Can a reasonably well-behaved country with few, if any, enemies, become an international pariah? Can a country that has pursued neutrality, contributed much to the UN and taken diplomatic political correctness to asphyxiating heights, come crashing down and become shorthand for mendacity, evasiveness and intercontinental tax avoidance?
These are questions we should ask ourselves as the international backlash against the likes of Starbucks, Google and Amazon’s tax avoidance policies spilled over in Britain last week.
The ubiquitous Starbucks was forced into a very public climbdown on how it operates its tax affairs. This was particularly galling for a company whose PR machine appears almost “happy clappy” in its efforts to appear on the side of the angels when it is, in fact, a large franchising conglomerate going about the entirely reasonable capitalist business of gaining market share relentlessly.
The carefully crafted image became somewhat tarnished when it was revealed that since 1998, Starbucks has only paid Â£8.6m in tax to the UK government in the 14 years it’s been operating in Britain.
This derisory figure amounts to about a fortnight’s turnover of its 800 outlets there. Its executives made fools of themselves in front of a parliamentary subcommittee the other week and, after that, it was only a matter of time before the company did something.
The public’s mind had, consequently, begun to focus on something rarely discussed in the UK: the tax affairs of large companies. According to the ‘Financial Times’ “activism against tax avoidance is on the rise across Europe”.
Yesterday, in the US, two huge UK banks, HSBC and Standard Chartered, were fined $2.6bn for breaching money-laundering rules by moving money around their various affiliates. Granted, these two cases are very different but what they reflect is the impact of public pressure on the behaviour of tax authorities.
The Starbucks case is about winning the battle for the public’s mind. The corporates and their shareholders will want to have as much latitude to avoid tax as possible. Pro-business politicians will line up behind this position, terrified to point out that the richest corporations pay a rate of tax that is far less than the poorest employee of that corporation for fear that the corporation will get upset.
In the case of Starbucks — given that it is selling coffee to thousands of employees and if it hasn’t a retail presence it has no business — the notion of it upping sticks and going to cheaper destinations is out.
Therefore, the nub of the issue is what it does with its money once it has sold you a coffee, where does it send it, where is it registered and why is it leaving the country where it generated the turnover. In terms of morality, it is clear that the company should pay tax in the country where it raises the revenue which, in this case, is the UK.
The debate was played out on BBC’s ‘Newsnight’ last week. It pitted a woman from a small NGO and a pastor against a corporate economist and a tax expert. In terms of optics, which are all-important to the spin doctors who try to massage the message and are paid handsomely by the tax-avoiding corporates, the notion of an articulate young woman from an NGO and a committed Christian talking morality is precisely the conversation the media manipulators didn’t want to hear.
Starbucks opted to cough up a little, but when its UK chief executive said it did this because “Starbucks listens to its customers”, after the puke bucket passed to your left, you could see the battle lines drawn again.
What it is failing to realise is that the world has changed since the global financial crisis. It is not business as usual. Great events change perceptions and one of those perceptions is that companies — particularly multinationals — have got to be respectable corporate citizens, and part of that is paying a fair share of tax.
Now the theatre of this new conflict, between the interests of citizens and the interests of corporations, focuses on the behaviour of corporations — but this will change. In time, the focus will shift to those jurisdictions that facilitate tax avoidance. This is where Ireland comes in.
What sort of global citizen is the country that actively markets an aggressive beggar-my-neighbour tax policy as its main plank of industrial policy? Up to now, in an era of as little regulation as possible, this may have been seen as a victimless policy. But, now, governments all over Europe — in France and Germany in particular — are responding to public pressure and beginning to agitate for common tax policies.
In the US — the country that arguably loses most from our tax loopholes — the left of the Democratic Party have for years urged their legislators to police the tax activities of its multinationals more closely. In a world of the “fiscal cliff” when the US will be looking to raise revenue to close its budget deficit, do you not think a newly liberated, second-term President Obama will examine this area?
In short, the Starbucks case could be the tip of the iceberg. We may be witnessing the beginning of a mass social movement against large corporations’ tax ambivalence. This is the type of moral outrage that tips into a movement. If it takes hold, the first in the firing line will be the companies and their shareholders. Next up will be the countries that give refuge to such tax fugitives and where will we be then? Pariah or great little country?
David McWilliams’ new book ‘The Good Room’ is out now
We should stop pretending in this country that our low rate of corporate tax represents any sort of ‘plank of industrial policy’ or strategy where job creation is concerned. It highlights the absence of any strategy, not to mention the absence of any real bargaining power. What it underlines is that Ireland is merely a prop in the strategy of corporations to avoid paying tax – and not vice versa. Furthermore, the fact that ‘defending our low rate of corporation tax’ has become a mantra in political and media circles further highlights the absence of any strategy. Because a mantra… Read more »
I have never been a fan of Starbucks, my eyes were thankfully opened by Naoimi Klein’s excellent book ‘No Logo’. Starbucks in effect has driven out the smaller coffee shop with its cluster business model so its tax avoidance tactics comes as no surprise.
David what has been interesting with the corporation tax issue here is that the Irish government have remained steadfast to it despite massive pressure from France and Germany, etc, ironic really that they can take a stance on this issue but not in dealing with the colossal debt issues.
Being a resident in the UK (but an Irish citizen), I definitely agree that activism against tax avoidance is on the rise and even now in conversations with my British colleagues, the Irish corporation tax rate enters the conversation. I usually respond by saying that such a tax rate is needed in order for Ireland to compete on an internation stage. Otherwise, there is little incentive for much international business to take place in Ireland and it would be mostly centred in the UK, Benelux, Germany or France. If such countries want Ireland to introduce a higher corporation tax rate… Read more »
WARNING! PLEASE READ IMMEDIATELY! THIS IS SERIOUS! If you get an envelope from a company called Irish Revenue Commission,” DO NOT OPEN IT! This group operates a scam around this time every year. Their letter claims that you owe them money, which they will take and use to pay for the operation of essential functions of the Irish state. This is untrue! The money that Revenue collects is used to fund various other corporations which depend on subsidies to stay in business. This organization has ties to another shady outfit called the Pension Plan, who claim to take money from… Read more »
Excellent development. Might start to disrupt lazy thinking for a change and start to get our “leaders” to understand that wealth comes from local companies who need tax breaks ratther than PAYE derived fluff of fly by night MNCs.
Lots of empty buildings to fill. Let;s get cracking lads!
Thats a really rather good point David. A friend here in Berlin works for a US company that has its EMEA HQ in Dublin, purely for tax purposes. There are hundreds of companies like this I believe. He didn’t understand why the corporation tax was so low, given that the country was up the creek financially, until I explained to him that the Irish economic model is all about extracting value, not creating it. People in Ireland like to go on about having Google, Microsoft Facebook, Paypal etc etc based in Ireland and “sure aren’t we great” and “sure isn’t… Read more »
I have been saying for years, long before it became fashionable, that low corporation tax attracts the worst sort of foreign-owned corporations and encourages the most contemptible corporate practices.
I’d compare it to the prostitute who resorts to the most grotesque ‘tricks’ (like eating excrement) to pull the clients.
Cauldron of Macbeth Bubble Bubble Toil and Trouble Fire Burn and Cauldron Bubble Oh Dear ……this article is provocative like the bits and pieces that form the taste of the witches cauldron. Such a Bad Taste ….yak. I am referring to the mixing of inappropriate words in this article that are shown on the same pedestal and give out all the wrong messages that is detrimental to what should be the real policy of the successive Irish Governments . Lets look at them …’ interest of citizens morality’…’what it does with your money once it has sold you a cup… Read more »
Remember when our political elite amadans and their developer cheerleaders used to sneer at the Europeans because we here in Ireland were doing it so well and they, the Europeans, really needed to learn from us. The Irish establishment was like a boy-band who started to believe they actually had some talent, started to tell the management how it should be done, and eventually started to feel they didn’t need the management at all. The Europeans tolerated our low tax rate for years because we were small, we were poor, we had a difficult history, we didn’t rock too many… Read more »
Would we have all the companies in that we have now, with the employment they bring, if it we didn’t have a low corporation tax level? Realistically, we’d have plenty of Starbucks probably; there are enough D4s who need their daily hit of pretentachinos. The domestic market is there, certainly in south Dublin. Would we have larger companies though? Google? Facebook? We would not, and that’s the simple truth of it. Maybe there could be two rates of corporation taxes for multi-national companies depending on how many people they employ here? No company would ever choose Ireland over a central… Read more »
Corporation Tax compares to rent or paying for a room in a hotel. You pay for what you get- cheap and cheerful vs luxury. Let’s not kid ourselves, corporations that setup in Ireland get relatively less in terms of location, talent, infrastructure and so on. Ultimately our headline tax rate and a corporations capacity to take advantage of it is what is attractive. Shareholders love cheap and cheerful. According to broad figures quoted (by Mr.Noonan-interpret yourself), foreign multi-nationals directly employ 200,000 people in Ireland. Indirectly they create a further c.400,000. That is 600,000 jobs on this small rock, a massive… Read more »
The MNCs setting up in Ireland do not pay VAT either!
I often wonder if our corporation tax needs to be quite as low as 12.5%. David would you feel there would be much elasticity in investment drop for Ireland if it increased to say 15%? Would it make foreign HQs pull out or break new deals?
Well, I reckon that this is a case of “let him who has not sinned, cast the first stone”. The Netherlands, has facilitated pop stars U2 in avoiding the Revenue. France bounced Ireland and Greece into taxpayer funded bailouts to prop up it’s insurance companies. Frankfurt is by no means clean. Neither is the City of London. Then we have all the chicannery that comes from the NYSE. Of course, because we are small we are expected to yield to the hypocrisy of the bogger boys. Ever think that a power monopolizer like the EU is always going to screw… Read more »
David, be careful concening the issue of legally acceptable tax avoidance. A certain highly public Irish billionaire is trying to get control over large parts of the Irish media. The FG party are doing nothing about this.
Then we have the SiteServ deal. Personally, I don’t like this because SITESERV is a supplier to the state.
In he interim, his rivals (like the current boss of INM) (and like a tax obedient CEO from Westmeath) will continue to make swipes at him.
A low corporation tax is not a strategy for employment it is a tactic and is unmeasured in its effectiveness. As someone earlier said it is just a mantra. We preach at people who pay over 50% if an effective tax rate that the 12.5% to large companies is sacroscant and not for changing. We actually had politicians getting animated in Europe over this and only this issue. A strategy would be an education system that fosters languages, sciences, electronices and computing from an early age but you would have to take on the INTO for that so bugger that… Read more »
And if everyone paid their land rent to the public purse, you could have a zero income tax rate on both labour and capital. Of course, I guess it would still be open for crooked companies like Starbucks to take all the land they occupy overseas?
David what you have said is very courageous! . 1) First let me deal with a practical thing. I never went to Starbucks, and after the latest revelation I’m very glad that I never gave them a penny. Most of the time I go to an Irish own coffee shop, because it sells a great product, and the prices are very reasonable. I saw the owner several times on TV, and I really like him. But one day in which I was in three different shops of that chain around Dublin, I asked myself… how Irish is it? In the… Read more »
Botom line here is, firstly the title of the article should be “The Gathering” secondly, uh ,….R.I.P. OFF IRELAND.
Nuff said. David I know you dont write the article titles.
Baltic Dry Index plunge. The idea peddled by the government that Ireland can grow our way out of this depression through multi national exports is more than a little fanciful, I believe our future is in Irish agribusiness. Clare. ——————————————— see report below.- Amid growing concern that the global economy is teetering on the edge of a total collapse, governments in Europe, China and the United States continue to manipulate statistics in an effort to paint a picture of recovery and a return to normalcy. But despite their best efforts to fabricate positive employment numbers, GDP growth, currency stability and… Read more »
here we are debating the merits of the low corporation tax when we have the highest paid gobshite…ooops i mean leader in the world.we probably have the highest paid people in all areas of public office than any other eu country and all we can debate is the tax take from google et al!!!wake up people…as long as this farce continues then the moral authority is non existent and we will be forever seen as the basket case that we are.we have buffoons and spoofers running the country.anyone see max keiser lambasting noonan on his tv show?now theres a guy… Read more »
France is a Registered Enemy of The Irish Corporation Tax Rate and Tax System Ryanair has more regional airports in France than any other country …well almost. However it does not have any Hub Centers like it does elsewhere .Neither does it employ ground staff as it does in other countries .Why ? Because the French Enarchs make that very difficult to do so .If not impossible. Despite many attempts by Ryanair to ‘develope’ a normal business plan in France , it failed. The French Courts are a common place for Ryanair to do their battle ground in their effort… Read more »
David…see Karl Whelan’s just tweeted that Irish Pictorial Weekly might be stealing your material!
You’d better watch out……He’s making a list and checking it twice … :)
how about no one pays tax!
where does most of tax money go?
globalist bankers.. to hell with them
chaff blowing in the wind while the money masters clean up.
read who really is in control then set your policies.
most are in denial
Today’s Financial Times p 24- Henderson (Global Investors asset management group) returns to London from Dublin. The FTSE 250 listed company that manages 65bn only moved to Dublin in 2008 and is already leaving. Proof that our MNC’s are not that entrenched and are highly mobile. Why? Because the UK reduced their tax rates. Yes it is a race to the bottom, but it is a race and unfortunately it is pretty much the only race in this town! We don’t have the infrastructure/location etc. Global advertising group WPP are also to announce plans to leave Dublin for London. Can… Read more »
There is something of a irony as the writer mentions the capitalist game and the way companies play it in a way which at times comes across as ‘all is fair in love and war’ and yet is a tad exercised when a CEO uses PR spin in an effort to dampen the fallout over the efforts that go into limiting a company’s tax exposure, a major aspect of the capitalist game. For me at least, it is one and the same, the system is the problem and ‘movements’ fighting this beast have been around for decades, like the global… Read more »
You only need to look at the ease of access that the multinational corporations that based here, would appear to have to our government, the strength of which was revealed in the media this week, to be able to see the very obvious connection between this absolute obsession at government level, with our 12.5 Corporate Tax rate, and this open door policy for our MNC’s in this state. Just like how our government painted themselves into a corner with the property bubble of the day, our complete reliance now on the multinational corporations based here, particularly when we take into… Read more »
Hi Deco, Interesting advice you’ve given to Irish property owners in France! The only problem is that there is no way out because it is now very difficult to sell up. There have been major changes recently regarding capital gains on property in France. In early 2012, Sarkozy extended the relief on capital gains for second homes from 15 years to 30 years! This has really impacted the second homes market. But worse still, a few weeks ago, Hollande has introduced a special clause on capital gains relating to your main home ‘domicile’ (up to now, you didn’t pay capital… Read more »
There have always been plenty of ‘viager’ offers around but it’s a risky business. Jeanne Calment was 122 yrs old when she died (she outlived those who had bought her home). French people generally have a healthy livestyle and a varied diet, and they do really do live long very long lives! Another neighbour of mine (about 82 yrs old) sold her apartment as a viager about 7 years ago (and my sister in Ireland was sort of interested, but didn’t buy it in the end). It was probably a good thing, as I can’t tell you how much this… Read more »
All depends on where you want to buy. The Paris intra muros property market is a different market to the rest of France (prices start at â‚¬8500 m2). The risk isn’t the same if you’re buying a little house in a village in the middle of nowhere & hard to get to place for about â‚¬100k (for this sort of property, it’s a buyer’s market at the moment).
David, the business of accounting is rather different to that of economics. That perhaps explains why you would have done very little (possibly none) accounting in your studies and that accountants do little (possibly none) economics in theirs. The two are similar only in the fact that they deal with money, and yet economists don’t do much of that either. Simply speak to Steve Keen briefly to get an idea of what economists generally understand about money. Given economists’ very poor level of knowledge it’s hard to believe that they know about tax either. Therefore, all the emotional MSM uproar… Read more »
I don’t understand any of this. The UK I can understand, as the UK is, in fact, just a 60 million person TV advert. But for everyone else, I’m amazed: If the government says “You only have to pay 10% tax if, at 4pm each day, you stand on your head and count to ten slowly”, then the country would be full of people, at 4pm, standing on their heads and so on. The international argument simply means that somewhere else there are people standing on their heads. If you want to tax big companies, then introduce a tax that… Read more »
and so what if rich people leave? How many people would lose their jobs if a rich person moved country. Really. Would they shut down a complex operation (i.e. one employing lots of people), with all the costs that entails, and then start the same thing up somewhere else, even if that made economic sense, with all the extra costs at that end? It would be an act of pure, silly, spite – and rich people didn’t get rich by being silly. This is just rich people doing to us exactly what the banks did to the politicians in 2008… Read more »
and finally, one of the implications of the worry of rich people leaving is that they are the only people who can set up and run successful businesses.
If this is correct, then we may as well all pack up and go an live in Iceland, where they’re clearly far, far, better at this than anyone in Ireland/UK/France/wherever-else-is-complaining.
It isn’t true. Clearly.
MONEY AS DEBT by Paul Grignon. Nobody should miss it!-Look at it in the corresponding order, and you’ll have two hour of fascinating analysis. You’ll clearly understand the magnitude of the scam, and the terrible evil that Private Banks represent for the humanity. Wikipedia: Money as Debt is a short animated documentary film by Canadian artist and filmmaker Paul Grignon about the monetary systems practiced through modern banking. The film presents Grignon’s view of the process of money creation by banks and its historical background, and warns of his belief in its subsequent unsustainability. http://www.youtube.com/watch?feature=endscreen&v=jqvKjsIxT_8&NR=1 (MONEY IS DEBT PART 1)… Read more »
Thanks for your ‘viager’ advert. It just seems so expensive especially if the guy lives for another 20 years or more! And it’s only a 45m2 one bedroom apartment! And not even a Haussmanian building!
How come you know so much about ‘viagers’? Have you spent a lot of time here at some stage?
Yes, I’m still hanging out here in the 13Ã¨me. 12 years in fact!
Ireland is a very confused country that lacks policy direction. In the private sector we portray the attributes of true capitalists. support entrepreneurs, low corporate tax rates, low unit labour costs. yet on the public side we have a public sector pay & welfare problem that is typical of a socialist country. it seems the private sector has raced ahead into the modern age yet the public sector has been left behind wallowing in cronyism and the way things use to be done. we need to address the latter. sadly, we don’t have the political leadership in place. it seems… Read more »
Over the last 10-12 years clever governments have been buying gold while idiots have been selling.
Contrary to all the nonsense we have heard from the Irish media since the early 1990s, we really are a one trick pony show in this country.
We depend on taxation policy. Without that we would be Scotland without sterling subsidies or oil.
And to think that we spent most of the past fifteen years spending like crazy, in “celebration” (as we were instructed) of exactly what I have not yet figured out.
Beware the herd effect in Ireland. It always precedes disaster.
A Swiss eye view of the world economy.
The charges levelled at HSBC warranted serious jail time but it was impressed upon the judge that putting these guys behind bars would be letting the side down and ‘undermine confidence’. Just not cricket you see. But! …. you get 6 years for smuggling garlic! This monty python movie has been going on for years now and the waking world has realised that the majority of humanity is living under tyranny. Perhaps it is this mass awakening the Mayans were predicting. It sounds more likely than us being wiped out by HAL or a nuclear war on Mid Winters day… Read more »
In part 3 of MONEY AS DEBT Mr. Grignon makes the most comprehensive analysis, of the greed and corruption that Governments and Banks wants to perpetuate, through the inflexibility of the monetary system, and the foul idea of perpetual cycle of growth and debt. And Mr. Grignon give us most of the answers we are looking for. He agrees with David’s idea of debt forgiveness, and the impossibility of paying an imposed and extortive debt. So what credible argument do most of our unimaginative political class and their advisors have left? The links for part 1 and 2 are in… Read more »
Napoleon has been known to win many wars and was Emperor at age 35 but he is remembered for only the loss of one war namely Waterloo where he was defeated by an Irishman the Duke of Wellington . What is not known about him outside of France is he creation of ‘ Code Civile ‘ that currently forms everything that France really is and especially its leaders in Industry ,Politics, and Civil Service. No English speaking country in the world can boast of such a strong centralised management structure with strength and endurance as this legacy given to the… Read more »
Massive raid (500 police) on Deutsche Bank in Frankfurt. This follows closely the HSBC ruling. Dossier: Tax Evasion, Carbon Hoax, Derivatives Fraud Dec. 14, 2012 (EIRNS)–Five senior officials of the bank were arrested, in the context of the massive police raid on the two bank towers in Frankfurt, two days ago: one of them is an IT expert, who is said to have ordered extensive erasing of data, particularly e-mails, from the bank computers, which were seized in the raid. Apparently, the bank was tipped off before the raid, in time to erase data. He is to be interrogated, as… Read more »
The report on Deutsche Bank should reset priorities – tax policy is a joke compared to these numbers. It may be convenient for some to hit on coffee or the web while the British Empire’s Dope, Inc HSBC is caught red-handed, and protected by Obama’s DoJ. Just to clear up any illusions of what “money laundering” really is, have a look at this report rarely ever touched by the media, often dismissed as “rumor”. Drug Trafficking and The Financial Crisis shows the inverted pyramid where the banking sector voraciously seeks drug money. Victor Ivanov, head of the Russian Federal Drug… Read more »
HSBC Backlash: Oregon Sen. Merkeley Accuses DoJ of Violating Congress’s Laws Against Terrorism; British Role Exposed.
HSBC, Hong Kong Schanghai Bank Corp, Standard Chartered, RBS, Barclays (LIBOR), all inveghed in major scandals.
The British Empire is Too Big to Jail?
With all this talk of wealthy organisations paying little or no tax and France perhaps we should also consider what happened Louis XVI…