Flying the flag for US business as tax dominates the agenda

The American Chamber of Commerce Ireland chief says ‘can-do attitude’ of Irish workforce is key ingredient for multinationals

In the global tax game, Ireland is a mere pawn, powerless in the face of big corporations and their aggressive tax avoidance schemes.

It’s no secret that these firms inhabit a parallel universe when it comes to tax, paying rates that would make a cowboy builder blush. But if we want their business – and they already employ 130,000 people here (7.2 per cent of the workforce) – we’ve no option but to turn a blind eye, as ugly as that sounds.

Equally, any unilateral move to phase out some of the more contentious aspects of our code, something the Department of Finance is considering, would be risky, if not foolhardy.

American Chamber of Commerce Ireland chief executive Mark Redmond did not say any of this – not directly, he’s too diplomatic – but one can’t help reading between the lines.

“Ireland has for a very long time identified a competitive corporate tax regime as being really important to attract foreign direct investment [FDI]. That didn’t happen today or yesterday. That’s been in position since the 1950s and why?. . . because we’ve a small island on the edge of western Europe and our only natural resource is grass, so we had to have some way to attract inward investment.

“Why we have these competitive tax environments is because governments have chosen to put them in place, Ireland being just one example.”

He points to George Osborne’s crusade to transform the UK into Europe’s premier low-tax economy as proof that other countries are following Ireland’s lead.

However, isn’t it inherently unfair that SMEs – cumulatively the State’s largest employer – are hounded by Revenue to file Vat returns on time while the big fish show a casual contempt for the tax code?

Redmond counters with a list of what US firms have done for Ireland, not just in terms of employment but in the high-tech, entrepreneurial culture they have nurtured. He also notes that US companies contribute €3-€5 billion annually to the exchequer.

Sometimes these things “get lost in the overall debate”, he says.

“There’s not a family in this country that hasn’t benefitted directly or indirectly from US investment. I think most Irish people get that because at the end of the day it’s down to jobs.”

I put it to him that no one would dispute the need for a competitive tax regime, but the overriding message from big multinationals is that tax is for the little people. Redmond disputes this assertion.

“The effective corporation tax rate, or the rate after various adjustments, is around 12 per cent, so it’s very close to the headline rate . . . that’s a really strong indicator of the transparency of our system.”

He also says that, in terms of the corporation tax yield as a percentage of gross domestic product, Ireland is slightly ahead of the European average, roughly the same percentage as, say, Germany or France.

Nonetheless, Redmond’s appointment as head of the chamber, at a time of such international focus on tax avoidance, speaks volumes.

Prior to this job, he was head of the Irish Tax Institute, and knows, better than most, the difference between a “Dutch sandwich” and a “double Irish”.

In a recent submission to the Department of Finance, the chamber warned that any unilateral phasing out of anomalies in the tax system could put the State at a competitive disadvantage. A similar warning was made in a submission by the Washington-based Tax Executives Institute, which advises US multinationals on tax.