When it comes to corporate tax rates, Ireland may soon be forced to pick between 100,000 job losses or guarding our international reputation. Which will the government choose?
The situation has been described in a new submission to the Department of Finance by the Consultative Committee of Accountancy Bodies Ireland (or CCAB-I).
https://twitter.com/agoodall4/status/1437722098357649416
In a nutshell, the OECD is proposing a unified global corporate tax rate of 15%. In short, countries who agree to this proposal would have to tax companies at a minimum of 15%.
This, of course, is meaningfully higher than Ireland’s famous 12.5% rate, which is obviously a significant source of the country’s foreign investments. Let’s face it; it’s not like Ireland, with less than 7 million consumers on our whole island, is some huge market to appeal to. Plus, with Britain out of the European Union, a well-educated English-speaking workforce only takes you so far.
Therefore, Ireland’s main attraction as a destination for foreign companies is our astonishingly-low tax rate by European standards. But according to this latest report, the government is facing quite the ultimatum on this issue.
Consultants say that, quote: “Ireland will lose sovereignty over corporation tax under the OECD Pillar 2 proposals. Ireland will be subject to a tax rate set by large countries like the US, Germany, and France.”
Lest it be forgotten, these countries are our economic rivals in many ways. It’s in their interest to see Ireland weaken its main economic advantage in the interest of “solidariddy,” to quote Stephen Donnelly.
Sure, we’re friendly with our European and American pals, and long may that continue. We can and should have a working relationship with other nations. But every foreign company that sets up shop in Ireland is one that didn’t set up in any of these other larger countries – a fact which they often clearly resent.
Ireland has been dubbed a “tax haven” (as if that’s a bad thing), and it’s no secret that other nations have wanted to even the playing field in this area for a long time. Not by lowering tax rates themselves, mind you, but by making us tax companies the same way they do, thus making our economy just as unattractive.
But here’s the bombshell from the report: “If an employer threatens to pull 100 jobs out of Ireland, the Irish public expects the government to do all in its power to fight to retain those jobs in Ireland. On this occasion 100,000 established high value jobs are at risk along with future job creation opportunities.”
However, the consultants added: “…the fact that Ireland is not signed up to the Inclusive Framework is not good for the country’s reputation,” concluding “There is no clear solution to the dilemma facing Ireland.”
I don’t think the Irish Independent were over-egging the pudding when they called this a “nightmare scenario” for the government.
On one hand you have economic catastrophe, and on the other, you are being forced to go against the grain internationally and not go along with what the oh-so-wonderful international community in Europe wants.
This is not to say that our international reputation is irrelevant – of course it matters how we’re perceived abroad to some extent. But not to the extent of economic suicide, which is what the government will now have to contemplate.
Sure, Finance Minister Paschal Donohoe has previously stated that Ireland won’t be signing up to this – but would anyone be shocked if we did?
Minister for Finance Paschal Donohoe has said he is "so committed" to retaining Ireland's low corporate tax rate that he is not willing to sign up to a new international tax agreement in its current form. https://t.co/0XFfURTT2B
— RTÉ Business (@RTEbusiness) July 15, 2021
For the past decade at least, Irish politicians have found their sole identity as “Europeans” and “Citizens of the World” – to quote Fianna Fáil leader and Taoiseach Micheál Martin:
“We want nothing to do with a backward-looking idea of sovereignty. We remain absolutely committed to the ideals of the European Union.”
Leo Varadkar, as we know, has said for years that he initially joined Fine Gael because it was a “particularly pro-European Party” and that he is “very much a federalist on European issues.”
During Brexit he was quick to assure European Commission President Ursula Von Der Leyen that Ireland is “very much on Team EU.”
Quotes like this don’t exactly instill confidence that these are people with a great willingness to stand up to the OECD countries. If Martin meant it when he said that sovereignty is a “backward-looking idea,” then tax sovereignty is a small price to pay for another step down the road of globalisation.
Moreover, the straining of Ireland’s power grid with radical green policies and the shutting down of power stations have not exactly made it easy for tech companies and data centres to invest in Ireland. It seems like the government is doing everything it can to undermine foreign investment in the economy.
Martin often quotes former Fianna Fáil Taoiseach Seán Lemass, whom he clearly respects. But it was Lemass who first gave Ireland its FDI model.
As Sean Lemass so often said, social and economic progress must go hand in hand.
Our core objective is to not just rebuild, but to build back better
This #EconomicRecoveryPlan will help kick start a jobs-led recovery and drive the economy forward. pic.twitter.com/FotK5Jq3Iy
— Micheál Martin (@MichealMartinTD) June 1, 2021
Let’s see if the government will actually fight to protect the fruits of Lemass’s policies, or if our economy and sovereignty will be sacrificed on the altar of European goodboyism.