Little taxation, full representation

In the wake of controversy in the UK over the low tax payments of some of the world’s largest companies, Yvanne Kennedy looks at whether we are getting our money’s worth from them this side of the Irish Sea

Google, Starbucks, Amazon: all multi-national corporations, all seemingly profitable and all paying some of the smallest tax bills in the United Kingdom. There are no allegations of illegality, wrongdoing, or of fixing the system. They are simply utilising a system that allows for tax avoidance for companies large enough to work it for the benefits. Tax avoidance, though with similarly low tax bills as tax evasion, is not illegal and as such, carries no penalty.

UK Business Secretary Vince Cable, has called this practice “completely unacceptable” but it has to be remembered that the legislature itself created an environment where this sort of behaviour can thrive. If the loopholes didn’t exist, they couldn’t be utilised, so why do they continue to be left open when obvious problems persist?

There is a certain element of ‘the times we live in’ entering the argument here and it makes no bones about taking a front row seat. For years, companies operating with similar practices went unchecked because, again, they were doing nothing illegal and in the process were creating thousands of jobs and still creating millions in revenue, despite the low rates. Now however, with the bubble burst, the idea that the best off in society have to contribute more has stretched to corporations. If they can reap the benefits of being so profitable, should they not also deal with some of the downfalls, such as the huge tax bills?

In Ireland, there is a low 12.5% taxation for “trading income” which is much lower than the 20-42% paid on earnings for the average Irish employee. Even the 25% tax on “non-trading” income leaves a large gap between the so-called ‘99%’ and their famed 1% rivals.

The idea behind such low tax rates was a noble one; an idea to create foreign investment in the island and encourage job and enterprise growth. However, there is an obvious worry that if these enterprises are asked to pay more tax than is currently being requested that they will flee to countries where this isn’t, and is not likely to become, an issue. We value the input these corporations have, with Google and Starbucks having huge holdings in the State and employing hundreds of people but is the quid pro quo really being maintained? What exactly are the  benefits to the average person from the presence of these multi-national corporations (MNCs) and how can we maximise them like they are us?

There are boundless opportunities given to us by MNCs. They provide jobs for thousands upon thousands of people throughout the country. These can be of use to everyone from the student working part-time in a McDonald’s to the executives sitting on the boards of companies in the IFSC. There is something inherently good in the companies that have stuck out the downturn and that there are certain of these companies that could have moved operations abroad but didn’t.

However, the dark side to that is exactly that, they could have moved and can at any point in the future. A study from the University of Limerick recently referred to MNCs as ‘nation-less’ companies. As a result, there is no particular link felt between these corporations and Ireland, or anywhere else for that matter. There is a worry that at any stage, a better offer could come along and they will up and leave. Plenty of national and international companies have done this recently and all it could take is one good offer and thousands of jobs will once again be lost.

We give MNCs a lot, more than just our talent and skills. We have afforded them a haven from which to run their businesses with all the advantages that a country in the middle of an economic downturn can give. We have low property prices, great transport links and an obvious need for their help; a fact that no doubt can make us quite vulnerable.

Is there a general societal loss when companies can contribute less to the societies that they are ‘living’ in than the average person? UCD School of Sociology lecturer, Doctor Iarfhlaith Watson considers that “when it comes to MNCs, the societal impact is not restricted within the borders of one state because they operate in different states with a different impact depending on their role with R&D, sales or production.” This impact can, in some cases, be very powerful in certain fields, again, job creation, but in others be very damaging, especially when we look at how an MNC can be treated compared with a small domestic retailer and how they can treat them personally.

However, there is an argument that all of these characteristics are simply in their nature due to the types of enterprises that they are. If we focus on the positives instead these is a lot to be said for these companies. They may pay low tax in this country but that is a small aspect of their existence and perhaps a small price to pay.

“Overall, I think that restricting our view to Irish society overlooks the full global impact of MNCs,” says Watson. Whether we believe that, we have to at least consider the fair trade, the charitable initiatives, the donations and yes, the tax they do pay, before we launch a simple tyrade based on a single factor, no matter how significant it may be.