IT’S BEEN JUST over three years since Ireland was labelled as a “tax haven” on the floor of the US Senate.
It was a direct and public attack on Ireland’s relationships with multinationals and their tax, and it forced the government into a response.
Five months later, on the floor of our own representative house, Finance Minister Michael Noonan said that the government was going to crack down on ‘stateless’ companies registered here.
In the intervening years, there have been claims and counter-claims about Ireland’s tax practices. Claims of a ‘sweetheart deal’ with Apple, the biggest US tax avoider of them all, have been denied by the government.
But Ireland’s denials took another massive hit on Tuesday when GDP figures for 2015 were revealed.
While the Central Statistics Office had previously predicted a very strong GDP growth rate of 7.8%, the actual end result was a crazy 26.3%.
The figure is ridiculous not only for representing a growth rate nearly four times that of China, but mainly because it shows the scale of the effect multinationals have on Ireland’s small economy.
The massive figure comes in large part from multinational companies, like pharmaceuticals Medtronic and Allergan, moving intellectual properties here.
It’s not an exaggeration to say Ireland’s accounts became the punchline of the economic world for the day. Nobel laureate and New York Times columnist Paul Krugman called the stats ‘leprechaun economics”, a wonderfully cutting term that could be here to stay.
The Financial Times had the most fun of all, comparing the numbers to some of Ireland’s greatest works of fiction.
Ireland getting the mick taken out of it for the day is one thing, but as Aidan Regan of UCD’s School of Politics and International Relations points out, the damage is how it puts the focus back on Ireland’s tax regime.
*The bottom line here is that this is corporate tax avoidance and Ireland’s role in facilitating corporate tax avoidance,” he says.
I think this 26% figure will come back to haunt the Irish government and policy makers because it shines a light once again on Ireland’s role in facilitating corporate tax avoidance.
Questions about the GDP figures were put to both the Taoiseach and Finance Minister during the week. While they acknowledged that they don’t represent the scale of actual growth, there seemed to be little acknowledgement that such announcements are actually bad news for our image.
On the campaign trail for example, both Hillary Clinton and Donald Trump have referenced Ireland when speaking about the questionable ways corporate American uses international tax loopholes.
But if companies are still coming here, then why should we care?
Well, firstly because headlines about crazy growth rates and corporate tax avoidance distracts from the good things that are actually happening in our economy.
Even apart from 4.5% growth in consumer spending and reduced unemployment, multinational companies are increasingly basing themselves here. This should be a feather in Ireland’s cap but it’s being unfortunately overshadowed by the scale of the tax avoidance they are engaged in.
“There is real activity taking place,” says Regan.
Just go down to the Grand Canal Dock and look at the large tech firms that are there and the role of the IDA and Enterprise Ireland in facilitating both foreign direct investment and indigenous enterprise, there’s real stuff happening and these figures just make a mockery of a lot of that and it undermines the enterprise policies of the State.
It also presents other problems, like making it impossible to measure things like exports as a percentage of GDP. Referencing the national accounts when making public policy choices also becomes difficult.
Perhaps most of all though, as international organisations like the EU the G8 make targeting aggressive tax avoidance a priority, global multinationals like Facebook and Google won’t be too happy if Ireland’s accounts keep bringing them bad headlines.
That more than anything is something that’s worth avoiding.
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