Ireland has never really managed to shake off the financial "Wild West" tag the New York Times used during the last boom to decry this State's light-touch approach to business regulation.
This week, tax politics reminded me of one the best films ever made about the Wild West, The Outlaw Josey Wales. In an infamous exchange, a sneering politician patronises a gunman with "an old saying: to the victor belongs the spoils".
“There’s another old saying, senator,” responds the gunslinger. “Don’t piss down my back and tell me it’s raining.”
In the debate over whether this is a “tax haven” for multinationals, each time Ireland denies it, our international neighbours turn to regard us. There stand our politicians, unzipped but pointing at dark clouds in the sky, pleading innocence over the stinking liquid running down the other nations’ fiscal spines.
Twice this week, Ireland was accused abroad of being a "tax haven" that shelters other countries' revenues, to the annoyance of the Department of Finance.
Michael Noonan, with one of his meaner casual remarks while minister for finance, even dismissed the Greek economy as being about little more than "feta cheese". He got a laugh for it. But it was a low blow.
The first was by motorbike-riding, leather jacket-wearing, student-swooning former Greek finance minister, Yanis Varoufakis. He told a German audience that Ireland is a tax haven “free-riding” on the rest of Europe.
Perhaps he is is still sore at our leaders for their occasional lack of solidarity during the financial crisis. Michael Noonan, with one of his meaner casual remarks while minister for finance, even dismissed the Greek economy as being about little more than “feta cheese”. He got a laugh for it. But it was a low blow.
The second "tax haven" accusation this week, from academics in Denmark and California, was more substantial. Their study – The Missing Profits of Nations – suggested Ireland is the biggest corporate "tax haven" in the world. It estimated the State sheltered $106 billion of foreign-earned multinational profits in 2015, more than every tax paradise island in the Caribbean combined.
The charge stung the department and its current Minister, Paschal Donohoe. He is an awful lot less flippant than Noonan, but is he any more credible internationally when he denies Ireland is filching its neighbours’ tax larders?
Whenever Ireland is accused of being a tax haven, the default position of the State is usually to plead that we don’t fit the definition of one. Often, as Donohoe’s department did this week, they point to the Organisation for Economic Co-operation and Development (OECD). It does not define Ireland as a tax haven because the State doesn’t have a zero or nominal corporate rate and isn’t wrapped up in tax secrecy laws.
“You see!” our leaders retort. “We’re not a haven because the OECD says so.”
The OECD is a rich country club that doesn’t consider any of its own members to be havens. This includes the Netherlands, which could give Ireland a run for our tax-dodging money, and Luxembourg, which isn’t far behind.
A March OECD report to the G20 group of nations gave Ireland the highest rating on tax matters. It also gave a similar clean bill of overall health to the Isle of Man, a crown dependency of Britain, another OECD member. Everybody knows the Isle of Man is where tax bills go to die.
Tax haven status, as with beauty, lies in the eye of the beholder.
Members of US senate finance subcommittees believe Ireland is a tax haven. So does the state of Brazil, which has us on its official list of havens. So, privately, do many members of the European Union, whose administrators have criticised the State for allegedly helping Apple dodge €13 billion.
Plainly, many of the world’s biggest multinationals must also see Ireland as a tax paradise. Otherwise, why would they keep redirecting billions of euro of their revenues, earned elsewhere, here? It isn’t just for our much-vaunted talent pool of English-speaking workers. That’s often just a convenient excuse.
It doesn’t matter whether or not Ireland fits some bureaucrat’s definition of a tax haven. It matters only that this State, by diving into the sack with every hot multinational that sashays along to reduce its tax bill, appears to outsiders to be one of the bad guys.
In the long term, this will damage our fabric as a nation. It doesn’t matter whether you’re the guy who jumps the counter at the bank, or the one who brandishes the sawn-off, or the lookout, or the planner, or the getaway driver (which is probably the closest to Ireland’s role in tax avoidance). To those left out of pocket, they’re all seen as bank robbers.
How should Ireland play this? For a start, lay off the national innocent face emoji. This State has an image problem abroad when it comes to fiscal matters, and it won't be solved by knocking down straw men.
How should Ireland play this? For a start, lay off the national innocent face emoji. This State has an image problem abroad when it comes to fiscal matters, and it won’t be solved by knocking down straw men. When faced with any tax avoidance criticism, the State often rushes out to defend our 12.5 per cent corporate tax rate. Stop it. The rate isn’t the problem and no serious nation really doubts that it is our sovereign right to set it at whatever level we like.
The problem is the perception, which, let’s face it, is grounded in reality, that Ireland is unfairly taking other countries’s tax revenues by turning a blind eye to the balance-sheet gymnastics of multinationals that funnel foreign cash here.
Many culprits are in the tech sector. They’re up and down to Donohoe’s office every 20 minutes, the lobbying register shows. He should tell them that Ireland will no longer carry the reputational can. Criticise them publicly for their tricks.
Recalcitrant multinationals, aided by our deliberate blindness, got us into this image problem. Who else can get us out of it but ourselves?
FOOTNOTES
Hindsight 20/20 on Nama sales
Sometimes, as with the corporate tax situation, Irish officials deserve much of their criticism. But sometimes it is not quite as clear cut.
The National Asset Management Agency this week suggested it could make a €3.5 billion surplus, and hinted it would like to stay alive past the 2020 date that the Government is expected to wind it up.
In recent times, many of Nama’s critics have slammed the agency for allegedly selling Irish assets far too cheaply to foreign funds, commonly disparaged as “vulture funds”, in the early days of its mandate in the depths of the crisis. The assets were worth far more and Ireland missed a trick, the theory goes.
The corollary of this theory is that there must have been other buyers out there at the time who were willing to pay higher prices than the vultures and had the cash to do it. Pray tell, who were they?
If Nama initially sold assets at fire sale prices, it might be because the State had gone up in flames. The cheap sales helped douse the fire by getting the market moving again, even if that felt like a burn.
Due to past mistakes, the State was walking around with its pants down at the time. When that happens, someone is bound to kick you in the behind. But at least it gets you moving.
Hard Brexiteer Rees-Mogg reveals hard neck
It emerged this week that Somerset Capital Management, an investment group co-owned by arch Tory Brexiteer Jacob Rees-Mogg, has launched an Irish fund under European rules that warns its investors about . . . a hard Brexit.
The local directors for SCM's Irish vehicle, according to Central Bank records, feature some interesting names. They include former Citi banker and one-time acting director of the National College of Art and Design, Bernard Hanratty.
Also serving on the board of SCM’s Irish unit are former KPMG accountant Seán McCreery, who used to mind the twine as chief financial officer up at Larry Goodman’s ABP meat empire.
SCM’s Irish move raised a chuckle here and in the UK, given its Tory co-founder’s stated political convictions. It’s not just Moggy’s preferred Brexit that’s hard. What about his neck?
