Professor Frank Barry:

I have been paying attention to this issue for about ten years but really started to research it in detail about six months ago. It was entirely fortuitous that by the time I had figured out what was going on, the Westminster committee and the US Senate sub-committee had released the results of their investigations. I presented a paper at the Institute of European Affairs about a month or six weeks ago to explain the fruits of my research. On foot of that, I was invited here to reprise that. As the committee knows, what we call aggressive tax planning by multinationals is in the news almost every day. In other words, it is entirely legal but it pushes the margins of legality to the limit in terms of trying to avoid global taxation.

Clearly, there is an important Irish dimension to this, because Ireland surfaced quite substantially in the Westminster and US Senate hearings. We have a very long history of using corporate taxation to attract foreign direct investment. The slide shows my iconic image of Irish industrialisation. I found it going through the files of TheCork Examiner. It is Fermoy in the mid-1950s. We are all familiar with Faber-Castell. I am sure we all chewed those pencils when we were kids in the classroom. This was one of the first foreign firms that came to Ireland in the mid-1950s. The second John A. Costello Government introduced export profits tax relief and that is the origin of our low corporation tax regime, so it has a very long history. Very generous tax allowances were given for corporate profits derived from new manufactured exports. The idea had been knocking around the bureaucracy for about ten years or so. It was originally thought to be a way of promoting indigenous exports in view of the dollar shortage after World War II and so on.

This is the foundation of our low corporation tax regime today and on that foundation is built the entire infrastructure of drawing in foreign firms. Ireland is one of the most FDI-intensive economies in the world. The idea of exports profits tax relief was initially conceived as an incentive to indigenous exporters.