Sunday Bloody Sunday

The Sunday newspapers lit up with news of Bono’s interposition into the debate on Ireland’s tax system. Referring to the current pressure from Europe in an interview with The Observer, Bono appeared defensive of Ireland’s generous tax regime:

“Look, Ireland is not going to back down on this. We are a tiny little country, we don’t have scale, and our version of scale is to be innovative and to be clever, and tax competitiveness has brought our country the only prosperity we’ve known. That’s how we got these companies here. Little countries, we don’t have natural resources, we have to be able to attract people. We’ve been through the 50s and the 60s, and mass hemorrhaging of our population all over the world. There are more hospitals and firemen and teachers because of policy.”

Coming off the back of criticism of U2’s own tax arrangements, this intervention is perhaps unwise. Whatever else, at least Bono is consistent, as evidenced by his attestations in an interview last year in The Observer:

“[A]t the heart of the Irish economy has always been the philosophy of tax competitiveness. Tax competitiveness has taken our country out of poverty. People in the revenue accept that if you engage in that policy then some people are going to go out, and some people are coming in. It has been a successful policy. On the cranky left that is very annoying, I can see that. But tax competitiveness is why Ireland has stayed afloat.”

Ad hominem attacks aside however (and with Bono they come thick and fast!), it is worth untangling the general sentiment of his statements. On two counts, Bono is correct. First, it is true that low corporate tax rates are an historic feature of Ireland’s tax regime. When Saorstát Éireann (1922 predecessor to the Republic of Ireland) came into being, the Corporate Tax rate stood at 5%, although Income Tax was also levied upon companies at that time. It is 1957 which really marks the era of low corporate taxes wherein certain firms were subjected to overall rates of 10%. Second, Ireland has not had an entirely prosperous economic history and the 50s and 60s were incredibly hard.

Immediately, however, Bono’s logic has come undone, for whilst Ireland has had a competitive tax regime almost since her inception, economic prosperity did not arrive until the 90s. This suggests that there must be something other than corporate tax rates which drove the economic prosperity. Membership of the EU and Eurozone undoubtedly contributed. The IDA will claim some of the credit and the International Financial Services Centre in Dublin, which was created in the late 80s, has also clearly been a factor. More sinister is the probability that other unscrupulous tax benefits have had an effect, such as the treatment of dividends, controlled foreign companies, thin cap rules and corporate secrecy (see here).

Two propositions flow from this analysis. The first is that Bono has overegged the importance of Ireland’s tax system, failing to take account of the influence of the EU, IDA and IFSC. The second is that Bono has overstated by omission the moral integrity of Ireland’s tax system. More distinguished minds will debate which proposition is more correct. Whatever is preferred, it is clear that Bono is out of place in this debate.

Ultimately, this intervention serves as another reminder of the need for a more intellectually engaged discourse on tax issues.

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About taxatlincolnox

Tax PhD candidate, College Lecturer and Tutor at Oxford University; Researcher at King's College London and Social Sciences Tutor with the Brilliant Club. With this blog, I seek merely to contribute to the debate. All thoughts are mine, of course.
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3 Responses to Sunday Bloody Sunday

  1. Pingback: A few quick thoughts on the Chancellor’s statement | taxatlincolnox

  2. As with many corporate decisions there are key considerations such as available workforce; infrastructure (office/factory space, data lines etc. etc); rule of law; location to markets etc. to set up in a given country. Tax is rarely the ONLY consideration. However the reality that there are other elements, doesn’t mean that Tax is not a factor. In reality, it is often the major factor!

    So low tax was there, but when Ireland caught up with a better trained workforce (Thank you Chuck Feeney https://en.wikipedia.org/wiki/Chuck_Feeney), global ‘flattening effects”, EU four freedoms and the Euro (?), Ireland with its existing low tax took off. IDA also acted as a great salesforce for Ireland.

    Liked by 1 person

  3. Stephen your notify buttons aren’t working

    Like

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