Multinationals and the economy

 

Sir, – There has been much debate on Ireland’s reluctance to sign up to a minimum global corporate tax as agreed by the G20 group of major world economies.

The size of the risk for Ireland has been considered in great detail by the Minister for Finance and his department officials and they clearly assess that there is little to be gained for Ireland in conceding on a higher corporate tax rate at this time.

A bigger risk for Ireland’s economy will be the impact of a dramatic change in Government policy on personal taxation for senior managers in our multinational sector.

Ireland’s quarterly national accounts now show that the multinational foreign-owned sector of the Irish economy now exceeds, in euro value terms, the size of all aggregated domestic small and medium enterprise and other sectors.

Put simply, the multinationals’ impact on the Irish economy far exceeds the corporate tax yield.

The furore surrounding potential corporate tax changes in the future is irrelevant in the context of the wider economic impact of these multinationals.

Crucially, employees of multinational companies are very well paid by any comparison to local companies and the senior managers of these multinationals are exceptionally well paid – frankly they are, by and large, among the wealthiest people living in our society.

It is factual to assert that Ireland has very high personal taxation levels combined with the most redistributive taxation and welfare system in the EU. A standardised measure comparing progressivity trends expresses the tax-wedge experienced by above-average income earners as a share of the wedge facing those on below-average incomes.

On this basis, Ireland registers as the most progressive country in the European Union.

You would never imagine this to be true if you depended on Irish media for your information but by any international comparison we operate a welfare state in this country, delivered by the parties of the political centre, often described as right-wing parties.

Ireland’s largest tax-head yield, by a considerable margin, comes from taxes on income. Only circa 470,000 employees in Ireland pay higher rate income tax while we have approximately 960,000 exempt from income tax, unlike Scandinavian countries, often celebrated by parties of the left, where the taxation burden is more evenly spread into the lower income groups.

The success of Irish industrial policy in attracting inward multinational investment is undeniable and the redistributive benefits of their being here equally so.

A major risk to the multinational sector is the potential impact of Government policy changes in personal taxation. Ireland’s political parties of the left propose additional taxation on the better off, very many of whom are senior decision makers of multinationals.

This risk should be assessed and addressed by an unemotional and non-ideological debate before our next general election.

The largest opposition party, Sinn Féin, proposes additional taxes on the higher paid, such as a new 5 per cent high-income levy, removing tax credits on higher incomes, a new wealth tax on assets held by the wealthier, introducing a new 15.75 per cent rate of employer PRSI on higher salaries above a certain threshold.

Certainly People Before Profit would support these proposals and indeed other left-leaning parties would be under severe pressure to back them too.

The mobility of multinational capital and investment must be properly assessed in Ireland and not simply through the sole prism of corporate taxation. We must observe the experiences of other countries where governments led by parties of the far left have come to power.

The assessment must include detailed analysis of the likely impact on economic growth, on business investment, on employment and crucially, on tax yield available for redistribution, health services, education and State investment in public housing, hospitals, schools, public transport, and so on. – Yours, etc,

MARK MOHAN,

Castleknock,

Dublin 15.