Companies such as Microsoft’s Round Island One (alluded to in the article) and similar operations by other multinationals give the impression that Ireland has a vibrant exporting economy, when in fact, all that’s happing is that goods and services produced and delivered in other countries have their ownership transferred to a shelf company registered in Ireland which then in turn ‘books’ the profits generated by their sale (a process known as transfer pricing). The result is that tax is paid on the profits generated by the Irish shelf subsidiary company, at Irish rates saving the parent business vast sums of money (Now, don’t get me wrong here, I’d much rather the Irish exchequer gets the cash than not, but the process does skew GDP and also creates a false sense of economic activity in the country that just does not exist).
Aside from that, its pretty dumb to act as a clearing house for activity executed in another, bigger and far more powerful neighbour.
It cant last.
How long before the UK exchequer starts feeling the pinch?
What will they do then?
The simple fact is that we have nothing to attract these companies except a low tax rate.
This is the great shame of the whole boom era; no real investment.
I have long been convinced that when people hear about our “export lead recovery” they immediately envisage a whole network of indigenous Irish companies up and down the country producing smart, exportable telecoms, pharma, biotech or IT products and services. A hive of creativity, innovation and wealth creation with a grateful world out there hoovering it all up. Certainly when politicians talk about our exports you can be damn sure this is the image they want people to get.
But of course it is almost entirely bullshit and not at all what our “exports” are about. 99% of the talk abut our “export lead recovery” is so dishonest it makes me want to puke with anger.
Also rather humorous - and typically hypocritical - that when an Irish person similarly reduces their tax bill by utilising a lower-tax jurisdiction then Gilmore et al start foaming at the mouth. Strange how Labour don’t denigrate Microsoft quite as loudly as they do Dermot Desmond!
Not my point though - just saying that (particularly) Labour should -to maintain consistency in their argument- be berating Google, MSFT, Adobe etc for ripping off the UK exchequer every time they go on about how evil Denis O’Brien is or whoever. We’ve based our economy on tax “efficiency”, but don’t like eating our own porridge.
Google Ireland == Denis O’Brien.
DOB has an Irish passport, and Google profits massively from their UK operations - but they both structure themselves to benefit from a “friendlier” tax environment. In one case Ireland loses out, in the other it benefits.