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Archive for the category “Ireland”

Make it a double, Paddy

"Look. This one doesn't bend."

“Look. This one doesn’t bend.”

The scene in Disney’s Snow White, where the wicked witch entices the heroine with a poisoned apple, has fueled the nightmares of generations of kiddies since it first saw the light of day (or should that be ‘the dark of night’?) in 1937. I had double the reason to be terrified as my parents had an old acquaintance  – the mother of a friend – who, I was genuinely convinced, must be related to the evil lady.  Her name was Megan, born sometime in the last decade of the 19th century. She had masses of unruly hair that matched her nicotine-stained, spindly fingers. And she spoke in an Irish smoker’s brogue. Bed-wetting material, par excellence.

Half a century later, I can still hear my parents talking about her having been in the “Post Office”. For years, my mind’s eye saw her going from house to house delivering mail and, when some unfortunate maiden opened the door, offering her a juicy red apple. It was only when she had died, and I had progressed to a higher degree of cognitive reasoning, that I understood that she had been an Irish Volunteers (later, IRA)  operative in the 1916 Easter Rising. She was in the General Post Office on O’Connell Street when almost the entire leadership was carted off by the British and put in front of a firing squad.

Although the Easter Rising served to unite the people of Ireland in the cause of independence, it was a bit daft really. The arms the rebels were counting on were intercepted by the British, and they knew that they didn’t have a chance, but they went ahead anyway.

The Irish are big on miracles

The Irish are big on miracles

In the spirit of 1916, over the last 30 years successive Irish governments have proven adept at blundering almost thoughtlessly into madcap schemes for economic progress, like the 12.5% corporate tax rate;  miraculously they keep pulling them off. They managed to build a Tiger economy without an ounce of local initiative, relying on US multinationals and extremely generous European Union aid. True, they were hit quite badly by the global financial meltdown, but they pulled out of that faster than any of the other crisis countries.

It would appear that the luck of the Irish may be running out (or, maybe, not). The EU Commission is investigating whether tax agreements with the Irish Government brought  Apple and 4,000 juicy jobs to the depressed area of Cork. For the first time, the Commission is using the argument of ‘State Aid’ to attack a tax break (Fiat and Starbucks are getting it in the neck elsewhere).

The alleged scheme is annoyingly simple (almost, crass) and has been an open secret (but not necessarily in relation to Apple)  to international tax advisers for years. Referred to as the ‘Double Irish’, it takes advantage of two bits of Irish Blarney in local law. Firstly, as opposed to just about every other nation no longer in loin cloths, Ireland did not have  significant Transfer Pricing rules until recently. Secondly, Irish law defines tax residency of a company purely on the basis of management and control (most countries today have an additional test of place of incorporation).

Once those fiercely permissive non-rules were in place, it was time to pour the Guinness. Apple (and there will be plenty more US companies joining the wake, if the EU pull this one-off), is, it appears,  accused of  establishing two companies in Ireland. One, subject to the standard astronomical rate of 12.5%, is alleged to have carried on the business. Lest Apple be saddled with such an unacceptable tax rate, that company had an agreement to pay royalties to the other Irish company (it’s subsidiary) at a Disney fantasy rate. The second company, however, was managed and controlled from an offshore jurisdiction (BVI is popular) so was not liable to tax in Ireland (not even withholding tax on the royalties). Abracadabra – a minimal level of taxation in Ireland. Now, the US has, as everybody knows, a fairly draconian system for catching low-tax profits of foreign subsidiaries (Subpart F) in its tax net. The only  part of this scheme requiring intelligence (the American part) required that the lower Irish company check-the-box for US purposes turning it, effectively, into a branch of the other Irish company. The intercompany payments then, if the rumours are true, disappeared for US tax purposes.

The irony of all this is that the Irish might still come out of this laughing. If the scheme is found to be State Aid, Apple may be required to pay an absolute fortune in tax – to the Irish Treasury.  The Irish Government is claiming innocence in the whole matter (it will need to get over the hurdle of how the world’s tax advisers knew what was going on while it didn’t,  AND possibly embarrassing revelations concerning those rulings). Apple, meanwhile, can reasonably claim that it did nothing wrong – a sovereign country (and EU member, to boot) offered it  a favourable ruling.

Workaholics or Alcoholics?

Workaholics or Alcoholics?

The Irish Government has belatedly announced that it is  taking steps to eliminate  the Double Irish – from January 2015 it is proposed that companies incorporated in Ireland will be Irish resident under domestic law.  With headline rates in other jurisdictions brushing against their once incredibly favourable rate, the Irish may have to start doing things for themselves. They could try learning  from the Seven Dwarfs: ‘Hi Ho, Hi Ho, it’s off to work we go’.

Letter to America

Minister For (sic) Finance, Republic of Ireland

June 1, 2013

Mr Seamus Noonan, Boston MA, USA

Dear Seamus,

Mother Ireland is being crucified once again and she is hurting, to be sure. I was walking past the General Post Office on O’Connell Street yesterday when old Stephen Megan accosted me: ” What’s all this about Apples, young Michael?” he growled, he did. “Were not the good old earth apples our ancestors died for in the famine good enough for the likes of you? Don’t you remember what the Church says about the Forbidden Fruit and the  Fall of  Man?  If poor Patrick Pearse had been standing over there in 1916 (he waved a finger at the entrance to the Post Office) reading out loud the Easter Proclamation, and he had known what you were going to do, he would have folded it up – he would truly – and gone back inside to post it to his mother. Then the British wouldn’t  have executed him and all our beloved martyrs.”

And just last Sunday I was queuing up after Mass to speak to Father O’Leary (he is new to the Parish since Father Callaghan had to go away because of something we don’t talk about), when Mam and Da’s friend Mrs Flaherty started bawling at me at the top of her voice: “Michael Noonan. You are a disgrace to our country. Why did we have to lend all that money from the Yooropeeans? You were an Altar Boy, Michael Noonan (at this point Father O’Leary shuffled uneasily from one foot to the other). You know that the  Church loves thrift – but you had to try to be like the Yooropeeans. That poor De Valera will be turning in his grave”. I thought of telling her that I had not been in the Government when the crisis hit, but she was looking like our mother used to look when our father came home from the pub, so I held my peace.

Talking of pubs (which is always a comfort, so it is), last month the barmaid was just pulling me my first pint at a nice little establishment in the centre of the City when a leprachaun-sized fella in a grey suit and coiffed hair holding a glass of red wine, tapped me on my arm and asked in an accent not from around these parts : “Qu’est que vous doing with a 12.5% tax rate, screwing the rest of us in L’Europe, cochon?”. I politely explained how a wine suppository could cure the little reptile’s  constipation and went to join friends – but it was disconcerting, that it was.

Seamus, it’s just not fair. We are being made to suffer for all mankind. Well brother, I have decided that we are going to take action. You are going to be St Paul  spreading the gospel and putting the record straight once and for all. Next time you are in Paddy O’s in Boston’s fair city,  buy a round for all our brothers and cousins  (I enclose a 50 Punt  note as a Government contribution to the cause) and then sit them down by the fire and tell them Ireland’s  tale of woe. Add a bit o’ the ol’ blarney and, if any of the Kennedys, Connellys or O’Neils are listening you can tell them that the next time they are running Washington, they should tell our story to the world:

When Ireland joined the European Economic Community in 1973 together with Britain and Denmark she had an economy that was worth bugger all. Her biggest export was people, who built the whole world except the Great Wall of China and the Pyramids in Egypt. One day someone had a great idea to lower the corporate tax rate to 12.5%. American companies  competed with each other to swim across the Atlantic and set up operations here. Nobody could nail us on the tax rate because we offered it to everyone – Irish and others alike. We were willing to pay the price of less welfare payments because we had been raised by the Fathers and Sisters  not to expect much. Of course, there were other reasons those companies chose Ireland. There were lots of the Irish in America and, when we were sober, we spoke something resembling the same language. This got up everybody’s nose in Europe but the only concrete response was the French building Euro Disney.

In 2008, when the financial crisis hit, the Irish government’s finances were healthy. Our Budget Deficit was manageable as was the Debt – GDP Ratio. What was not healthy was the private housing market where the banks were overexposed. We should have remembered our Bible lessons and what happened to the tables of the money changers in the Temple. Not wanting to leave the banks to tumble,the government rescued them – and that left the government totally buggered. So they had to take a loan from the EU (usury is, I confess, a dreadful sin) and impose austerity – which was the nostalgic fun part for most of the population. Unlike other crisis countries, within 2 years Ireland was proudly back on track.

So everything was starting to chug along beautifully when, last week, some  brightsparks in Washington started asking Apple questions. In fact, the gentlemen were very polite to Apple, praising it for its iconic status in the US economy. But, their largesse did not extend to poor Ireland. We were flayed mercilessly for tempting the little Innocent with Government-backed tax schemes that brought the tax rate down from the lofty 12.5% to 2%. There was talk of Double-Irish structures (believe me Seamus, the only Double-Irish I know is a 12 year Bushmill’s Single Malt – and very good it is too) with companies registered in Ireland but not resident there and subsidiaries that shared American research and development costs.

Tell me, Seamus, was this not the hypocrisy that the Church tried to exorcise from God’s Earth? Ireland, a country with a legitimate 12.5% tax rate being used by Americans taking advantage of all the vagaries of  OECD guidelines and idiotic US tax law – and it was our fault! Look across Europe at their special R&D rates and Finance Company rates and Heaven knows what else.

Seamus, it is time for us to act. Starting spreading the pints. The spirit of 1916 is back!

Your loving brother

Michael

P.S. You couldn’t see your way to picking me up a new iPhone from the local Apple Store the next time you’re there, could you?

P.P.S. The characters and events in this letter are fictitious. I do not have a clue if the Minister For (sic) Finance has a brother, had parents or, most notably, what (if anything) he actually said to that  Sarkozy look-a-like  in the pub.

Irish blarney

This book cover is for illustrative purposes only

I have always been skeptical about the rave reviews on the covers of books. “I just couldn’t put this book down”, may  have been the first part of a sentence that concluded, “the kitchen sink disposal unit”; “His best novel yet” , could have ended, “which, given his other semi-literate offerings is no great achievement”. 

So, when Irish ministers recently insisted on quoting  over and again an OECD survey praising the preservation of the 12.5% corporate tax rate despite the country’s ills, I dived for the survey to find out what it really said.
 
And what it really said was: “The decision to maintain the corporate tax rate at 12.5% is prudent as a sudden increase in tax rates would create uncertainty about Irish tax policy that could undermine investor sentiment.”
 
Now,  before I go on, I must be fair to the Irish. They may have found themselves waist deep in the bog  and requiring a bail-out by the IMF thanks to their outrageous housing speculation but, if there is one thing the Irish are really good at, it is austerity. And that is just as well, because that is just what the IMF and everybody else has demanded of them. They learned it from the British, who spent hundreds of years abusing their economy, and then spent the first sixty years of independence  doing the same to themselves. As a result, the prognosis for the Republic, which has stoically accepted its position, is surprisingly good according to most economic indicators.
 
Having said all this, the new government’s November budget included two entirely understandable, but morally questionnable, tax elements. The first, as mentioned above, was a commitment to the 12.5% tax rate which – while, as noted by the OECD, may under current conditions  be unavoidable – is obscenely low for a country relying on the charity of others and arguably gives it an unfair advantage over many of its EU competitors. The second, which received little publicity, was an incentive scheme for Ireland’s all-time number one export – people; tax benefits are being offered for Irish residents working abroad part of the year for Irish companies. The emphasis was put on the BRICS countries (Brazil, Russia, India, China and South Africa) which, given that they only comprise around 3 billion citizens, are obviously short of labor or, at least, will not notice another million or two Irishmen taking jobs that could have gone to the locals (I may be suffering here from a minor bout of Irish Exaggeration).
 
The Irish economy has always bothered me. I vacationed there with my family a few years back, before the Celtic Tiger tripped over its tail, and apart from coming close to being throttled by a petrol (gas)  station manager in the border area for asking for a copy of the London Times (“We don’t like the British round here, you know”), we had a delightful time driving up and down the country’s only motorway admiring the myriad of signs advertising EU financed infrastructure projects. It seemed pretty clear that the country was not doing enough to build an independent economy for when the foreign multinationals get tired of relying on the tax rate and decide to move on. Should the Euro Zone survive, it will be interesting to see what happens to Ireland in the long term.

James Joyce & Celtic Tigers

And, as regards those book reviews, I remember the late Auberon Waugh reviewing the results of a BBC poll of the “Best English Language Novel of the 20th Century” at the end of 1999.  Tolkien’s  Lord of the Rings and Orwell’s Animal Farm took second and third places.  First place went to the Irish Joyce’s Ulysses which, Waugh pointed out, proved that the British are a nation of pseuds since hardly anyone manages to read it from start to finish. The writer Anthony Burgess (A Clockwork Orange) said on the cover of my (half-read) copy  that “Everybody knows now that Ulysses is the greatest novel of the century”. History does not record whether that was the end of the sentence.

Happy New Year.

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