Credit: D Storan

Good news from Taoiseach: 12.5% rate not actually very important

For twenty years or more, Ireland’s politicians have been touting the vital importance of our 12.5% rate of corporation tax. So vital was that rate of tax perceived to be that, in order to secure passage of the second Lisbon Treaty referendum in 2009, a special protocol was secured from the European Union which promised that Ireland would never be compelled, under EU law, to change that rate of tax. At various times it has been described as “vital”, and “essential”, and “the key to Ireland’s economic strategy”. In fact, at the last two elections, both Fianna Fáil and Fine Gael have warned voters not to choose Sinn Fein, because of the risk that that party might raise the 12.5% rate.

All of those statements, apparently, were lies, and it was never that important. Here’s the Taoiseach yesterday, telling us something that he has, for some reason, never thought to tell us before:

Ireland’s lucrative 12.5% corporation tax rate is “not a unique selling point” for multi-national companies and never was, the Taoiseach has claimed.

Micheál Martin has told the Dáil that negotiations that would see corporation tax set at a minimum 15% are “not complete at all” and Ireland is seeking further clarification on the issue.

However, he claimed that our low corporate tax rate “on its own is no longer a unique selling point,” adding: “It never was, actually.”

Instead the Taoiseach has said that investment in education and our joining the European Union were among the “fundamental pillars” which have lured multi-national companies to Ireland.

The media’s job, in a democracy, is to tell the voters when politicians are spoofing. In that spirit, we may as well tell you plain: Mr. Martin is engaging in olympic-level spoofing on this issue.

It’s not especially difficult to show that it is nonsense, either. Mr. Martin says that the tax rate was never Ireland’s unique selling point, but that rather, it’s all down to our investment in education, and our membership of the EU. Which rather requires you to believe that our EU membership, and education levels, are unique. The problem is that they are not.

Ireland, in fact, does not even make the top 10 in terms of education spending in the EU. Belgium, Denmark, Sweden, France, Cyprus, and Latvia are just some of the countries that are ahead of us, in that metric. They are all, too, in the EU. And they all have a higher corporate tax rate than Ireland does.

He might have offered a more plausible argument had he claimed, for example, that Ireland’s status as an English speaking country inside the EU was vital. That would still have been highly dubious: After all, most of the northern European countries, from Belgium and the Netherlands and Germany through to Scandinavia, have a very high proportion of fluent English speakers.

There’s also this to consider: If the 12.5% rate is not, as he claims, of vital importance to attracting multinational investment to Ireland, why haven’t we raised it to 15% ourselves, voluntarily, years ago? After all, in this telling, we could have done just that and lost nothing. We’d actually have saved ourselves billions in lost revenue, and the nuisance that these international negotiations over tax have been. What was stopping Mr. Martin, or previous Governments? Do they just like the multinationals so much that they wanted to give them a present?

The truth of the matter is that, for whatever reason, Mr. Martin does not feel comfortable asserting Irish sovereignty over our own tax affairs. Maybe he fears reprisals of some sort from bigger countries. Perhaps he is simply embarrassed to be seen as an outlier amongst his peers at Davos, come January (a factor that plays a much bigger role in these decisions than politicians would ever admit). Perhaps he feels he can negotiate something even better than the 12.5% rate in return for giving it up. Whatever the reason, the Government now seems set on abandoning the cornerstone of Irish industrial policy over the last three decades. But pretending that it was never the cornerstone of our policy is embarrassing, and, to boot, a barefaced lie.

If you don’t believe me, maybe believe this guy. Here he is, in 2014, telling us all that “166,000 people work in multinational companies in Ireland….. good quality jobs. Small businesses get a lot from the multinational companies in Ireland. The OECD is an important body but it does not have international jurisdiction. It’s not our fault that the USA has a tax regime that it decides to have. It was out of order for David Cameron to have a cut of our tax rate…. All David Cameron wants is our jobs! He wants Apple in the United Kingdom!”

Quite so.

What changed, then?

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