Posts contrassegnato dai tag ‘europe corporate tax’

Ireland is planning to establish a sovereign fund where taxes paid by US-based high-tech multinational companies domiciled on the island will be pooled. These companies earn profits in European countries but avoid paying local taxes on their profits by choosing to pay them in their Irish tax haven offices, thanks to Ireland’s favorable tax regime of 12.5%, compared to a higher European average, ranging from 28% in Sweden to 37% in Italy.

Dublin is at the center of a huge capital flight that should have gone to other EU states. The profits made in Europe are transferred to tax havens by large multinationals using legal tricks, bouncing between Ireland and the Netherlands before ending up in the Caribbean, and escaping taxation in the countries where those profits were generated.

The Irish government provided the numbers, and in 2022, it was the only European government to close its books with a significant surplus of €8 billion, equivalent to 1.6% of GDP. This was significantly contributed to by taxes paid not only by high-tech corporations but also by pharmaceutical companies, amounting to approximately €22 billion, paid by companies that only conducted a small portion of their activities in Ireland. It was easy money for Dublin, which did not have to incur any expenses to receive this economic return.

According to Irish authorities, the sovereign fund that they now want to establish, similar to Norway’s oil fund, will accumulate more than €140 billion by 2035. This would be a blessing for Ireland, which would have a liquid fund to solve any budgetary problems, make investments, and subsidize welfare. However, this would be at the expense of the rest of Europe. If that amount corresponds to a tax rate of 12.5%, it means that the amount that multinationals should have paid to the tax authorities of the countries where they operate would have been two or three times higher. Some countries have already challenged this generalized erosion of the tax base, disputing the millions that should have been paid locally.

In addition to the tax aspect, the ability to migrate tax payments to where it is most convenient creates an additional distortion, namely the consolidation of positions that become almost monopolistic, violating free competition. The investment, product development, and promotion capabilities of groups that pay a third (at best) of taxes compared to competitors are disproportionate and form the basis for the expansion of an industrial sector that does not comply with national rules, but rather those of deregulated globalization.

It’s all legal, but it’s all wrong. And for national governments, it is difficult to oppose, also because, in today’s world, these companies control the flows of information: they could become potentially dangerous enemies, at a time when a tweet can destroy a politician or a party. The good news for Ireland becomes bad news for the rest of Europe because the projections made by Dublin herald the continuity over time of this fiscal version of the shell game. Not even the obligation to raise taxation to a minimum of 15%, as decided by the OECD starting in 2024, seems to be able to crack these privileges.

The Chinese box mechanism created by multinational companies to transfer profits to Ireland and then to the Caribbean is the same one used by organized crime for depositing money in the coffers of the Cayman, Bahamas, and other islands. The difference with high-tech multinationals is that money launderers, or those who derive their funds from tax evasion, have never told us that they would make the world a better place.