Companies must pay their fair share of taxes

Companies are not people. There, I stand in opposition to the US Supreme Court, who have held that not they are people whose rights are equal to that of a natural born person.

This includes the right to free speech, and gee, the same Supreme Court held that money talks, literally. Money is speech. Speech is free for people. Companies being people can spend what they like on political campaigns. And so the US continues its descent into plutocracy.

Here things are not quite so bad. Companies are not yet equated as being the same as thee and me. They have many attributes of legal personhood, and that’s good and right to allow them to conduct business. They can sue and be sued, they can be held to account in a court of law, and they can engage in contractual engagements. They have rights.

Rights however come with a flipside — they bring responsibilities. Here one might consider that Irish companies are perhaps less diligent in pursuing their responsibilities than they are their rights. This week two glaring examples came back to the forefront. Companies in Ireland have engaged in and been facilitated in shirking their responsibilities to contribute to the public good in general, via tax, and in particular via engagement with higher education.

The deal on capitalism is, or was the following: Those that provide capital can extract a bloody good return but this will be both circumscribed by law and in part expropriated by tax, because we live in a society.

But if companies do not pay their fair share where then are we? Ireland. We are not a tax haven. But we are a crucial part of the international chain of non-being that allows companies to become non-existent. The logo of the modern multinational corporation should really be the same for all — the Ouroboros, neither beginning nor ending, a snake swallowing its own tail.

The Department of Finance published a report by University College Cork economist Seamus Coffey that looked at the effective tax rate for multinationals.

They found that it was remarkably close to the headline rate. Job done, we are a low-tax not a tax haven country.

Irish companies in general pay low rates of tax. We collect a smaller percentage of GDP from tax on capital and business income than the EU average. Ditto with employers’ social insurance contributions. We have decided to not tax them in the hope that they will, out of gratitude, employ people.

We, in doing so, have fostered a multinational sector in particular which is divorced from the rest of the economy, but whose tax enabled activities distort the overall, masking over decades the stagnant state of the remainder.

Domestic corporates also get an easy ride — there are a bewildering array of reliefs, write-offs, and shields for directors and owners. It is simply capital welfare. The reward to capital should be treated the same as the reward to labour, and that means tax rates that are the same.

The 12.5% corporate tax rate has become a totem — but as late as the Celtic tiger of the late 1990s when we had a truly export-based real economy the rate was in the late 20s. Perhaps then we had it right?

The reality is that companies will press for the lowest tax rate possible — zero or less would be good, as many Irish companies have achieved. Society, which despite the echoes of Margaret Thatcher’s claim does exist, should press for a rate that is fair within society. Alas, when the political class is captured by the myth mirage and spin of the corporate welfare seekers, there is zero chance of that. If companies didn’t leave in 1995 or 2003 when our corporate tax rates were much, much higher, they will not leave now. Unless of course they were here only for the tax rate… which we are told they are not.