IDEA Blog

Closing Time on the “Double Irish”

18/09/14

Closing Time on the “Double Irish”

Note: This is an opinion piece intended to provoke discussion and reflection. It does not necessarily reflect the views of IDEA. We welcome comments and critical engagement!

Today (Wednesday 17th September) saw the welcome announcement from the OECD that moves to stop aggressive tax avoidance by big multinational companies were being put in place. With today's announcement comes fear that Ireland's (controversial) allure will be tarnished and large multinational companies will leave, taking their jobs with them. This is a truly global issue that has local implications. It also is an illustration of the impact that political pressure through collective public action can have on a global level.For these reasons, today's announcement should be a great resource for anyone involved in Development Education in Ireland.If we remove the jargon (Beps?) and the many acronyms at the core of this discussion is a battle between human values and the profit imperatives of capitalism. The OECD describe their proposals as "good citizenship". If they succeed it will be a demonstration that international institutions, such as the OECD, prompted by public outrage can in fact make changes to the global economic system, changes that result in a fairer world for everyone.

To summarise the announcement made today; The OECD is calling on Ireland to unwind some elements of our corporate tax regime. The so-called "double Irish" is a system that allows companies based abroad to be registered as Irish companies. It is used to route profits through Ireland and onto other Irish-incorporated campanies based in tax havens such as Bermuda. Apple paid only 2% tax on its foreign earnings in 2012. A key point is that these measures are expected to be agreed and implemented by all OECD member nations collectively. The Group of 20 will meet next January to agree on a way to put the plan into action. The OECD is not singling Ireland out or even  accusing the Irish government of wrongdoing. In fact, the messaging is quite interesting. "Is  Ireland guilty? Of course not. It is being used," said Pascal Saint-Aman, the OECD's tax policy  director. Our relatively low corporate tax rate (12.5%) is not the issue here, although that has frequently come under fire from other EU countries. So, should we be delighted that international insitutions are doing something that (on the surface at least) seems to be for the public interest? Or should we be afraid that big employers will leave Ireland and scupper our nascent economic recovery?

Let's take the first point: that tax avoidance is a truly local-global issue. Apple and Google are 2 large multinational companies that have been present in Ireland for decades. Between them they employ tens of thousands of people in Cork and Dublin. Their factories and offices provide jobs and they use the services of the local economy. Their activities bring people to Ireland for temporary vists and shine a light on our country to the world. There is no doubt that their presence is of value to us.

Imagine that Apple were to close its factory in Cork City: 2,000 people would be no longer employed, many people would leave, shops, catering companies, bars, restaurants would suffer reduced trade. The government would be obliged to step in and support these people in their transition to new work. The local city council would have less money to keep the streets clean and safe. What would happen if Ireland implemented the OECD's proposed new tax regime? The Irish government would receive more in revenue from Apple- money that could alleviate our debt burden and the austerity measures that every citizen in Ireland has been affected by. Apple would pay more tax on its profits. Or, they might leave. They may decide to relocate that factory to a country with a "more competitive tax environment", let’s day Honduras, for example. Communities in the Honduras are affected in  exactly the same way. Tax avoidance weakens already underfunded Governments. Not only does this lead to lower spending on public services, it weakens the Government’s ability to regulate issues such as working conditions and environmental protection.

The second point is about demonstrating the efficacy of collective action on global outcomes. Everytime the NGO sector or Avaaz ask you to sign a petition, what do you believe will happen?  It is difficult to tell the story of a single act- from signing the petition to seeing the effect of the changes with your own eyes. With donations it is still complex but it is an easier story to tell. We can see videos and pictures of the goat we purchased standing with the family who have received it. As development educators we are frequently asking learners to go beyond donating money to a good cause. We hope learners will become critically engaged in the issue and take action to tackle its root causes. With such complex, global issues it can be difficult to see the impact of that action. The risk is that people lose their passion, their outrage and stop trying to make a difference.

The OECD were prompted to examine aggressive tax avoidance by global leaders present at the Group of Eight Summit last year in Lough Erne, Northern Ireland. Those leaders were under political pressure to combat tax avoidance. That pressure came from public outrage. That outrage came from media stories about Apple and Google, from growing disquiet about the extent of public bailouts of banks and from the efforts of NGOs to inform and activate the public on these issues. Are we now seeing a (potential) global solution to tax avoidance, as a result of public action? If so, what else is possible?

Next year is the European Year for Development, and the year that the Millennium Development Goals end and a new set of global goals are agreed. An international Climate Summit will be held. Decisions will be taken next year that will have impacts for generations to come, possible for centuries to come. How can we affect those decisions? That is the crucial question that we as Development Educators MUST be able to answer.We have to be able to join the dots from local action to global change and back again to local impacts. If the OECD successfully tackle aggressive global tax avoidance they may provide us with at least some evidence that it can be done.

Author: Eimear McNally

NOTES: