Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance) | Oireachtas source

The amendment I submitted on the knowledge development box has been ruled out of order for being a potential charge on the people, which is the new formulation. It used to be "a potential charge on the Exchequer". The new formulation is ironic in this case. If we eliminated the tax loopholes that benefit multinationals and allow them to aggressively avoid paying large amounts of tax, far from being a charge on the people, it would be of major benefit to them. That is what we should be doing but have failed to do. For this reason, I am opposed to what is a new tax avoidance mechanism that will allow multinationals to replace - progressively, between now and 2020 - the "double Irish" tax scam with the knowledge development box tax scam. The whistle was blown on the double Irish and outrage was expressed across the world and by growing numbers in this country at the manner in which a small number of considerably profitable multinationals were aggressively avoiding making fair tax contributions. Even 12.5%, one of the lowest corporate tax rates in the world, was too much for them. They did not even want to pay that. No, we must have a mechanism that allows the largest, most profitable multinationals in the world to pay approximately 2%, which is what the US Bureau of Economic Analysis and the US Congress, which held hearings on this matter, estimated that the large American multinationals, particularly those in the IT sector, were paying in Ireland. According to the Revenue Commissioners, the average is approximately 6%. These figures are unbelievable. The European Commission was forced to investigate. The preliminary indication is that it believes we agreed a special tax deal with Apple and other beneficiaries in the IT sector. Were Apple forced to pay the tax that it should have paid, it is estimated that we would receive an extra €18 billion or €19 billion. Imagine what that sort of money could do for the housing crisis, rehabilitating our water infrastructure, investing in our universities and schools or dealing with the disastrous situation in the health service.

I stated something on Committee Stage and will keep trumpeting it at every opportunity. If one shouts long and loudly enough about scandals like this, one eventually forces the situation. For example, it took us four years to get an acknowledgement of the housing crisis. We kept going. Similarly, we will continue shouting about the corporate tax robbery by these multinationals.

The so-called abolition of the double Irish tax mechanism was much trumpeted, but it was not abolished. It will remain in place for the key culprits in this story until 2020. They will continue to benefit from that tax scam so that, by essentially handing money to themselves, they will be able to avoid paying billions of euro in tax. Trying to explain in simple terms to the public just how cute these multinationals are in avoiding paying their tax and the efforts to which they go to do that is almost preposterous. This amounts to people such as Bill Gates having conversations with themselves. Bill Gates says to himself that he has a great idea. He asks how much he will charge himself for that idea and decides on $500 million. Bill agrees to pay himself the $500 million, takes it out of one pocket and puts it in the other. In that one action, he saves himself tax on 80% of the $500 million. This is how it works. Multinationals pay money to themselves through subsidiaries to avoid paying tax. We allowed this to happen and will continue to allow it until 2020.

The scale of what we are losing is shocking. As I told the Minister on Committee Stage, it stretches credibility past any point of belief to claim that the Government was not aware of the scale of what the multinationals were doing and the way in which they were doing it. I referred to a certain document then. If people have the time, they should read it. It is the technical paper produced by the Department of Finance on effective corporate tax rates. From table 3.2.5 of the Revenue Commissioners' corporation tax statistics, it is as clear as day that the multinationals began to take advantage of the tax loophole more aggressively from approximately 2008 onwards, robbing the Exchequer of tens of billions of euro in the process. In 2007, for example, there was €63 billion in total corporate income, the bulk of which was generated by a small number of multinationals. In that year, the deductions, or write-offs, on that income amounted to €6 billion. In 2011, total income was €61 billion but the write-offs had almost quadrupled, to €21 billion, because companies were charging themselves for the use of ideas. Bill Gates came up with another idea, upgrade or whatever the hell it was. An idea, so-called intellectual property, is intangible, which means that it cannot be measured and is impossible to chase down.

The knowledge box that the Minister is proposing to replace the double Irish scam over a six-year period will give tax breaks on intellectual property - that is, the management, development, creation and processing of intellectual property, which is the technical term for someone coming up with an idea. A multinational comes up with an idea, wonders how much it will cost and decides on $500 million, $700 million, $300 million or whatever it wants to charge. Based on the claim that it came up with the idea in Ireland, it will be able to write off most of its profits and avoid paying tax on them. The knowledge box will facilitate that.

Just in case the companies have to work it a bit to get used to the new method through which they can avoid tax, we are going to phase out the existing tax scam up until 2020. Therefore, between now and 2020, they will have two mechanisms to avoid tax, namely, the double Irish and the patent box. Patent boxes are being investigated in many other countries for precisely this reason. They are being abused by multinationals as a way to avoid tax. We are now copying other countries instead of simply demanding that multinationals pay corporation tax at a minimum rate of 12.5%. We should stipulate that any other tax breaks, incentives and research and development measures should kick in only after they pay at that rate. If we just insisted on that and if it were in this Bill, we would have €4 billion extra in revenue for the Exchequer next year. Imagine what we could do with that annually. I just do not see why we cannot do what I propose. If we did so, we would still have a lower effective rate than most of our so-called international competitors. However, the Government will not do as I propose. This is really quite shameful when one considers that the multinationals use our infrastructure also. When we talk about the water infrastructure that needs to be rehabilitated, we should realise the multinationals use a large amount of our water. Should they not pay for the rehabilitation of the infrastructure?

Multinationals' employees need houses. At present, they cannot find or afford them. Should the multinationals not contribute towards their employees' housing? Guinness used to be involved with providing housing in the Liberties. It was not the most benign capitalist in the world in the 19th century but even it understood that it had to build parks and houses for its employees because in order for those employees to make money for it, they had to have somewhere to live and a semi-reasonable environment in which to live. However, the multinationals now do not believe they have any responsibility to the country, infrastructure, society or their employees who generate all the profits for them. Should we not force the multinationals to make some sort of reasonable contribution instead of facilitating them yet again in avoiding tax?

I am utterly opposed to the Government's proposal. Given that our amendment to delete it has laughably been ruled out of order on the basis that imposes a so-called charge on the people, we must support the amendment that calls for a review, at the least. Can we at least have an analysis in six months of the real cost of the measure and its impact?

Even very mainstream voices are now seriously questioning the Government's measure. In the business section in The Irish Timestoday, Mr. John FitzGerald of the ESRI refers to the folly of relying so heavily on the FDI sector and so-called tax competition in the corporate sector, based around multinationals, for a sustainable economy in the future. He does not use the phrase "race to the bottom" but effectively makes the same argument, that is, that Ireland has spearheaded a race to the bottom in the corporate tax area such that every country is now starting to do the same. Soon they will be outbidding us. The North is now doing it, Britain is reducing the tax take from the corporate sector and countries in Eastern Europe are even trying to underbid further. It is a dangerous strategy that we are pursuing. We are putting all our eggs in one basket such that our policy will come back to haunt us. We should be developing indigenous SME and public enterprise sectors that are sustainable in the longer term. This would contrast with the dangerous dependency on multinationals that do not pay their taxes and that could flit off at any moment or be hit by some big external shock. It is a dangerous, unjust strategy. I am absolutely opposed to the knowledge box and the whole economic strategy that lies behind it.

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