For years Ireland defended its low corporate-tax rate, 12.5 percent, as a matter of national sovereignty and part of an overall economic strategy that lifted the country out of poverty and into becoming one of the richer nations in Europe. The idea was to facilitate foreign investment in Ireland’s English-speaking workforce. American companies that wanted access to the European Union’s market did just that. Just a few years ago, government ministers there would call Irish taxation policy it a “red line” issue. Both parties currently running the government in Ireland ran on protecting Ireland’s tax sovereignty.
And then, a week ago, Ireland gave it up to join an OECD minimum-corporate-tax pledge of 15 percent. Irish media presented this as an inevitable evolution of the country’s position. They had to — there was hardly any debate about it in public at all. In September, the taoiseach, Micheál Martin, explained that a tax hike couldn’t be ruled out. Which was instantly translated by the island’s media as an assumption that a tax hike was inevitable. And because inevitable, probably good, yeah?
Now, there were perhaps good reasons for modifying Ireland’s economic strategy. It seems to me that Ireland’s strategy does facilitate multinational investment in Ireland and that it reaps rewards in jobs. But this comes with a price in which American and other foreign executives have a hugely outsized voice in Irish concerns. The system in Ireland also seems to favor foreign investment over native entrepreneurship. These are debates and discussions that should have been had. It could have resulted in parties taking contrasting positions and winning mandates from voters to make a generational change.
Instead, it was all presented as a fait accompli.
Media from other countries were quite clear that what had happened was that Ireland capitulated. Fig leaves were handed out. Hadn’t the Irish and others prevented there from being a global minimum effective tax of 21 percent?
This OECD agreement matters in part because it was instigated by the United States and other nations that want the running room to tax more than they do currently. The willingness of sovereign nation-states such as Ireland to build an economic strategy around low taxation was putting a limit on the taxing ability of other states.
I’m very curious to see how this plays out in the long term for Ireland. But, for now, it seems enough to observe that this is another sign that, for good and ill, the neoliberal era that began in 1979 is drawing to a close.