IRELAND’S CORPORATE TAX rate has come under heavy criticism at the World Economic Forum in Davos, Switzerland.
The invitation-only summit, which is held every year in the snow-covered mountainous village of Davos, sees academics, politicians, private business owners and public speakers gather to discuss economics, politics and world affairs.
Finance Minister Paschal Donohoe and Taoiseach Leo Varadkar are in attendance, and have been engaging in debates – and defending Ireland’s controversial corporate tax rate.
During one of those debates, which played on Morning Ireland today, Nobel Prize-winning economist Professor Joseph Stiglitz accused Ireland of stealing revenue from other countries through its corporate tax code.
“The big case and everybody knows was the Apple case. €13 billion that were generated all over Europe that were funnelled into Ireland, created a few jobs, but were stealing revenue from all the other countries of Europe. It was clear it was stealing revenue and to some extent jobs, from other places in Europe because it was secret agreement.
If that agreement had been transparent, and open to every other company, Europe would have had zero corporate tax revenue from American companies.
Donohoe’s reply was:
“The reason why we took the stance that we did is because we do not do deals with individual companies. Apple have been present in Ireland for 14 years, as have many other companies, it is not in the interest of companies or investors that we have in Ireland or all the taxpayers that I represent, to do any deal with any of them and we don’t.
I know this is the source of fierce debate and I’m involved of most of it myself, I do need to use this opportunity to acknowledge that we do need to make progress on this… but it isn’t Ireland’s role or indeed ability to be a global tax collector.
“What we can do we’re going to do, while retaining the competitiveness of a very small and very open economy.”
Ireland’s corporate tax rate is at 12.5% – almost half the rate of other small European countries’ rates. For example, Belgium’s rate is 33.9%, Austria’s is 25%, and Greece’s is at 29%.
Ireland is being accused of retaining its low rate to attract large multinationals, but at the detriment to its European counterparts. That accusation has been exacerbated by a report that showed 13 of the top 100 companies in Ireland had an effective rate of less than 1% in 2015, as one Davos guest speaker pointed out.
Italian investor Davide Serra, who’s the founder and CEO of Algebris Investments, was even harsher in his criticism of Ireland’s handling of corporate tax. He said that Ireland collecting less than 1% of tax from multinationals was “a joke”.
“It’s very simple. Within Irish tax code if you are a multinational, there is 100% directed outside Ireland – de facto you’re not taxed.
“Hence and this is the law, and I’m happy to challenge you in a rule of law. So Google €22.6 billion revenue in Europe in 2015. How much taxes they paid in Ireland? 48, which equates to 0.002%, a better deal than Apple.”
“If you are in Ireland, you charge 12.5%, if you are somewhere global and you put everything in there, they don’t see you. Now, this has equated to more than a €20 billion illusion a year in European taxes.
Why are you allowing illusions, less revenue, so losses, to European citizens of €20 billion?
I say – and I love Ireland and I have a business in Ireland – [you should] tax everyone, no matter where they come from at 12.5%. Because if you tax at 0.002%, this is a joke.
Donohoe’s response was to say he’s “delighted” that Serra had decided to locate his business in Ireland, where there’s “such a good environment to do business in”.
He repeated a statement that’s been given before by Donohoe when asked about Google and Apple’s rate of tax in Ireland: that it wasn’t appropriate for him as Finance Minister to comment publicly on their private tax affairs.
But he added:
“I believe companies and corporations should pay their fair share of taxes and should pay an effective rate of tax and I believe that needs to be done in a coordinated and global manner.”
Meanwhile, Taoiseach Leo Varadkar has been conducting interviews with international media about Brexit.
In an interview with Reuters published yesterday, he said that he didn’t believe the UK would backtrack on its last-minute December deal that ensured “regulatory alignment” between Northern Ireland and the Republic.
“I don’t think the United Kingdom will depart from that and if they try to, it would send a very bad message in general as well, that if you agree something in December and try to move away from it in February, it’s very hard to trust that person, so I‘m sure they wouldn’t do that,” he said.
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