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Without mentioning me by name (presumably to deny me a right of reply) the Irish Times has published a letter in response to my letter and directly linked to it to mine in the online edition. It reads as follows:
Multinationals and taxation
Sir, - While a letter writer (September 8th) makes a case for not following the EU line on setting the minimum tax rate for multinational corporations perhaps he should consider the billions of tax revenues being lost to these companies which could contribute to the healthcare and other social services in the countries that they operate. Doubtless, it was a master stroke setting a low tax rate that encouraged the foreign investment to come here in the first place, leading to economic growth and a general higher standard of living. Nonetheless, time has moved on and perhaps it's time that our present generation of executives put on their thinking caps to seek out innovative opportunities for the future. Surely it is high time that foreign companies paid a fair level of tax. Why, indeed, should we wait for the US Congress to decide what taxes should be levied on businesses when we, along with our EU partners, are capable of making such decisions for ourselves. - Yours, etc,

DAVID MURPHY,

I have drafted a response as follows:

A Chara, - David Murphy (Letters, 13th September) takes issue with my argument that we should await the decisions of the US congress on the final shape of corporate tax reform before implementing whatever rates and regulations are finally agreed at OECD level. He rightfully notes that any increased tax revenues accruing to the countries in which multinational companies operate could be well spent on healthcare and other social services. However, the reforms he advocates are already taking place and we are merely debating the details of what and how further corporate tax reforms are agreed.

Irish corporate tax revenues have increased by 250% since 2014 and August receipts set another record high. The infamous "Double Irish" corporate tax loophole has been closed, and the "Knowledge Development Box" scheme which replaced it is compliant with OECD guidelines. There is nothing to prevent any country implementing a digital sales tax in its territory to increase their revenues and thereby reduce corporate profits taxable anywhere. Nothing, that is, except the outright opposition of the US government, which, under Trump, threatened sanctions against France for proposing to do so.

Whether we like it or not, the final shape of any global corporate tax reforms will be determined by whatever the Biden regime can get passed by Congress and agreed at OECD level. It would be naive to believe a small country like Ireland will have significant influence on the process, or that its primary aim will be to increase global tax equity and reduce global social inequality.  The only reason US Congressmen and women and Senators might be persuaded to vote through increases in corporate tax often payable by their main donors is if it increases the US tax take generally and reduces the amount of tax payable by most of their voters.

Ireland will then have no options but to row in behind whatever is agreed by the major powers at OECD level or risk sanctions that would put our foreign direct investment at risk. The OECD corporate tax reform process is due to conclude by the end of this year, so at most, any differences between Ireland and our EU partners is a matter of timing. I fear David Murphy and many others will not be entirely happy with the outcome as it will have been decided by the main global powers in their own interests, and the degree to which they can withstand the lobbying power of global corporations. But the reality is that we are rule takers in this instance and will simply have to make the best of whatever new arrangements apply.

Hopefully, whatever is finally agreed will be a step forward in terms of global tax equity and reduced global social inequality, but just as in the case of climate change, we cannot solve these problems on our own.

Personally, I would have preferred that Ireland had taken a leadership role on corporate tax reform. As one of the beneficiaries of the current regime we would have had some moral authority for doing so. But I very much suspect that it would have had very little influence on whatever is agreed in Congress: that will be decided by what the big money donors will tolerate and what the Biden regime (with its narrow congressional majorities) can push through.

Congressional leaders have already watered down Biden's proposals with further compromises sure to come. The debate is entirely internal to the USA and its interests, with the international implications barely meriting a footnote in the debate. It may very well be that the EU will have to take the lead on this issue, risking sanctions or other countermeasures if it is deemed to have targetted US digital giants unfairly. But that is a bridge we will have to cross when the OECD process is concluded, which it should be in the next few months.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Sep 13th, 2021 at 05:23:43 PM EST

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