Jason OMahony - Irish political blogger, Irish politics, EU politics
 

We need to take the lead on tax harmonisation.

Previously published in The Sunday Times Ireland Edition

Who would have thought that Brexit was going to be so boring? It’s going on and on and on and aside from the odd entertaining scene provided by Brexiteers united in a bond of trust akin to that of your average New Jersey gangster, it feels like nothing is actually happening.

As if that isn’t bad enough, our political parties know that despite the mind-numbing tedium of the process, they have to be seen to be constantly talking about it because it is, of course, very important to our open island economy. That would be fine if Fianna Fail and Fine Gael and Labour and even (whisper it) the shinners all had differing opinions on what our response to Brexit should be. But they don’t. Each one is an interpretative dance saying the same thing: no border, keep the UK market open, and keep the rights our citizens currently enjoy both here and in the UK. Even an election won’t change it, regardless of whether FF or FG end up propping up the other, the Schrodinger’s Cat of Irish politics, both in and out of power simultaneously.

The funny thing is that there is a huge issue looming towards us which is going to require a huge national debate. It has the potential to tear us apart, destroy our European policy, indeed call into question if not our membership of the European Union itself but at least the Eurozone. Whilst Micheal and Leo are down in steerage, drawing each other like “one of your French girls”, there’s a wall of pain looming out of the night towards us and we may not have anyone in the crow’s nest with binoculars.

It is, of course, our old friend, tax harmonisation. It’s back on the table, it isn’t going away, and more to the point, we should be willing to engage. It’s time we start the national debate. Should we support a European corporation tax regime?

We all know the arguments against. Our sovereign right to set corporate tax is the closest thing we have in Ireland to the Americans right to bear arms. Whereas in the US middle-aged men dress up in combat gear and take up positions on streets with ridiculously unnecessary firepower, in Ireland corporate lawyers stand menacing with copies of the Maastricht treaty tucked in underarm holsters. We’re on a rock in the north Atlantic, and without the power to help giant corporations fiddle their taxes (sorry, achieve optimum tax efficiency) we have bugger all to offer them compared to other countries within the single market. That and we’re a bleeding island too, that doesn’t help either.

True, we do speak English. The Americans regard us as less objectionable than the French and not as scary as the Germans, and in any case they’re related to half of us. Also it helps that our nearest neighbours seem determined to win the Olympic gold in self-face punching, but the tax issue is a big deal to us.

But things are changing on the continent. Emmanuel Macron is busy trying to push through reforms to French labour law to, you know, let businesses hire people without the MD having to surrender a kidney as a hostage. But as his plummeting poll numbers show, he’ll need to do something to shore up the centre-left vote that put him in. What better way than kicking the crap out of mega-companies? Nobody likes them anyway, so make them pay more than the current somewhat modest contribution they make to our corporate tax coffers? Hence our problem.

We could panic, and try to hold the line. It would at least save us the hassle of having to think up a new policy. Lord knows, our politicians sure hate having to think up anything other than new ways to spend other people’s money. Didn’t we get through the first fifty years of independence on a single idea? That everything was the dirty Brits fault and if they cleared off out of the north we’d be in clover? That was quickly followed up by Jaysus, Look at the Size Of The Wallet On That German Fella! Now we’re like a non-violent Pablo Escobar, helping all sorts dig holes to bury whatever it is they’re burying, of which we’d be shocked, shocked I tells ye, to discover was money.

Now that era is coming to a close, and rather than roar and shout and play the victim, let’s confront a few harsh realities.

Yes, Macron needs the tax revenue. But so do we. Just go into McDonalds and see the stationary robot you type your order into. We’re entering a new period of human existence, where labour surplus (what we used to call unemployment) mixed with longer life expectancy will require huge wealth redistribution. Everything from more health spending to a basic income will require more tax revenue, and Ireland alone can’t raise that money if it is engaged in tax competition with other members of the single market.

The argument has always been made that we will be screwed by a consolidated tax base (CCCTB) because we lose a very attractive tool and get little in return as many of those companies, hit by taxes wherever they are in the EU, decide to move to the continent where the main marketplace is.

It’s a fair point. It’s also why Ireland can’t just drag our heels but have to leap forward with a proposal. That yes, we are willing to drop our veto to tax harmonisation. But only if it goes the whole way by creating a central European Corporate Tax Treasury. A central fund where all Europe’s corporate tax revenue will go, and where a country like Ireland, at a serious disadvantage being both on the Atlantic rim and an island, will be guaranteed a compensatory share. A share we can use to openly bribe companies to stay here, whilst enlarging the corporate tax take for all of Europe.

It’s a big deal. It might even need a referendum, given the fact that we would be effectively ceding some tax-raising powers to Brussels. This is high stakes, because the Brits have proven that they can’t stop European integration and we can’t either.

But we can turn this to our strength. Google and Apple and the rest aren’t dummies. They can see the argument on corporate tax is changing globally. Now, with the Brits sailing off into the 19th century, the corporations still have a friend at the table that gets them. That will listen.

Us. The island between Boston and Berlin.

But only if we take the lead, work that seat, be the bridge between our FDI friends and the Macron-Merkel alliance.  

Scary? Yup. That’s life in bed with the giant Franco-German elephant.

But rather than complain about being squashed, better we get an early say as to who gets what side of the bed. 

1 Comment

Cahir ONeill
Sep 27, 2017 at 8:58 am

Ireland should be getting out ahead of this issue – lobbying for benefits that can be derived rather than just looking at the negative consequences. That said, could there be a Eurozone fixed corporate tax rate which would satisfy the joint need (e.g. 10%) and then each nation state can set their own additional Corporation tax on top that? The relative differentials would probably end up smaller but still could be enough to keep MNCs in situi…


 

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