US treasury secretary Janet Yellen with Minister for Finance and Eurogroup president Paschal Donohoe at the G7 finance ministers meeting in London last week; Michael McNamara TD
Having returned from having smiling photos taken with the world’s economic leaders, Paschal Donohoe announced he was going to fight them on the beaches, on the landing grounds, etc.
Boris couldn’t do it better.
There was much talk in the media this weekend about a €2bn reduction in our tax take and that this has been foreseen for some time. All of this is true. The bigger problem, however, will be the impact on our GDP figure which, for several years has been inflated by profits channeled through Ireland for corporation tax reasons. Our borrowing (especially over the past 12 months) only look sustainable relative to that inflated GDP.
Once that deflates, the situation looks a lot less sustainable than Paschal merrily portrays. The reality is that we have the highest borrowings per capita in the EU and the highest rise in borrowing per capita over the past 12 months.
As all of this was happening, Joseph E. Stiglitz, Nobel Prize-winning economist, was accusing the government of “stealing tax revenue from its neighbours – from other members of the EU,” at an event organised by the German Friedrich Ebert Stiftung think tank to look at the transformations required to deal with the consequences of the Covid-19 pandemic.
Coming just three weeks after Paul Krugman, also a recipient of the Nobel Prize in Economics, wrote “Biden, Yellen and the War on Leprechauns” in the New York Times, it was clear that there was a concerted push against Ireland’s corporate tax regime from in high in the USA. Stieglitz, Krugman and the New York Times would all be considered to be broadly sympathetic to the Democratic Party that currently controls the White House, Senate and House of Representatives.
Meanwhile, the European Commission was calling for tax reforms as part of Ireland’s national recovery plan and Ireland was embarrassingly reduced to opposing basic tax transparency measures in the EU earlier this year, proposals designed to make sure that multinational corporations pay their fair share of taxes in all States, in developing as well as developed ones.
Ireland opposes them on the rather narrow legalistic grounds that the rules are being adopted on the wrong legal basis, the morality of the proposals being very hard to argue against – never a great indicator of the longer term viability of a state’s position.
All of this leaves the central strategy for the economic development of this State since the dark mid-80s – one that has served us well over many years but has become unsustainable during Paschal’s tenure as Finance Minister – in ruins.
Instead of developing an alternative in response, he merrily continued to assure us it was all OK. Just like Comical Ali as the detonations were getting closer, the blithe assurances remain the same.
When we first started to attract Foreign Direct Investment on a large scale in the 80s, our Government also used to speak of the attractiveness of our well-educated, young, English-speaking population.
Now, most multinationals, particularly in the tech sector, hire in from abroad. In the past year, many of those workers have been working from their homes all over the world but for tax reasons they, the tech corporations and Irish Revenue Commissioners all pretend they’re still in the empty office and apartment blocks in the Docklands.
Ireland Inc has effectively given up on presenting any basis for our economic development other than our tax code and its selective implementation.
Perhaps there was truth in Paul Krugman’s article: that “the way to create jobs is to create jobs, mainly through public investment, rather than by chasing unicorns and leprechauns”?
For our part, the biggest investment in the infrastructure that is a prerequisite for job creation is the National Broadband Plan. During the last general election, it was routinely compared to the post-War rural electrification scheme such was the scope of its ambition and the impact it would have on rural communities and the ability to build an economic future to sustain them.
Water supply limitations is the big obstacle to further economic expansion in our Capital, we’re told, with Victorian pipes leaking half of their precious potable water into the ground. Yet, the opportunity to replace those pipes posed by the hiatus of activity on the streets under which those pipes flow was spurned.
Just 4,000 homes were reached by the “national” broadband plan in the first half of this year, out of target of 115,000 for 2021.
But we’re still getting the Comical Ali assurances.
Michael McNamara is an independent TD for Clare.