First, the good news. We learned last week that our corporate tax take, which is heavily dependent on the big tech and pharma multinationals, didn’t decline. The also-good news: it really never declines. It’s increased every year since 2014, and usually has been robust. For years.
But, as my colleagues have noted here, noted we have nonetheless already been warned, as we are every year by the finance mandarins, that corporate tax receipts from the multinationals could decline.
They will say the same in early October, when the budget is announced. And they’ll say it again this time next year, when the half-year returns are reported. The wary cautions about the risk of plummeting corporate tax revenue are as predictable as M50 traffic jams.
Or my columns, I suppose. I could pull out various pieces I’ve written over a couple of decades rebutting the regular dire warnings that multinational tax revenues could drop off, and the companies could leave. This is frequently connected to recurring assertions that Ireland is or has been the EU equivalent of an offshore tax haven, but as we’ve seen with the long, long, long legal debate in the EU over supports given to Apple by Ireland, opinions swing many ways on those assertions, too.
That’s not to argue that there aren’t many problematical aspects to the sweet deals made between the Government, its agencies and multinational corporations – there are – but much of the financial trickery is structured around extremely complex international regulations that big multinationals aim to exploit out at the limits of feasible interpretation. The US could have most effectively addressed these through its own tax laws, given that companies eventually want to bring that money back home to the US mother corporation. But for years, it didn’t bother to do much.
Yet after Ireland, the US and EU worked to close the best known loopholes like the so-called Double Irish and Dutch Sandwich, the corporate tax take in Ireland still continued to rise. Perhaps most telling, even after Trump blustered and complained specifically about Ireland and then changed US tax structures, Ireland STILL saw increases in the multinational tax take.
That tax resilience stands as convincing evidence that the State could and should have been far less open-handed to multinationals, many of which have grown wealthy beyond imagining. Of the mere eight corporations that have at any point surpassed a market valuation of a trillion dollars (€924 billion), five have major operations in Ireland: Meta, Alphabet/Google, Apple, Microsoft and Amazon.
This is all an extraordinary turnaround compared with when I first arrived in a very poor Ireland in the mid-1980s. But as I wrote in 2005 (yes, 2005) when tax-talk was again all over the front pages, the companies are not fly-by-night visitors attracted only by tax deals. They’re here for a broad range of reasons, some of them quite soft and social. Back then, I quoted an Irish business source who was based in the US and regularly had sight of high-level corporate discussions and decisions.
Ireland, he said, was “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.”
In 20 years, nothing has changed on that list except that Ireland is, if anything, even more attractive as a major European base because the UK is considerably less appealing after Brexit and also hasn’t exactly had the most stable of political environments in recent times.
When a US company looks at where to base in Europe, it wants to deal with governments through English. And it wants a location where US employees and management are happy to work, which for most, means, an English-speaking country. Cultural links, such as those the US shares with Ireland, are a plus. It wants a country in the euro zone. Etc, etc. That means Ireland comes out on top, over and over, on multiple levels.
Yes, prudence is wise. Plan for a rainy day, don’t assume an endless multinational tax bonanza. But the way to do that should have been started long ago, when the State would have been better off boosting its home-grown tech (and other) business sectors, bolstering education rather than tightening budgets, and addressing problems that not only aggravate and disadvantage Irish citizens, such as housing shortages, but have become the stronger determinant as to whether multinationals remain.
Ironically, the State is learning it isn’t the subsidies, tax deals and other perks that attract and keep those taxpaying multinationals. It’s the housing, education, health, cultural and other facilities and supports that make life liveable and rewarding for everyone. Many of those multinationals have been flagging housing, education and other social issues for a long time. As the government mulls over what to do with its bumper €8.3 billion budget package – much of it funded, as ever, by bountiful corporate tax receipts – its To Do list is self evident.
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