So the US Permanent Subcommittee on Investigations has declared that Ireland is a tax haven and Apple executives giving testimony to the committee have said that the Irish government gave them a special 2% rate. Rate in this context is irrelevant however, as the mechanism ensures that what Apple declares as taxable income is completely up to them. As many reports have suggested, Apple could pay as little as 0.05% on income earned and passed through Ireland, and the revenue appears to be sales tax on Apple products bought in Ireland. In addition they have also said that their Irish companies are not registered for tax anywhere, so that none of the $30 bn global income earned in the last number of years was taxed.The Irish government denies that it has provided special tax treatment to Apple, and that it is not a tax haven. This is the surest sign that it is one, according to Richard Murphy of Tax Research UK.
If you haven't already you could do worse than get one of the remaining handful of copies of the first issue of Irish Left Review, which includes a good interview with Ricard Murphy about the Irish system. There is also a long article about Ireland and corporation tax which deals this in a fair amount of detail.
However, with all the coverage I am drawn back to a post by Conor McCabe from July 2010 written around the time he was working on the chapter on the cattle industry in Sins of the Father. (Good news, the 2nd edition of Sins of the Father, with a new chapter on more recent developments will be published towards the end of 2013).
The trade union movement emphatically voted nearly 2-to-1 against CrokePark2. Grassroots members across several trade unions are coming together this Saturday to host a public rally at 2pm in Liberty Hall entitled ‘No2CrokePark2 – No2Austerity’ to remind the government and others of that vote and that “No Means No!”. All are welcome. Please share for your friends.
In my long article in the first issue of Irish Left Review on Ireland’s corporate tax regime I made the point that Ireland in effect sells its abilities to make tax laws to profit hungry MNCs, in much the same way as it sells to the rights to our natural resources to large oil companies. That is, whatever economic benefit there is, and its small, goes to the ‘agents’ who negotiate the deal, with very little, if any, benefit appearing in the economy.
Still, with all the attention being on Google for a while now, there was one fact about the Irish government’s arrangements with the search engine company that I had missed.
Recently these arrangements, known as the Double Irish with the Dutch Sandwich have been given a lot of attention and are often explained. For example, see this New York Times info graphic. However, while listening to Jim Stewart’s interview on Morning Ireland last Friday in a conversation about Google’s ‘grilling’ before the UK’s Public Accounts Committee on taxation, I found out that the ‘Dutch Sandwich’ is no longer used, and instead Google’s earnings from its EMEA market goes from Google Ireland to Google Ireland Holdings, which is registered in a solicitor’s office at 70 Sir John Rogerson’s Quay and also in Bermuda. So, by passing these to the Bermuda registered company, the earnings go straight to Bermuda. Google Ireland Holdings has no employees and is ‘owned’ by Google Bermuda which also has no employees. Both are unlimited companies, so under Irish law, they do not have to publish accounts.
For many the detail about the pressure which was widely reported to have been applied by the ECB for Ireland to enter the 2010 Troika bailout has coloured their understanding of the original blanket guarantee. The extent of the guarantee and the large sums being poured into our failed banks ensured that a bailout would be required. It was hardly a coincidence that the bailout occurred in the months after the blanket guarantee ran out on the 29th of September 2010.
The ECB’s insistence that the promissory note for Anglo Irish Bank and other unsecured unguaranteed bonds should be paid have led people to think that it was ECB pressure that led to the 2008 – 2010 guarantee in the first place. I have tried over the previous posts to unravel this myth and show that it was an Irish decision alone put in place for very local reasons. In fact, the ECB warned the Irish government that under Maastrict (where the cost of borrowing is dependent on maintaining a good credit rating in the financial markets) the guarantee could cause substantial funding problems for the sovereign. Other events disprove it, including the fact that an attempt by the Greek government to also bring in an unlimited guarantee immediately after the Irish made their announcement was rescinded due to pressure from EU Commission. Neelie Kroes, EU competition commissioner at the time said “A guarantee without limits is not allowed”.
Of course, the myth has its own political uses and it’s not surprising that there has been very little examination to date of the guarantee. But even any future Public Accounts Committee examination and its ‘who said what in the room on the night’ scope will not provide much clarity. Looked at from the perspective of class and power, however, examining the guarantee reveals much about how both work in Ireland. Such a focus would not fixate on the technical detail of whether dated subordinated bonds should have been included, or whether Dermot Desmond was there behind the curtain throwing his voice in to the mouth of Brian Cowen. Instead, the focus should be on the decisions made in the context of how the Irish government behaved in the past when other Irish financial institutions went into freefall. We tend to see 2008 as a rupture, but in terms of understanding why certain decisions are made it’s more useful to examine the continuities. After all, this was not the first time that Ireland provided a blank cheque for Irish banks.
Belfast & District Trades Union Council invite you to their Annual May Day Lecture:
Who Profits from Peace?
Thursday 2nd May at 7pm to 9pm
Belfast Unemployed Resource Centre
45/47 Donegall Street, Belfast , BT1 2FG
Will decent manufacturing jobs be replaced by low paid jobs in the finance and services industry?
The ‘double transition’ – towards peace and neo-liberalism – has been evident in the world of politics, finance, law and accountancy. This talk will examine who the winners and losers are in the peace process and will also explore ‘who really profits from peace?’
The rest of the world seems to be suffering from austerity fatigue – apart from the Berlin and Dublin governments (and London too – but no-one is holding it up as a model for anything).
The Department of Finance tells us that the deficit is improving. DoF reports that the general government deficit fell from €22.4bn in 2009 to €12.4bn in 2012. But it is widely known that the impact of bailing out bank shareholders and bondholders has had a hugely distorting effect on public finances. Unfortunately, DoF does not show these effects in the same release as the overall government finances, and you need to go to a separate database to get these data.
Adding the two together produces a measure of the underlying deficit, excluding both costs and revenues from the bailout. It is regrettable DoF doesn’t do this itself. The table below shows the deficit excluding the effects of the bank bailout.
General Government Deficit
Bank bailout net expenditure/receipts
Underlying Deficit (excl. bank bailouts)
Fig.1 – General Government Deficit Excluding Effects of Bailouts for Bank Shareholders and Bondholders, €bn. Source: Department of Finance
This article follows on from Why Ireland’s 2008 Blanket Bank Guarantee Decision Was Taken: Part 1 & Part 2.
Hindsight provides 20-20 vision, but in light of more recent events political spin and a sense of justifiable grievance can cloud the popular understanding of what happened in the past. There is, of course, the accuracy of the historical record to correct the flawed collective memory.
One ‘flawed memory’ is that the bailout by the Troika was forced on Ireland in order to ensure that money from Irish tax revenue was used to pay back French and German banks, and that since the bailout was a consequence of the guarantee, that it too was forced on Ireland by the ECB to ensure that European banks got their money back. At the time that the bailout was announced, Brian Lenihan began the process of conflating the terms and conditions of the program with the guarantee:
“There is simply no way that this country, whose banks are so dependent on international investors, can unilaterally renege on senior bondholdersagainst the wishes of the ECB. Those who think we could do so are living in fantasy land.”
But when Irish politicians provided an unlimited guarantee the credibility of the guarantee and therefore its effectiveness in upholding the banking system depended on the willingness of the ECB to prevent a country from defaulting on its sovereign debt.
This is not to say that the actions of the ECB, its rules and structures or even the way that the single currency is arranged and the orthodox thinking that underpins it in the interests of private banking is correct or just. Far from it. However, a clear order of cause and effect must be followed, and the ECB is not responsible for the far reaching consequences of providing an unlimited guarantee.
It is five years since the Irish government announced on the 30th of September 2008 that Ireland was going to provide an unlimited bank guarantee to six covered financial institutions. It’s important to remind ourselves of the context of that event. On the 15th of September 2008 Lehman Brothers collapsed and the subsequent credit crunch ensured that the international banking system was soon struggling to obtain interbank credit. Soon significant problems at European banks came to a head. Towards the end of September France, the Netherlands and Belgium injected €11.2bn into Fortis, Belgium's biggest bank and then, a couple of days later on the fateful 29th of Sept, the Netherlands was forced to take over Fortis’ Netherland operation at a cost of €16.8bn. By the 6th of October the German government had authorised a €50 billion rescue package in its second, and this time ‘successful’ attempt to rescue Hypo Real Estate Holdings. The first attempt was a week previously, again on the 29th of September.
The problems for Irish banks trying to access liquidity in the interbank market were not unique, but Ireland’s solution to resolve it differed considerably to that of every other country in the EU. In the weeks prior to the full guarantee the Irish government had already taken the decision to guarantee deposits up to €100,000. Up to that point deposit guarantees in the majority of European countries was just €20,000 with only Italy providing a deposit guarantee of 100,000. As a result of the Irish extension 97% of all customer deposits in the Irish banking system were fully guaranteed (Carswell, IT Oct 2008, see image below). Yet this wasn’t enough to stem the banking crisis and the loss of liquidity. At this time Anglo Irish Bank that was losing significant deposits of between €50 million and €200 million each, amounting to losses of €1 billion a day, causing Anglo to breach its regulatory liquidity ratio. Most of these deposits were borrowed from the short term money markets.
A recent AlJazeera English report called Firms enjoy tax haven in bankrupt Ireland which uses a short excerpt from the recent Anarchist Bookfair IFSC walk tour.
Ireland is one of the country’s that’s been hardest hit by Europe’s debt crisis.But amid the austerity, billions of dollars are still flowing in and out of the economy.The problem for Ireland is that it is not collecting much of a share of the money. Laurence Lee reports from Dublin.
Jorgo Chatzimarkakis, a German MEP with the Free Democrats party has announced that he is resigning from German politics because he is “fed up with German hypocrisy”. Chatzimarkakis was born in Germany to Greek migrants and has dual nationality so his actions and comments are particularly directed towards German-Greek relations. The issue of corruption is the one where he sees hypocrisy as most glaring:
“The Germans in their hearts believe it is OK to bribe if it leads to more profit. They have a totally different attitude to corruption as the donor [party]. Many regard themselves as not guilty if they give… The guilty ones are those who take … this is the sort of hypocrisy that I am personally fed up with.”
A recent report entitled Guns, Debt and Corruption: Military Spending and the EU Crisis, authored by Frank Slijper, hones in on one sector where such corruption is endemic. Greece has long had the highest levels of military spending in the EU and Germany has been one of its leading suppliers of military equipment. In 2011, two former managers of the German firm Ferrostaal were convicted in Germany of paying €62 million in bribes in connection with the export of submarines to Portugal and Greece, and Ferrostaal itself was fined €140 million. The former Greek Defence Minister, Akis Tsochzopoulos, along with several others, faces trial in Greece for taking kickbacks on defence contracts, including an alleged €8 million from Ferrostaal.
Gombeen (g?m ‘bi:n). Anglo-Irish. Usury. Chiefly attrib., as Gombeen-Man, a money-lender, usurer; so also gombeen-woman. Hence gom’beenism, the practice of borrowing or lending at usury.
The 19th-century term Gom’beenism, the practice of borrowing or lending at usury, is increasingly referenced in relation to Ireland’s domestic economic practices. Conor McCabe takes a look at the history of the Irish middleman and argues that they haven’t gone away.
On Tuesday 3 January 1882 the nobility and landed gentry of Ireland met in Dublin to discuss the future of the island. Among those present was R.J. Mahony, a landowner from Kerry. He stood and said that the recently-passed land act would be the ruin not only of the landlords but of the small farmer as well. He explained that as soon as the landlord class was put out of the way, another would come along to take their place.‘The merchant, the trader, the usurer, the gombeen man,’ said Mahony, were ‘the future rulers of the land.’ Mr. Mahony called these the middlemen, and although he may have had his reasons for defending landlordism, his warnings were not without foundation. Forty years later the middleman were in the ascendancy and set about carving the newly-independent free state in their image – and we’ve been living with the consequences of that ever since.
Just who were these middlemen? In an article published in 1982 Michael D. Higgins wrote that the mainstream image of the period – and the one taught at secondary level – was one of poor small farmers fighting against perfidious, foreign landlords. However, what was glossed over in such a black and white analysis was that there was another struggle – a class struggle – going on, one that involved small farmers and the rancher/grazier families. These large rancher farmers fattened cattle for export, and occasionally they were the local shopkeepers, the arbiters of credit in the community, and the dispensers of loans. It gave them significant societal influence and power. Not all shopkeepers were graziers, of course, but neither one was the friend of the smallholder. The social relations which underpinned Irish rural society were not only framed by land, but by credit: those who needed it, and those who profited from it. And in the north and west of Ireland, it was the Irish entrepreneurial spirit of the middleman and his gombeen cousin that held sway over credit.
Working on the last few pages of a chapter for a book edited by Colin Coulter and Angela Nagle. I’ve just been rigid with anger over the last couple of weeks - more than usual - and I think the process of writing this chapter is the reason why. This little paragraph sums it up […]
Speaking tomorrow in Galway before Donal O’Kelly’s performance of Bat the Father, Rabbit the Son. The title of the talk is: All the Devils are Here - A Short History of the Irish Entrepreneur. All welcome. […]