Dáil Éireann Debate, Wednesday - 11 July 2018
64. Deputy Paul Murphy asked the Minister for Finance his views on a recent study (details supplied) which has concluded that Ireland is the world's largest tax haven; the measures he will take to close tax loopholes and stop aggressive tax planning in view of the fact this is one of many studies with similar findings; and if he will make a statement on the matter. [31054/18]
Amharc ar fhreagraI ask the Minister to recognise the writing on the wall and to accept the reality that Ireland is a major corporate conduit tax haven. I ask him to accept the points made in the paper, "The Missing Profits of Nations", which outlines that Ireland had the greatest amount of corporate profits shifted through it in the world - some $106 billion in 2015, which was more than all the countries of the Caribbean combined. I hope the Minister will agree that this is not only utterly immoral in driving inequality around the world but also utterly unsustainable as an economic model.
I am aware of the paper to which the Deputy refers. My officials and I have been considering it. First, I reject any assertion that Ireland is a tax haven. The report to which the Deputy refers does not provide a definition of "tax haven" and appears to assert that Ireland and many others countries are tax havens without providing any rationale for the assertion. In the report, the authors appear to use the terms "low-tax countries" and "tax havens" interchangeably. The inference that Ireland is a tax haven simply because of its longstanding 12.5% corporate tax rate is totally out of line with the long-established position that a low corporate tax rate applied to a wide tax base is good economic policy for attracting investment and supporting economic growth. The central analysis of the paper looks at links between the level of profit booked and the level of wages paid in a country. This creates the totally misleading impression that corporate profits are, or should be, linked directly to wage levels. In reality, corporate profits are linked to the outputs of investment in all income-generating activities such as investment in research and development, intangible assets, capital intensive machinery and investment in staff. A small country with high levels of high value-adding foreign direct investment relative to the size of the domestic economy will, of course, appear like an outlier in this type of analysis.
Nevertheless, I am cognisant of the problem of aggressive tax planning by large multinational companies and recognise the need for effective solutions. That is why Ireland is involved and participating fully in the OECD's base erosion and profit shifting, BEPS, process. Yesterday, the Government approved a memorandum on the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. The convention provides a mechanism by which to implement the recommendations of the OECD.
Diarmaid Ferriter put it well in The Irish Times when he said that if the Department of Finance were to be believed, there must be an awful lot of eejits slaving away on academic research projects relating to tax. The approach of the Department and the Government is simply to deny report after report based on facts which illustrate Ireland's role as a corporate tax haven. Let us deal with the central proposition of the paper, which is the point about the ratio of profits to wages. The report found that US companies in Ireland declared $8 of profit for every $1 spent on wages here. That is 16 times the average rate among non-tax havens and 16 times the average among Irish companies in Ireland. To put it simply, what explains the extraordinarily high levels of productivity of workers in the multinational sector in Ireland compared with workers in the indigenous sector? Is it not the case that the only explanation for this relates to the shifting of intangible assets, etc., and the use of Ireland as a conduit tax haven?
The explanation for that is the fact that we are either the first or second most globalised country and that the workers to whom the Deputy refers in those companies are part of global supply chains. As the Deputy pointed out, we have a high share of intellectual property investment in our country. One of the reasons for that is the focus we have had on ensuring that companies make long-term commitments to Ireland. We believe long-term commitment is facilitated and strengthened if it involves the location of manufacturing, intellectual property and a high number of jobs within our country. That has led to long-term relationships between Ireland and many large multinational companies, which has been at the core of the economic transformation we have experienced. Amid the Deputy's criticism, will he comment on the fact that we have 735 companies located in Dublin, attracted here by IDA Ireland, which employ 88,000 people? I ask the Deputy to look at the Grange Castle Business Park near his own constituency and the companies located there which employ people as a consequence of the policies to attract investment to Ireland of which the Deputy is so critical.
Butter would not melt in the Minister's mouth. These companies are simply super-productive and it is all down to the workers. That is not true and the Minister knows it. I am defensive of those workers who work in multinational corporations. I am defensive of their terms and conditions and I am defensive of their ability to be productive, but I do not buy the idea that they are 16 times more productive than workers in indigenous companies. What that statistic reveals is the extent of corporate profit shifting being carried on through intellectual property and intangible assets. Google paid corporate tax at a rate of 0.14% between 2005 and 2011, Starbucks paid €45 in tax in 2015 and Apple Sales International paid tax at a rate of 0.005% in 2014. Ireland is a driving factor of inequality around the world which means that 82% of the wealth generated internationally last year went to the richest 1%. A key factor in that is corporate tax rates going, on average, from 49% in 1984 to 24% in 2018. It is not sustainable in the context of Trump or Brexit and a different model is needed.
I do not comment on the tax affairs of any particular company, nor will I do so now. I did not say, although I could have made the case, that companies locate here due to the quality and number of our workers. While I could credibly have made that argument, all I asked the Deputy to acknowledge was the fact that the investment strategies of which he is so critical have led to the employment of tens of thousands of people, particularly in Dublin. I asked the Deputy to acknowledge that, in Dublin alone, over 88,000 people are employed in the companies attracted by policies pursued here.
The recent article by John FitzGerald in respect of this matter is very interesting. While that article looked at issues around profit sharing and the movement of profit across the world, the Deputy underestimates in his analysis the effect of American corporate tax changes on the global tax playing field. They will have a significant effect because they will change the incentives available to companies regarding where they locate profits and how they repatriate them. As those changes happen, Ireland will continue to be competitive. Much of the engagement I have had over the last number of weeks points to that. However, those US policies mean the global tax environment is being changed. As to sustainability, this is why I gained Cabinet agreement yesterday to a number of further changes in our corporate tax code as part of the OECD process to deal with global issues and concerns.
