Thomas Pringle (Donegal South West, Independent) | Oireachtas source

SMEs and Irish companies would never get away with not paying the 12.5% corporate tax rate.

That is not to say that multinational companies cannot play a role in our economy, but that should not be at the expense of society. Ireland is now facing growing economic inequality, with the wealthiest 20% owning around 70% of the country's total wealth, while the least well off 40% of Irish households have an almost 0% share in Ireland's wealth. The gap between rich and poor is increasing almost to US levels. There are undoubted links between tax avoidance carried out by multinationals and increasing economic inequality. The Government is very slow to react to the inherent inequalities in our taxation system, and reform is only just about on the horizon. The "double Irish" taxation mechanism was targeted by the Minister for Finance, Deputy Noonan, in last year's budget but it will not end until 2020 or beyond. If we are serious about income inequality and rising levels of poverty in Ireland, we need to think about implementing a fairer taxation system, under which those who can pay must pay. Apart from enforcing the corporation tax on multinationals, there must be other changes in our taxation policy.

Our tax code currently has the interests of the elite at heart. The distribution of wealth rarely strays further than a select few individuals who are protected by their tight networks and their access to large amounts of capital and assets. One idea that was floated recently was a financial transactions tax, which this Government was completely against, citing its competitive corporation tax mantra once again. The past two decades have witnessed the elimination of taxes on financial transactions in numerous countries, resulting in less control over the financial sector. Despite promises by governments since 2008, there has been very little reform of the financial sector, even though it was central to the economic crash. A financial transactions tax would be progressive in that it would target the financial services sector that is currently exempt from VAT.

Do we really have a progressive tax system? A tax system can mean more than just corporate or wealth tax. It can include taxes on capital and income as well as value added and other forms of taxation. VAT is inherently unequal because taxes on consumption are disproportionately paid by people on low incomes who have to spend all of their money. Almost all of the tax paid by the bottom 30% of households is in the form of indirect taxes.

Tax avoidance extends into the international arena. In the EU there are moves towards greater transparency in tax policy, but it remains to be seen whether this will have any impact at all or whether it will be enforced. EU finance Ministers will be meeting in Luxembourg on Tuesday and are expected to reach political agreement on the automatic exchange of tax rulings, a proposal launched by the European Commission this year in the wake of the Lux Leaks scandal. The proposal is to oblige states to share details of their tax rulings - essentially letters of comfort offered to companies by tax authorities - with other member states as part of a broader move towards greater corporate tax transparency across the EU. The re-launch of the common consolidated corporate tax base, which would harmonise the way taxes are calculated across the EU, was also announced in June. However, there are concerns that this could disadvantage Ireland due to the size of our economy.

Globally, it is estimated that tax avoidance costs governments between $100 billion and $400 billion in lost revenue. In fact, we do not even know how much we are losing out to these practices. While it can be argued that the recent OECD report is a step towards greater transparency in global taxation practices, the report has some shortfalls and is not nearly as aggressive as the multinationals are in their tax avoidance practices. The OECD report presents a package that does not legislate for companies to pay tax where they do real business or to stop the use of tax havens. It is effectively a code of practice as opposed to a real initiative which seeks to legislate for more equitable tax systems.

One step that we could take if we wanted to address inequality in our society is to make 12.5% the effective tax rate for corporations. We could ask the multinationals to pay the tax rate that supposedly attracted them to this country in the first place - that is, 12.5% - and make that an effective rate on their bookable profits from the very start. That would provide very useful revenue for this State to help to address the inequalities right across the State and to enable us to undo the damage that has been done throughout the crisis. In doing that, we would not have to increase the corporation tax rate by even 1%. We could just make the corporations pay the rate they claim attracted them to the country in the first place. Was that it, or was the real attraction knowing that they could use all of their tax avoidance measures without being pursued by the State in order to reduce their corporation tax bills even further? That is a question that must be asked.

Yesterday I had a conversation with a constituent about the issue of income inequality across our society. That individual, who must have been a Fine Gael voter, argued that we must reward risk takers and entrepreneurs and that everybody benefits from that. However, the reality is that everybody does not benefit. The rising tide certainly does not lift all boats. If we have learned anything from the crash and the boom before it, it is that. Income inequality continued to rise and poverty continued to grow. Even if we were going to develop policies to reward risk takers, those risk takers would not be multinationals. The multinationals that come to Ireland are not taking risks by coming here. The multinationals that come here are already internationally established companies who come here to maximise profits. They do not come here to take risks on new products or to risk their entire businesses by investing and creating jobs. They come here because they know they can manipulate the tax system and get away with not even paying 12.5% in tax. If we want to talk about rewarding risk takers, we should look at our own indigenous Irish companies that are trying to compete against the global multinationals. They are taking risks but they are the ones that end up paying the 12.5%. They are not the ones who can use the system and manipulate the code to reduce their tax bills. If we want to reward those people, that is fair enough. Let us target those who are not taking risks, the companies and corporations that are not risking anything by coming here, and make sure that they contribute to our society for the benefit of all of our people. One thing is certain - the rising tide of multinationals will not lift too many boats in this country.

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