Time to take gloves off in tax war - ECB letter and tax evasion

The publication yesterday of the utterly unambiguous November 2010 letter from the then ECB president Jean-Claude Trichet to then Minister for Finance, the late Brian Lenihan, shows how power is used and how real and pressing vulnerability — a country facing economic collapse and the chaos that would ensue could only be described in those terms — turns national politicians into supplicants rather than negotiators.

The parallel publication yesterday, also by The Irish Times, of revelations that showed how Irish companies, and many others, use legal tax arrangements in Luxembourg to cut their tax bills by millions upon millions shows how power prevails and gathers a momentum that almost puts it beyond the reach of governments of small, moderately influential, occasionally supplicant, countries.

That Ireland has been accused of facilitating behaviour just like, or versions of, Luxembourg’s “advanced tax arrangements” shows how pervasive and deeply rooted the profit-protecting, profit-enhancing process really is. It is as if international tax loopholes are a never-ending conga line determined to evade obligations rather than a way to impose legitimate levies to sustain civilised and stable societies.

That President Barack Obama, who once seemed capable of almost transcending normal politics, has been reduced to a lame duck president by mid-term elections is now dependent on the support of “business-friendly” Republicans also feeds into the narrative that the old power brokers are stepping back to centre stage — as if they ever left it.

That Jean-Claude Juncker, the 12th president of the European Commission, was either finance minister or prime minister in Luxembourg when the tax arrangements exploited by Glanbia, Sisk, Pepsi, Ikea and FedEx and many others, were put in place hardly suggests that he might be the man to confront this abuse, one utterly indifferent to the idea of social responsibility or equity.

It is more than likely though that these revelations will further alienate water charge protesters and add legitimacy to a campaign that has become a catch-all for discontent with Government, the feebleness of political institutions and their inability to deliver real, field-levelling change. The protests may sometimes be a loud, sometimes an inarticulate and irrational scream, but yesterday’s revelations add an undeniable authenticity to it.

At the end of next week G20 leaders meet in Brisbane. Proposals on cross-border tax flight will be considered. Fifty-one jurisdictions have agreed on an automatic exchange of information, based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Early adopters have pledged to work towards information exchanges by September 2017.

Let us hope that process succeeds because unless our political systems can show they can protect the societies they are designed to serve then social chaos looms. The concentration of wealth and the reduction in living standards for the great majority of people caused by these schemes cannot be tolerated any longer.


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