There’s little doubt that large companies such as Apple, upon which the specter of tax avoidance fell recently, benefited greatly from Ireland’s more than favorable corporate tax rate, and their presence in the country contributed to Ireland’s economic boom in the period between 1997 and 2008.
As the debate has raged on over which party is to blame, Ireland or Apple, for the latter’s tax avoidance, it should not be forgotten that Ireland was one of the worst-hit countries in Europe, and that it has been more or less decimated by the financial crisis and the subsequent recession.
So while a favorable tax regime did indeed bring investment from numerous multinational companies over the years prior to the crisis, and Ireland’s 12.5% corporate tax rate has remained unchanged since then, the Apple issue, according to Micheál Collins, senior research officer at Nevin Economic Research Institute (NERI) in Dublin and vice-chairman of the Irish Social Policy Association (ISPA), should really serve to draw focus on a much larger issue: The need for a more concerted move toward an international taxation model that, while allowing companies to be profitable, also ensures that they pay their fair share of taxes on their profits wherever in the world they have business.
The Apple case has brought to light the fact that that link between where companies make their profits and where they pay their taxes on those profits doesn’t exist, Collins said, but at this time, it is a vital link that will benefit Ireland as much as it will benefit other nations struggling to get out of the recession. “When we think of a tax system for multinational companies in Ireland in the years to come, I would anticipate that in the next five to 10 years, we’ll see corporate tax structures greatly altered,” he said.
Ireland, as much as any other nation, should be part of a global model for corporate taxation going forward. The continued investment by multinational companies in Ireland is important for economic growth, Collins said, even if it is just a part of what’s going to be needed to stimulate the economy.
In fact, Ireland’s favorable tax regime for corporations – domestic as well as multinational, albeit much lower than elsewhere in Europe, was always just one of the factors driving the nation’s economic growth in the years before the crisis.