The announcement of Ireland's new International Tax Charter by Michael Noonan, finance minister, in his Budget speech on Tuesday is what Americans would call political kabuki, evoking a classical Japanese dance-drama. In the vernacular, it merits being termed a fake while some of the claims made in the accompanying document could be termed economical with the truth for sensitive folk or lies to people who inhabit a world of common-sense.
The only direct legislative measure Noonan promised on Tuesday was to address the issue of "stateless" non-tax resident Irish companies that had been highlighted in a report on Apple last May by the US Senate panel, the Permanent Subcommittee on Investigations.
report [pdf] said
Apple Operations International had not filed an income tax return in
either Ireland or the US, or any other country, for the past five years. From
2009 to 2012, it reported income totaling $30bn.
Senator Carl Levin, Democrat of Michigan, and John McCain, Republican of Arizona, chairman and ranking member, respectively, of the Permanent Subcommittee on Investigations, released the following statement Tuesday on Ireland’s announcement.
While the current work being done by the Organisation for Economic Co-operation and Development (OECD) to develop proposals to update international corporate tax law, at the request of the G-20 leading developed and emerging economies, is more important than national initiatives, the Dutch who facilitate corporate tax haven activities that are much more extensive than Ireland's, announced last month measures to restrict the Netherlands' 23,000 foreign letter-box companies and revise tax treaties with 23 poor countries to allow the incorporation of anti-abuse clauses where necessary.
In Dublin, the strategy is to play for time and obfuscate because there is a reality that the Government will not officially acknowledge: corporate tax avoidance is entwined in the fabric of the national accounts.
With merchandise exports under stress because of the expiry of patents on American blockbuster drugs that are manufactured in Ireland, a surge in services exports in recent times has been hailed as reflecting increased competitiveness, while providing GDP (gross domestic product) with the only material boost. The latter, which includes the profits of the dominant foreign-owned sector, is the key metric for European Union targets.
In 2012, just Google and Microsoft accounted for a third of record services exports, because of tax related revenue diversions from other markets - - it's a bit of a stretch to classify Google sales in Australia and Hong Kong as Irish exports but that is what's happening.
So about 45% of the value of services exports or €40bn (25% of GDP) is virtual or effectively fake and to wipe this out overnight would be embarrassing. It would also undermine the argument about competitiveness as national output would have to be downsized with a resultant rise in unit labour costs.
In the debate on tax avoidance, the Government would like to keep the focus on defence of the headline 12.5% corporate tax rate but that is not under attack, despite some confusion overseas.
The Dutch have a 25% corporate tax rate and lots of tax avoidance and evasion.
Ministerial mantras that Ireland's tax system is transparent and the effective corporate tax rate is close to the headline rate, are debunked here:
The Department of Finance's 'Ireland's International Tax Strategy' [pdf] document, which was published on Tuesday contains some gems and what would commonly be understood as lies:
On the last point, in recent times, the US Eaton Corporation with a payroll of over 100,000 and only a small headquarters staff in Ireland, is availing of the 12.5% rate.
A brass-plate is one thing and a brass-neck is another.
The bromides on helping developing countries must rank with the hypocrisy of Bono, the frontman of the Irish rock group U2, who last month demanded transparency from extractive companies operating in Africa, who were likely using Dutch tax haven facilities just like U2!
This is classic cant and a wise man named Abraham Lincoln once said: "You cannot escape the responsibility of tomorrow by evading it today."
The good news is that default Irish procrastination will not work this time as the sands are already moving under the comfortable seats of conservative policy makers.
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