Well, not quite – but the effect may be the same. Many international commentators welcomed the Irish Government for ending the infamous ‘double-Irish’ tax scheme. But just as it shut this down, it announced a new scheme: a ‘knowledgedevelopment box’ designed to reduce corporate taxation to a little over six percent.
The ‘knowledge-development box’ is based on the concept of the patent box used by the UK and the Netherlands to attract multi-nationals with preferential tax rates on income flowing from patenting activity. However, the scope for the Irish box could be wider.
After all, what exactly does ‘knowledge-development’ encompass? In the UK and the Netherlands, companies get a tax break on income generated from inventions. In Ireland, we may see all manner of activities thrown in – source code, copyrights, patents, branding, trademarks and that expandable concept – R&D. And we’ll have to wait and see to what extent it facilitates more than just actual activity in Ireland (will it encompass activity ‘managed from Ireland’).
The Government was keen not only to put in a replacement for the double-Irish scheme, but to reassure key multi-nationals. Government officials briefed ‘multinational investors’ on the rationale for the Government’s policy (question: were any of you included in a conference call by officials prior to the establishment of the water charge?). The message was clear: the Government may have been forced to abandon the double-Irish due to considerable international pressure – but don’t panic; a replacement is at hand.
It is argued that we need multi-national capital to create high-end employment in the global supply chain. No one disputes this. Ireland’s indigenous economy, even with the best policies in place, would not have created the pharmaceutical sector we have today. However, this common-sense observation is then used to argue that the only way to achieve this is to pursue our current accommodative corporate tax regime (that’s a nice way to describe a tax haven-conduit). Yes, we have another roll-out of TINA – there is no alternative.
But are there alternative approaches to attracting multi-national enterprises without resorting to tax tricks or ultra-low tax rates? Does Ireland benefit more than our peer-group EU countries from multinational employment? This argument – that we have been more successful than other countries in attracting multi-national jobs – has been restated so many times that it is taken as gospel. But is it true?