Sean Barrett (Independent) | Oireachtas source

I welcome my colleague. It is always great to see him. The context of this discussion is that nearly all countries have unsustainable debts, the Vito Tanzi thesis and so on. The US economy cannot face up to even the slightest suggestion that fiscal stimulus might be removed. It is a Lance Armstrong economy.

Tanzi used the phrase "fiscal termites". We do this all the time. In the last Finance Act, there was a rights tax break for investments in property. We conducted that experiment and it was a disastrous form of tax relief. That we are doing it again concerns me. Previously, the recipient of the research and development grant needed to spend 75% of his or her time doing research and development. This level was reduced to 50%. This seems to be deliberate tax avoidance, in that we will pay people twice what they are doing for the benefit that we are seeking. Firms were provided an allowance to export to BRIC countries because they were far away, the hotels were not great, there could be riots outside, etc. It has been proposed to extend that allowance to the US, Switzerland and Japan. This happens all of the time.

People regard the Starbucks and U2 cases as scandals. There is a universal problem whereby straitened public finances are prone to lobbyists, as has been mentioned. The back of the Vito Tanzi book mentions that the most profitable person in most US companies is the lobbyist. He actually gave examples of tax laws being designed that were so complex that the President signing the Bill could not possibly understand them. Only the person in the corporate law firm who designed them and his or her opposite number in the tax authority could understand them. Frequently, senior people from most countries' revenue bodies move on to work for these corporations after designing tax loopholes. I am concerned that we have a problem.

I thank Professor Barry for the numbers. Some 11.1% is not that far off 12.5%. However, I am concerned by the continuous attempts under every Finance Act to erode the 11.1%. The termites do not stop. Tax avoidance is an unproductive industry, in that it moves money around rather than creating anything. Although Ireland needs the jobs, only 150,000 people or so of the 1.8 million at work actually work in these companies. Should we be part of an international effort to get a much less complicated system and to stop the gnawing of the fiscal termites? In Canada, Mr. Kenneth Carter advocated a single low-rate system without deductions or allowances. This would cut out the large tax lawyer and tax accountant industry and try to restart the Adam Smith capitalism mentioned in one of Professor Barry's papers.

The fiscalisation and financialisation of economies in this legislative environment reward many activities that do not have much social benefit. This is a concern. Perhaps we do it less than anyone else, but it must be a major OECD problem. I was in favour of the low rate of tax when the Government was running a surplus. It was a reward. Like companies, governments should compete. If a country can run its governance without needing high corporate taxes, that is a part of the reward for good governance. Hopefully, the same would apply to personal taxation. However, that world ended in approximately 2008 when we hit the rocks.

We could simplify our code. We should be a part of an OECD attempt to extend it worldwide. Tax lawyering and tax accounting are substantially unproductive activities.