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Dublin: 9 °C Friday 23 March, 2018

Ireland and the UK should double team the EU on tax

Eurocrats are gearing up, once again, to meddle with our corporate tax rate. We should take a leaf out of our neighbour’s book and demand better.

Aaron McKenna

THE EUROCRATS at it again over tax. Having safely bypassed the Irish people on two occasions with platitudes over protections in treaties we voted down, once again the “Common Consolidated Corporate Tax Base” (CCCTB) is back on the cards.

On Thursday we had a delegation from the European Parliament over to quiz Michael Noonan on Ireland’s corporate tax affairs. One of our visiting guests, French MEP Alain Lamassoure, told RTÉ’s Morning Ireland that nations like ours in the EU “steal money from the taxpayers of their partners in favour of their taxpayers”.

Thieves. That’s what officials in economically incontinent countries like France think of us. They see that Ireland has managed to turn itself from, as The Economist once put it, “the poor man of Europe”, into a vibrant hub of global investment and high-worth employment. They look at their own staid national economies – where the French state, for example, has failed to run a balanced budget since the 1970s, and rather than come to the conclusion that they might draw a lesson or two, they tell us we’re thieves.

They want to make it less attractive to work in Ireland

They talk, as Lamassoure did, about needing more “solidarity” in Europe; by which they mean, we raise our taxes so that they can attract (or, ‘steal’) some of the investment away from our shores.

Ireland ‘steals’ money from countries like France in about the same way that Ryanair steals passengers from Aer Lingus: we offer lower fares, and the punters flock to us. The French and other EUpeans who dislike Irish competition want to level the playing field by forcing us to increase the price and make it less attractive to work with us.

It’s as simple as that. Eurocrats and our partners in other European countries wail and bleat about the Irish exploitation of tax arbitrage deals, without any shame at the fact that their own corporations at home use precisely the same deals to reduce their bills. Our headline rate of 12.5% corporate tax rate is actually pretty close to what most corporations pay in Ireland (12.4%), while in France the effective rate paid is actually 7.5% and not the 33% headline rate they love to go on about.

The problem that fraudsters like the French have is that they then go and soak businesses with other costs. When you employ someone in Ireland, the company will pay 10.75% in social insurance on the gross salary. So someone earning €30,000 per year costs a business an additional €3,225 in employer’s PRSI. In France, the social insurance rate is pretty much 100%. When you hire someone in France you can forget about firing them, no matter how useless, and the workforce is actively hostile to their employers. Every company executive who comes to Ireland that I’ve met remarks on the hard work of the well-educated local people. In France recently, employees of a factory threatened to blow it up because they weren’t happy with their employer.

Competitiveness on tax is one of the only things Ireland has going for it

We are currently facing a bunch of investigations over tax deals done with the likes of Apple, who invested in this country back when we didn’t have an arse in our back pockets and emigration was more endemic and permanent than it became even after the recent crash. I don’t know what the outcome of those EU investigations will be, but what I can say is this: if Ireland Inc had to all but murder for jobs so that people could stay here and build lives in their home country, the Europeans can stuff their faux moral outrage about it decades later.

Competitiveness on tax is one of the only things Ireland has had going for it. We have no major indigenous industry or consumer base for industry, such as the far bigger countries would have. We’re on an island, so can’t just act as a natural extension of the likes of the Ruhr economy as the Low Countries do. We have successfully used foreign direct investment to train and upskill whole generations of Irish workers, who have gone on to run their own businesses both in support of FDI and the global market they have been exposed to.

Folks in Ireland who side with the Europeans on the basis that evil global corporations need to pay more tax will simply find themselves bereft of a job if they get their way. Dublin is great and all, but if it’s a choice between putting your corporate HQ here or, say, in Berlin or London, why would you stay if the savings can no longer be made? The highly mobile workers will presumably follow the jobs, and Ireland might have a good workforce but it isn’t uniquely wonderful.

The problem we have as Europeans keep chipping away and chipping away at national tax sovereignty is that nobody in the EU takes us seriously, except around referendum time when they’ve learned to be wary of us. All the major parties of government in Ireland are pro-EU. There has been no UKIP-style movement gaining traction in Ireland, let alone a properly Eurosceptic wing of one of the parties of power like Fine Gael or Fianna Fáil.

Seeing as how the Brits are going round Europe rattling cages and looking for concessions that will return more powers to national parliaments, we ought to get on the bandwagon with them. If the UK leaves the EU there’s a strong argument that our position within it is going to change irrevocably anyway; and if, as I suspect, a deal is done and the UK stays then we can benefit from whatever is in that deal.

A little more Eurosceptic noise

National tax sovereignty should be supreme, absolute and irrevocable. None of this “solidarity” baloney and very little of this politically-motivated investigation nonsense. Ireland should be able to decide its own corporate tax rate and corporations here make use of whatever globally available tax arbitrage facilities can be accessed. If another EU delegation arrives in this town throwing around words like “stealing” in relation to corporate tax, they should be kicked so hard in the arse they won’t need a low cost Irish airline to get them back to Brussels.

I’m all for constructively working with our European partners and believe in the many benefits of a free trade zone in the EU. But levelling corporate tax in favour of expensive economies is not free trade or fair competition, it’s the Irish people subsidising the inefficiency and high cost in other countries.

A little more Eurosceptic noise from the Irish political system wouldn’t go amiss while the future of national sovereignty in the EU is up for grabs, thanks to our cousins next door.

Aaron McKenna is a businessman on columnist for You can follow him on Twitter here.

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