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Dáil statement by Joan Burton TD on the Paradise Papers

8 December 2017

Speech by Joan Burton TD
Spokesperson on Finance, Public Expenditure and Reform, and the Arts

Speech by Joan Burton TD

Labour Party spokesperson on Finance and Public Expenditure and Reform

Dáil Éireann, Statements on Paradise Papers

8th December 2017

In the context of this discussion and the breakthrough this morning which will allow us to move to the next stage of the Brexit negotiations, one little island did not and possibly will not merit a mention in any future discussion, namely, the Isle of Man.  It is a small island about an hour away from Dublin, Belfast, Scotland or the west coast of England, yet it is probably the location of one of the most effective tax avoidance and evasion operations of which we know going back decades to the days when some or all of the accounts held there by many people were reflected in the first of the banking scandals.  Many services of Irish companies, North and South, are routed through the Isle of Man.  They range from waste to financial services.  We really do not know very much about this location just off our shores with its secretive tax-efficient operations.

When we have a debate about tax issues, we need to think things through in order that we will have a rounded view.  For example, as I understand it, both Sinn Féin and the DUP in Northern Ireland favour having roughly the same corporation tax rate in Northern Ireland, presumably post-Brexit, as is applied in the South.

It has been said in promotional conferences that both parties, when in government over a long period of time, said that when selling the North of Ireland internationally in terms of jobs.

The reality of Irish tax planning is that, as with yesterday's discussion and the importance of our neutrality, there is a triple element to addressing widespread tax planning abuses, avoidance and evasion that is undermining the principle of tax fairness and justice on a global scale.  If we are to be honest about it we need to think in global terms.

To address the issues raised in the Paradise Papers and the Panama PapersDái, the questions on taxation I have raised frequently in this House over the years resulted in us getting the information about the billions of euro of tax losses Irish banks are now sitting on, which will mean that as they now return to profitability they can choose what, if any, corporation tax they will pay for the next ten to 20 years.  Four banks - AIB, Bank of Ireland and two of the smaller banks - stated in recent reports of having €5.5 billion of deferred tax assets currently available to them - that is not all they have available to them - that they can choose to use when they so wish.

If we were to have a taxation triple-lock approach, what would that involve?  Clearly, it will involve Ireland and how we arrange tax affairs and arrange for tax fairness and justice because we belong to the European Union.  It would also have to be not just on an OECD basis but on a globalised basis.  We would have to have that in a triple-lock arrangement that would, in effect, see a change in regime where there was a global approach to the collection of fair taxation sufficient to provide for the needs of the societies of different countries around the world and, importantly, for our own and for those countries that are at a developmental stage where many people live in conditions of poverty that are difficult to imagine unless one has been there.

When the subject of international taxation comes up, there is a barely suppressed panic in Government circles and in Fianna Fáil as well.  It is almost like a physical reaction of tight breathing and negativity.  It applies to Fianna Fáil and Fine Gael but it can apply to other parties.  It is almost as though we have agreed not to talk about that in front of the citizens of this country and of other countries.

In any kind of discussion I believe we would agree that tax avoidance on a global scale is a zero-sum game and the only people who lose are the citizens of the various countries.  The people who gain are the people who are advising on this and creating these structures.  The people who gain, in particular in the developing world, are the corrupt leaders who have an entire network of banks and financial structures that facilitate them taking money away from their extremely impoverished people.

The very big corporations dealing in basic commodities manage to wash the profits through, perhaps by using three, ten or 30 countries.  Something that may be very valuable intrinsically in Africa might leave very little there for the local population.  What is left is very often subject to a very high level of corrupt take.  We are not directly responsible for that and we cannot directly change that process.  We can change it if, as a country, we decide it should be dealt with out of fairness and with the aim of developing a vibrant democracy right around the globe.  We need to act with respect to our country, the European Union and global matters.  Will the Government concede that point?

When I was a member of the Cabinet I was a really strong supporter and argued constantly for us to be part of the OECD process.  This is not because I see the OECD process as perfect - far from it - but rather that in this area we must replace rhetoric with taxation law that works for different countries.  We must also recognise that in Ireland, many tens of thousands of people are employed by global multinational organisations that see Ireland as a very attractive place in which to locate.  It is legitimate for us to seek those companies to become major employers in Ireland.  We must talk this through in an honest way rather than a process that is only about rhetoric.  It is not just a debating game and this affects people's lives.

Global international companies nowadays touch down around the globe for product development, customer service development and sales development.  We can help to supply that, and we do, because of the calibre of our graduates and other advantages that we offer from Ireland.  It would be wrong to lose sight of the importance of that in this debate, particularly with regard to developing a robust economy in this country that can compete internationally.  As I stated, both parties in the Northern Executive have for the past 12 years sought to do precisely that.  The Republic of Ireland in its trade missions has supported the efforts of the Northern Executive in that respect.  We should be a little honest about it.

How should we approach this work?  The first action should be to look at loopholes as they arise, as tax is a planning, legal and constitutional matter.  It is technically very difficult for the many people not involved in tax matters, accounting and legal affairs.  There is a large number of law and accounting firms in Dublin.  In the annual Finance Act, we must close loopholes when we become aware of them and as they arise.  We have just passed the Finance Act and without a doubt I know well-paid people will spend their Christmas having a look at it and seeking possibilities to be used that we did not spot.  They will seek to mitigate the burden of taxation, whether it is income or any other form of tax, such as corporation tax.

One of the initial ways to address the problem is to utilise a concept called minimum effective taxation, whereby tax is levied at minimum rates.

I found it really upsetting that the Revenue Commissioners recently said there are ten very large companies that really pay no corporation tax.  That is wrong.  There should be a minimum effective tax rate.  I have been involved, as have others here, in discussions going back decades because the other side of the issue of tax and the effectiveness of tax collection is that if a country does not collect enough tax, it has to borrow a lot of money.  If it borrows a lot of money and becomes enthralled to having borrowing funding its basic services and is unable to repay it, the country can end up completely bankrupt as has happened to many countries around the world.  We need a minimum effective tax rate.

We need to establish a structure that will allow us, outside of but alongside the Revenue Commissioners, to look at tax issues as they arise, to give advice and information about the cost of these developments, how much tax is collected as a consequence, how much is lost as a consequence and how to strike the balance of a fair and effective taxation system.  Fine Gael and Fianna Fáil do not accept my suggestion of a standing commission on taxation, which I have suggested for many years.  Fianna Fáil recently did not accept the notion of minimum effective tax rates.  Its finance spokesperson was concerned that he did not fully understand what it would have involved.  We need a standing commission on taxation parallel to the Law Reform Commission because there is no perfect answer to this.  It keeps changing.  Good work has been done with regard to Ireland and our membership of, and participation in, the OECD.  For many people, the OECD is by the by, but it is a quasi-global organisation.  The next step in global organisations, going back to how we approach issues of military neutrality, is to look, for example, at UN-based structures and to see over a period of time if we can formulate a UN approach which would be tied into the millennium development goals.  Those goals seek, for example, to ensure that every child is able to go to school and that we have basic health and infrastructural services in developing countries for people who are very poor.  Those countries should be encouraged and supported by us all collectively to develop themselves and their democracies.  Those are the three things we need to do in Ireland and for Ireland's presentation and presence on the international stage.

Going back to Brexit, we probably need a couple of hundred lawyers and negotiators to work on the details of the next stage and we need probably 400 extra staff in the Revenue Commissioners to deal with these difficult issues and the scandals disclosed by the Panama Papers and Paradise Papers.