Mr. Paul Tang:

I appreciate the invitation to appear at this committee and also the Senator's contribution. I understand his position. I come from a relatively small country. The Netherlands sees itself as a small economy. Of course, we have a big tax avoidance industry, which we seem to forget, but we consider ourselves a small economy which is dependent on trade and investment. In that sense, there is a strong similarity with Ireland which I immediately recognise. Jobs and investments are important; that is crucial. In my introduction, I alluded to the fact that the thinking is changing slowly. We are Protestants and are very stubborn in that sense. It is changing, and we would like to think that it is all about jobs and investment. The question that must be asked is whether it is really about jobs and investment. When I try to make the distinction between paper constructions and real investment, it is a way of addressing fair taxation and economic growth and welfare. In my country there has been fierce debate as to how much this contributes at the moment.

I cited the numbers for inward foreign direct investment because it is obvious that the link with the real economy is lost. To take a simple example, Ireland's corporate tax rate is 12.5% and the effective rate is close to it, but Bulgaria has reduced the rate to 10%. Do I expect an influx of foreign direct investment into Bulgaria? Does anyone? I doubt it. I make that case about my country too. We have many assets. That is true for the Netherlands and for Ireland. Ireland is part of the transatlantic bridge, a gateway to Europe. This gives Ireland a unique position in the European economy. It makes it strong and thriving, and is the reason it has had success. Taxes may have been a part of that, but in my opinion, as an economist, it is not the most important location factor. It never is. It may have contributed, but I do not think the letter box and all of the legal juggling has really contributed to it. That is why I try to make a distinction between paper constructions and real investment. On paper constructions, I am very clear; it is piracy. If one looks at work by Gabriel Zucman, who is a French economist based, I believe, in Harvard, and has done a large amount of work,-including his PhD, on this topic, it shows who the winners and loser are in this game.