venerdì 9 settembre 2016

Letter from the front: Ireland's new dependency on tax avoiding corporations

La traduzione in italiano la potete trovare in "Lettera dal fronte: La nuova dipendenza dell'Irlanda dalle corporazioni che "sfuggono" al fisco"

By John Waters

This article, originally published three years ago in the Irish Mail on Sunday, acquires a renewed clarity in the wake of the EU Commission's order that Apple must pay a tax adjustment of €13 plus interest to the Irish government - and the Irish government seeks to refuse.


Strange that, although in ‘real life’ the words ‘evasion’ and ‘avoidance’ mean much the same thing, in matters of taxation they’re distinguishable in a manner that can be expressed in a legal formula. Tax avoidance is the legal exploitation of the tax regime to one's own advantage; tax evasion is doing the same thing by illegal means.

Such niceties are now what protect Ireland from acquiring an international reputation as a rogue economy to which shyster corporations repair in order to cheat their home economies of enormous amounts of moolah.

Monitoring various discussions of the Apple, Yahoo and Google tax controversies which have bubbled up intermittently in recent years, I have long been stuck by the total inability of our collective conversation to express a clear moral principle in this area anymore. A US Senate sub-committee revealed Apple had in 2012 paid just 2% tax on $74bn in overseas income, mainly by exploiting a loophole in Ireland's tax code. Google's UK sales are worth £3.2bn, but most are routed through Ireland, meaning it paid £6m in corporation tax in 2011.

So compromised have we become by our dependency on these shyster corporations that a braver commentator than I might easily rebut the idea that anyone has a moral obligation to pay tax at all. After all, if Google, Yahoo and Apple can be excused from paying all but a pittance to the Irish State, what moral basis can there be for pursuing ordinary Irish citizens for significantly higher proportions of their own incomes? Moreover, since it is now patently clear that such organisations have been using Ireland as an offshore laundry service, how can the Irish revenue service keep a straight face when demanding that already hard-pressed citizens pay a new tax on the roof over their heads? The idea of a moral obligation to pay taxes increasingly seems a soft fiction put about to take the hard edge off the fact that taxes are paid by the weak because they are afraid of going to jail, and withheld by the wealthy because they have the power to say no. If enough people began to see that the payment of taxes is governed by an entirely selective morality, the entire basis of our economy would collapse, and this, obviously, is such an appalling vista that the pretence must be maintained.

The trickle of revelations that has ensued in recent years is the inevitable culmination of 20 years of a morally derelict industrial policy which has done more than contaminate the moral groundwater of Irish public life. It has also dictated a policy direction whereby the natural, indigenous energies of Irish society have been neglected in favour of a cuckoo-in-the-nest economy from which Ireland ekes out an existence – swallowing the crumbs that fall sparingly from the transnational shyster banquet.

This state of affairs can be traced back to the 1992 Culliton Report, prepared for the then Minister for Industry and Commerce, Des O’Malley. This Industrial Policy Review Group swept aside proposals to pursue an indigenously-directed model of Irish endeavour in favour of attracting chemical and computer manufacturers using Europe’s lowest corporate taxes.

On the face of things, it was successful. By 1994, economic growth had risen to 6%, from virtual stagnation levels a couple of years before. But a hidden consequence was that Ireland developed a two-speed economy – the high-performing TNC economy and the rather sluggish indigenous model, which sucked the hind-tit of public policy. By the turn of the millennium, TNCs were generating six times more in profits than a decade before, generating as much as 90% of corporate profits in the Irish economy. Many Irish firms, on the other hand, were struggling to stay in business. People abroad looked in wonder at the headline Irish statistics, oblivious that, actually, they weren’t looking at the Irish economy at all.

And, of course, most of the TNC profits were being taken out of the economy as the earliest opportunity. In 1983, foreign profit repatriations accounted for just 3% of GDP; by the end of the 1990s, this had risen to 40%. Obviously, an economy with this kind of exposure would go to great lengths to hold onto its apparently benefactor outsiders, who inevitably hold the whip-hand when it came to deciding how high real tax rates should be fixed.

Fifteen years ago, I wrote about the damaging implications of TNCs operating in Ireland. Not only were many of them polluting the Irish landscape and transnationally fiddling their taxes, but their very presence was enabling politicians to pass the buck of responsibility for the longer-tern well-being of Irish society.

The impression put about is that the scale of Apple's and Google’s fiscal creativity has come as a surprise, but it was already common knowledge in the late 1990s that many TNCs were vigorously exploiting our low-tax regime. Two-thirds of American TNCs operating here were reputed to keep two sets of books – one set was for tax purposes and the other for evaluating their actual activities. Our political establishment has long pretended to be unaware that many Irish-based subsidiaries were importing raw materials from their parent companies at greatly reduced, sometimes nominal cost, and exporting the finished products at grossly inflated prices. Thus, a far greater proportion of the cost of such products was qualifying for the low Irish tax rate than should properly have been the case, a little fiddle known as ‘transfer pricing’.

One argument much in vogue in the 1990s was that the TNCs support the indigenous Irish economy through business 'linkages' with Irish firms. But a 1999 Enterprise Ireland study of 2,667 Irish companies found that only 174 of these were servicing TNCs, and most of these supplied things like packaging and printed materials.

We are told, time and again, that the presence in Ireland of TNCs is a good thing – mainly because of the jobs they bring. In fact, as we are beginning to suspect, it is a very bad thing, because ultimately it undermines the very basis of our community, by unraveling the principles by which citizens have been prepared to contribute, according to their means, to the common good.

Ireland is richly endowed with cultural gifts and natural resources. Our land is amongst the most fertile in Europe, our climate eminently suited to agriculture, our fisheries among the best in the world. Above all, our literary and musical traditions have made us the envy of the globe.

Our main problem, however, is that we have almost zero respect for what we are and what we can do of and by ourselves. Since we kicked out the English, we have been frantically scanning the horizon for some new tyranny to become dependent on, showing nothing but contempt for the idea of fending for ourselves and living by our own lights. Our whole approach to the question of self-sustenance and self-realization is craven in the extreme: a palm outstretched in search of alms and hand-outs.

In the face of the appalling facts or our situation at present, you still hear the smug voices that hypnotized us into taking the road to disaster, again assuring us that our economy is one of the most vibrant in Europe. They point to the promising growth projections and export figures, omitting to mention that all such positive indicators relate to the cuckoo-in-the-nest economy arising from the aggressive policy by which multinational operators have been lured here in the certainty of low taxation and minimal regulatory encumbrance. This is not, in any sense whatever, an Irish economy, but the consequence of a myopic and soft-option policy of availing of Ireland’s openness to the global economy in order to benefit from the overflow wealth from the prosperity and success of other societies.

When Google and Apple finally depart these shores – as they will the moment the tax advantages begin to dry up – we may find they’ve left behind an enormous hole in our sense of social solidarity, thus revealing the vacuum at the heart of our capacity to fend for ourselves that our cuckoo-in-the-nest economy has recently served to conceal.



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