The road to nowhere without multinationals

Our economy is hanging on by its finger nails. We are borrowed to the hilt and will be paying it back forever. One of the saving graces we still have is the continuing growth of our exports. largely thanks to multinationals.

Those companies, by and large, only have limited, albeit highly qualified, well-educated, well-paid employment.

However, on its own, our export-led economy will not pull us back from the brink. The hope, even intent, is that the export-led economy will spin-off into the domestic economy, provide much-needed employment through spin-offs and increased spending, and help us to grow again.

Unfortunately, it appears our so-called friends have designs on our exporters.

These multinational companies, products of foreign direct investment, are attracted to Ireland for a variety of reasons, primarily the availability of well-trained people, access to Europe, and our 12.5% corporate tax rate.

It is that latter attraction that most displeases our European friends, chiefly, Germany, France, and the UK. They argue that we have an unfair advantage despite the fact their own tax regime is not that dissimilar when everything is taken into account. Ireland has so far resisted myriad attempts from Europe to increase the tax rate.

In the last few weeks we have seen further manifestations of ways to reduce our tax take and increase that of our European “friends”. One of last week’s headlines ran: “EU to close tax loopholes for multinationals”.

That’s not to imply that any multinational is playing silly buggers or fiddling tax, just that they are making effective use of tax avoidance measures. It seems Ireland and the Netherlands are in the crosshairs. We stand to lose far more than a mainland nation.

Now that our favourite US president has been re-elected we can expect new measures to curb the overseas activities of US headquartered companies.

Its intent, to get these companies to contribute more to the US economy and provide jobs in the economy, is admirable if you are American. They are not so good if you are a Paddy looking for a job in Ireland.

In recent weeks we’ve seen both the French and the British government coming down heavily on multinationals including Starbucks for allegedly not paying their “fair share”.

In France that has included raiding the specific multinational’s premises and taking away material. Italy demanded Amazon pay a fine of €200m because of the misallocation of its transactions.

Ireland is again in the firing line as France alleges that certain Google transactions, for instance, claimed as coming from Dublin were in fact completed in France.

The allegation appears to be that the companies are playing ducks and drakes with the different countries’ tax systems in an effort to minimise what they pay.

These moves are being labelled as “trying to create a more co-ordinated EU approach”. Not on your Nellie. There are many ways to skin a cat. Our friends are looking at ways to skin us.

Can it have anything to do with the fact that while we have a begging bowl out to Europe we continue to pay people of questionable competence a lot more than their European counterparts? The importance of this vital foreign direct investment cannot be overstated.

Even without all of the foregoing it’s becoming more and more difficult as the competition for what little foreign direct investment exists in these more straitened times. We need to keep a very close eye on what is going on and ensure that our negotiators are acting in our interest and not their own. Without a highly profitable and effective multinational sector we are on a one-way trip to nowhere.

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