Usually, the fantasies indulged on July 12th in Ireland are played out up the road in the North. These are fantasies about past glories and are celebrated by the kind of people who the 20th century (let alone the 21st century) left behind. Rather than being a sign of confidence and strength, the Twelfth simply reinforces the political and economic cul-de-sac up which the unionists have waltzed. However, this year, fantasies were not limited to our separated brethren.
Yesterday, official Ireland delivered its own fantasies and these are as misguided as anything seen on the streets of the North. These fantasies are the Irish GDP figures.
In fact, the Irish GDP figures are now so off-the wall, they remind me of a time before the Berlin Wall came down. Back then, I was in a hotel in communist Czechoslovakia and the only programme on TV was one exalting the extraordinary harvest of the Czechoslovak agricultural industry. Without a hint of irony, the announcer rhapsodised about the bumper harvest, yet people queued for bread outside on the street.
Don’t you get a similar feeling when our politicians, such as Finance Minister Michael Noonan, “welcomed” figures which stated that Ireland’s income rose by 26pc last year when people can’t find a home?
According to our Central Statistics Office, the Irish economy grew by 26pc past year. This is clearly nonsense. Our politicians should have guffawed, embarrassed that Ireland’s official figures are so meaningless. But they didn’t.
Let’s examine the implications. Although the figures are wrong, they still tell us something about how this economy works and is likely to work in the years ahead. There could be an opportunity here.
According to the figures, our exports are up 34pc; investment is up 27pc and imports in 2015 rose by 22pc. As a result, the economy grew by 26pc. In terms of what these would mean if it were true, it would imply that the average income per person working in our country would have increased to €130,000 per annum in 2015.
But do you feel richer? Do you feel that much richer?
Of course you don’t.
Although Irish national income figures have always been rendered less than meaningful by multinationals moving money in and out of the country, last year something else happened. A massive industry has moved its assets here for tax reasons. That industry is the airline leasing industry. If you move all the planes on the balance sheets of big airline leasing companies onto the Irish balance sheet, obviously investment goes through the roof. This is driving the GDP figures.
However, while this year’s distortion is huge and is attributable to one industry, over the years other multinational sectors such as tech and pharmaceuticals have had a similarly magical affect on national income figures.
The problem with the multinationals is that the amount of their activity that goes to Irish people and into our pockets is very modest. As these companies have become more and more capital intensive, less and less money has gone towards the wages of Irish workers. So over the years, even though the amount of income created by the multinationals in Ireland has risen dramatically, the amount trickling down to Irish workers has actually been getting smaller and smaller.
Apart from wages, money comes to Ireland through corporation tax and as their income has increased and profits registered in Ireland have increased, the tax take has gone up. However, it is only a fraction of what goes back to the international shareholders of the companies in the form of dividends and higher share prices.
Therefore, the vast majority of the upside accruing to the presence of multinationals here does not go to the Irish workers or the Irish exchequer, but to foreign shareholders.
The latest figures about the 26pc rise in GDP, only reinforce how crazy the situation has become.
However, rather than complaining about the situation, why not see whether there an opportunity here? This is the way the world is and Ireland’s capital base has been built up by deploying our tax policy for the benefit of multinationals and their shareholders. So shareholders are winning big time. Therefore, why not become shareholders too? Why not take shares in the very companies that are making out in Ireland and distorting our GDP figures?
At the moment the world is moving toward closing tax loopholes, which will culminate in firms having to pay the headline rate of tax here.
But rather than taking this money in tax, to be frittered away in the next political auction, we could take shares. By taking shares in multinationals, we could create an Irish sovereign wealth fund that is linked to the share performances of some of the best-governed companies in the world, plugged into the world economy like no other and providing huge wealth for future generations.
So how would something like this work? Take this example.
In 2012, US multinationals made $100bn profit here on which they are supposed to pay 12.5pc tax, or $12.5bn. But in fact they only paid $4bn. So they ought to pay $8.5bn more than they do.
Why not encourage the multinationals to pay the difference between what they actually pay ($4bn) and what they ‘ought’ to pay ($12.5bn) in shares? We could pledge these shares for future generations of Irish people.
The figures are significant — $8.5bn is a lot of money, and it grows. Shares are permanent wealth, whereas taxes are more transitory income.
In recent years, financial wealth has grown much more quickly than income. Imagine an Irish sovereign wealth fund comprising the shares of these companies, compounding at these rates?
Why would the multinationals go for it? Because giving shares or share options is much cheaper for the company than giving cash. It always is.
And they are used to operating in this way. What multinational treasurer would not look at this option?
By matching our interests with the stakeholders and shareholders we would be jumping together and both have skin in the game.
Let’s see this ludicrous GDP figure as an opportunity. Rather than moan, let’s go and do something positive about it.