the IMF in 2015 found that about €200 billion of that relates to developing countries – in other words to the world’s poorest people. We pride ourselves (rightly) on our aid programmes, yet we are a big part of a system that takes money from healthcare and education in the countries we want to help.

The stupid part is that Ireland is setting its face against the inevitable. Even if we leave aside basic morality – and we’ve been doing that for far too long – it is bafflingly foolish to nail our colours to the mast of a sinking ship.

Any successful organisation anticipates change and tries to get ahead of it. It sees what’s coming and makes the best of it. There’s a reason why there’s a cliché about joining those you cannot beat.

The Government is positioning Ireland like a car company defiantly insisting that it will go on making petrol-fuelled cars while all the others are shifting to electric vehicles. Paschal Donohoe channelling Jeremy Clarkson is not a good look.

Do we think Amazon and Google and Apple will love us all the more because we put up a plucky but doomed fight for their right to pay as little tax as they feel like?

The certainty is that, sooner or later, Ireland will sign up to the OECD’s plans, including the minimum corporation tax rate. It will do so for the simple reason that a country that defines itself as the economic bridge between the US and the EU cannot give the finger to both Washington and Brussels.

Why then must we stage this charade of mock-defiance? Is it mere habit: the 12.5 per cent rate has become an icon of national identity? Did Paschal and Leo dream, when they were nerdy kids, of hanging out with the bad boys of international finance?

Do we think Amazon and Google and Apple will love us all the more because we put up a plucky but doomed fight for their right to pay as little tax as they feel like? These companies value predictability. Staging a sham fight and then beating a retreat just looks flaky.

It also diverts us from the real and urgent challenges that Ireland faces. For a country at Ireland’s late stage of development, the attraction (and more importantly the retention) of foreign direct investment is no longer about tax.

It is about the excellent education and rich skills of its people, the stability of its democracy (which in turn depends on a sense of equality), the beauty of its environment, the quality of life it affords, the innovative and creative power of its culture and the soft power of its international reputation as an admirable country.

Clinging on to a lost cause of corporate chicanery does serious harm to the last of these and distracts us from all the others. Sporting a dishonourable practice as our badge of honour is a lot easier than leading the kind of social transformation necessary for Ireland to thrive in the post-Covid world.

Some wars are just. Some are winnable. This one is patently neither. The Government has neither might nor right on its side. At the very least, instead of sticking stubbornly to old vices, it should make a virtue of necessity.