The Irish economy is not the miracle that is often portrayed. Yes, its GDP per capita is a highly impressive $78,800, compared to the EU average of $41,000 or the UK’s $43,000 – but it is a phantom economy achieved by rerouting the sales of multinationals across the whole EU into Ireland and crediting it as Irish GDP.
This is not because of the attractive corporation tax rate of only 12.5 per cent – as myth would have it – but because the Irish Government allows generous tax allowances and financial engineering that reduces the effective rate to between 3-4 per cent.
A new and detailed report by banking and finance consultant Bob Lyddon and City economic strategist Ewen Stewart, published this week by the Brexit think tank Global Britain, builds on past highly reputable academic studies and the Irish Government’s own official statistics to show the industrial scale of legal Celtic corporate tax avoidance. It demonstrates the claim of Ireland’s GDP at 294 billion Euros is hugely inflated by the Irish “flag of convenience” that multinationals use. Were it to end the Irish people would face another bout of severe austerity required to adjust to the genuine size of the economy – a staggering 130 billion Euros per year smaller.
By offering unusually generous tax write-offs, such as aviation leasing that results in 70 per cent of the world’s civil aircraft registered in Ireland even if in their entire life they never land or take of from there – many multinationals base their EU HQs around Dublin.
It is far better for Ireland to receive 3-4 per cent of something than 12.5 per cent of nothing because the tax revenues still amount to a significant amount.
Together, the additional revenues from the corporate services required to support the brass plate operation and the taxes of the employees dependent on the entirely legal scam keep Ireland’s public finances sustainable. Were they to dwindle the country would suffer an economic crash.
And why does it suit the EU – which claims to be a “rules based system” – to allow this corporate tax avoidance on a grand scale to continue? For one thing Ireland is not the only member state practicing it. Luxembourg, the Netherlands and other smaller countries offer similar low tax and generous allowance regimes to multinational corporations. The other is the EU is indeed moving towards ending such flag of convenience arrangements as part of its desire to create an ever-closer federalised United States of Europe. Creating a standard corporate rate across the whole EU will move up the Commission’s agenda once Brexit is dealt with.
The introduction of a common currency, a flag, and an anthem were no mere coincidence. Creating more and more common laws and expanding spending on military infrastructure twenty-twofold in the new draft budget is already happening. When conformity of tax rates arrives, as it eventually shall, so must come conformity of allowances to offset against the tax – and the Irish economy will go into a tailspin.
Brexit represents a genuine existential threat to Ireland’s economic business model because once the UK leaves the EU it will immediately be able to repatriate all the turnover of multinationals that is currently re-routed to Ireland and tax it at the UK rates. The days of leviathans such as Apple, Google, Amazon and the rest paying practically no corporate tax in the UK will end with the knock-on effect of denying the Irish Government those revenues to finance its unsustainable public finances. This fiscal and financial revolution will be in clear sight of the remaining EU members who will not be slow to conclude it will be in their interests to close down the loopholes that allow Ireland’s flag of convenience operations.
Bob Lyddon estimates the UK loses some £10 billion of tax revenues to Ireland per annum and claims this to be a conservative estimate, as it is calculated using only the largest companies and does not take account of the additional revenues that would come from the direct and indirect jobs that would return as HQs were re-established in the UK.
Those opposed to Brexit point to the need to secure the alleged higher regulatory standards of the single market that prevent such modern-day processing as chlorine-washed chicken, warning such goods entering the UK could find their way into Ireland and then the other twenty-seven member states. This weaponising of the Irish border is wilfully disingenuous. Northern Ireland’s trade to Ireland represents only five per cent of its total exports, while monitoring the movement of specific foods that are already subject to a large raft of checks and processes for a relatively small sector is not beyond the wit of man and digital technology. Nor does it recognise EU double-standards where other foods such as lettuces are chlorine-washed without the hysteria and faux-alarm that US chicken attracts.
Even less likely to be admitted are the repeated failures in single market food hygiene that exposes the criticism of porous borders as no more than mendacious deflections by EU vested interests. It was, after all, in Ireland that the original horsemeat in burgers scandal of 2013 originated – and it was the collapse of standards in the Netherlands that led to the Friponil egg scandal in 2017 when millions of eggs were destroyed and 3.5 million chickens slaughtered.
The single market is no guarantee of higher standards and is often used as a means to prevent competition and the introduction of new processes that will benefit consumers.
The creation of the “backstop” has had more to do with trapping the UK into regulatory and tax alignment with the EU’s Single Market and Customs Union than maintaining food standard integrity – or respecting the Good Friday Agreement that barely mentions the EU or borders at all.
The backstop and regulatory alignment – or better still, preventing Brexit altogether – would benefit Ireland by delaying EU tax harmonisation and closing its flag of convenience operation. The UK’s interests are better served by repatriating multinational turnover and reaping the tax revenues and jobs that can only come from leaving the EU. By conceding any ground the Prime Minister only postpones Ireland’s economic day of reckoning and denies Britain of reclaiming the revenues and jobs that are rightfully ours.
Brian Monteith is a director of Global Britain and a Brexit Party MEP in the European Parliament