At a reception hosted by the Irish Embassy on a trip to the US a few years ago, an IDA representative privately explained what is behind attracting foreign investment to Ireland.
ur, sometimes there is the diaspora heart of an American businessman with Irish roots who wants to give something back to “homeland” or be kind to “eye-er-land”.
As an English-speaking EU member state with significant cultural, social and political ties to the US, our country is also a good base for access to European markets. A well-educated young population and the attractiveness for young workers from abroad to come here are also strong selling points.
However, the real results for the IDA representative came from direct discussions with companies in this corner of the United States, through all sorts of contacts. But the CEO of the Irish great-great-grandfather or the sales manager responsible for export or the HR manager were not the most sought-after executives. It was the chief financial officer.
The Holy Grail met with the Chief Financial Officer to explain how the company’s bottom line would be impacted if some of the operations were based in Ireland with our tax system. This is how you connect them.
The number of multinational companies supported by IDA in Ireland is now 1,691 employing 275,384 workers. The Revenue Commissioners put the number of foreign-owned companies in the country at 16,535 employing 761,037 workers.
Apparently everyone settles here because they like the weather.
The government’s summer economic statement found that 10 multinational companies now pay half of all corporate taxes – and €1 for every €8 in tax revenue.
Although we hate to admit it, the corporate tax has been the backbone of the success in attracting foreign companies to this country.
The economic crash showed just how controversial our corporate tax rate is with our EU counterparts. After the low interest rate was not given up as a condition of the bailout, attempts were made to persuade Ireland to back down. At his first EU summit as Taoiseach in 2011, Enda Kenny was cornered by Germany’s Angela Merkel and France’s Nicolas Sarkozy trying to get him to give the 12.5 percent in exchange for undefined better treatment of Ireland give up debt.
The shakedown failed. Kenny was no slouch and wasn’t going to be mugged by the Crown Jewels on his first outing. In addition, the low corporate tax rate will continue to be an important pillar of the recovery. Here we are now with Celtic Tiger 2.0.
Various bureaucratic, legal and political attempts at EU and US level followed. Ireland is so accommodating that even if a company is found to have underpaid tax, we jump to its defence. The bizarre scenario in the Apple tax case saw Ireland take a 13 billion share. The decision was overturned and is now being tried in the EU’s highest court.
International pressure eventually led to a relegation. Last October Finance Minister Paschal Donohoe announced that Ireland would join the agreement on a new framework for the taxation of multinational companies, which includes a corporate tax rate of at least 15 percent.
“The agreement now provides certainty and strikes the right balance between our fiscal competitiveness and our broader place in the world,” he said.
The eventual introduction of a global minimum corporate tax rate means that Ireland’s main competitive advantage will ultimately be matched by other competing countries.
Coupled with the low corporate tax rate, the 12.5 per cent tax rate has been reinforced over the years by various tax avoidance schemes such as the infamous ‘Double Irish’ and taxing companies by their average profitability over a few years. Our pariah status as a tax haven reached absurd levels, nicknamed “Leprechaun Economics,” after the economy officially grew an unprecedented 26 percent in 2015 as foreign companies register here to avoid paying taxes elsewhere.
All is fair in love and war and taxes was our attitude, so we are unable to preach elsewhere about “fiscal competitiveness” or those who take advantage of it in other countries. Switzerland has long been considered an international tax haven, as wealthy individuals and companies benefit from low tax rates.
JP McManus, a billionaire businessman and Limerick hurling fan, is one such individual who lives abroad for half the year and is a Swiss tax resident. His generosity to the GAA back home in Limerick has helped transform a proud Also-Rans hurling county into a modern day superpower.
His support of Limerick GAA, from grassroots to senior level, was undoubtedly a factor in Limerick’s winning streak. His investment has transformed Adare Manor in his home county from a picturesque country retreat into a suitable venue for the Ryder Cup of golf between Europe and the USA in 2027. He is known for donating to and supporting charities and community groups in the city and county of Limerick.
Yet every time his name comes up, he is targeted by Dublin 4, sneering at his tax exile status and parallels between his generosity and the lack of taxes he pays in that country. What follows are superficial references to how everyone would like to decide where their untaxed income goes.
“If I were someone setting up a business abroad and it wasn’t doing so well, I would be considered an emigrant, if it was going well I would be considered an exile. Well, what do they want?” McManus noted a decade ago.
It’s a bit rich. Ireland does not have a high moral entitlement to taxes. Explore the Dublin Docklands north and south of the Liffey. There are a lot of tax evaders out there. They just don’t mention it on the nameplates on the doors.
https://www.independent.ie/opinion/comment/sneering-at-jp-mcmanus-is-a-bit-rich-as-ireland-has-no-moral-high-ground-on-tax-41846743.html Making fun of JP McManus is a bit pretentious as Ireland has no moral high ground when it comes to taxes