The rich are, and have always been, different. I suppose we should be grateful that they are now just stealing our money, not actually eating us. So, there has been some progress.
The revelations in the Panama papers were shocking for knowing the rich and powerful were salting away monies, and more so for discovering that the practices were widespread.
The Panamanian firm was only one small player in a global industry.
We are greedy and nobody likes paying tax.
That’s a human thing but most of us, through inculcation or fear, are tax compliant. This, in Ireland, was not always the case.
There was a massive and endemic culture — amongst certain sectors of society — of not paying tax.
We had Ansbacher, the private bank for the really well-off. No one was ever prosecuted.
Lower down the scale, we had Dirt tax evasion schemes and bogus offshore accounts for the middle and farming classes. We didn’t cook up anything for the PAYE worker.
We had successive tax amnesties. While these may stick in the craw, there is a role for them, if, as was the case in the first two, they are combined with increased efforts to ensure future compliance.
Better to get 15% of something outstanding, and capture the person to pay tax in the future, than get nothing at all.
The 1988 amnesty just reset the clock, wiping penalties but leaving the tax due, while th 1993 amnesty also wiped away outstanding tax.
Still, the Celtic Tiger was around the corner, and we all became rich.
We didn’t get rich at all. Then, at the same time as we were cutting welfare and wages we had another amnesty.
In 2009, while the country was on its uppers, we had a tax amnesty for those who hadn’t bothered to pay stamp duty.
Think on that for a moment. There is one law for the rich or well-connected, and one for those who are outsiders.
Despite all that, Ireland is not the most unequal, nor the most equal society. TASC — the Think Tank for Action on Social Change — produced a massive, and under-reported report on inequality that showed that before paying taxes and transfers, we are quite an unequal society.
However, our tax and welfare systems combine to make us rather closer to the Nordic model than many think.
Evidence from the World Wealth and Income Database suggests that the top 1% of Irish society in 2009 had 10% of its income.
Global inequality as measured by income distribution has fallen, mainly because of the growth of the lower middle classes of China and India and other large nations.
However, measured by the wealth and incomes of the top 1%, global inequality has perhaps grown.
In essence, the poor have gotten better off but the very top echelons, the types that have accounts in Panama, have gotten spectacularly better off.
Globally there is good evidence that inequality is linked to lower levels of economic growth.
While Irish people think the ideal is that wealth should be mildly unevenly distributed, with the top earners getting a little more, the reality is far worse than our perceptions.
Into this gap, we need to see a coherent policy of wealth redistribution. Instead, we see an occasional proposal for wealth taxes.
We are ambivalent.
We fear tax reform on a global scale, such as would be needed to tackle the hyper wealthy, electing governments that defend our corporate tax rate.
While we are not the cause of the games played over global corporate tax shells, we are an integral part of it.
We fear to peer too closely at our accounting and legal houses, where generations of Irish professionals have played a part in the creation of blind trusts, and in advising the wealthy of the benefits of ‘bearer shares’ and the wonders of tax planning.
We fear, without reason, that a proper tax regime will kill the IFSC, will drive out foreign investments. The reality is quite different.
Entrepreneurs are motivated by more than hyper wealth, which most don’t get. Tax is only one of a number of reasons we attract investments. We have nothing to fear from taking a lead.
Brian Lucey is professor of finance at the School of Business, TCD.
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