As the youngest member of Dáil Éireann, I am acutely aware of the challenges a future generation faces in an ever-changing global Ireland. The conversation on global taxation is not new. Recent announcements by the US and the EU, however, bring the issues out of the technical back rooms and onto the public stage. Ireland must be ready for this change.
We must re-examine the make-up of our competitiveness. Fostering an efficient ecosystem so we can continue to play an active role on the world stage is key.
This requires a three-pronged approach: maintaining our soft power advantage, doing more to enhance our indigenous ecosystem and re-balancing our cost of living.
Maintaining soft power
Despite the fallout from the financial crisis of 2008, Ireland has been able to rebuild its soft power status as a leading honest broker. The recent securing of a UN Security Council seat is a testament to this approach.
Whatever the implications of the US global tax affairs, the EU’s country-by-country reporting will place significant political pressure on Ireland to justify its tax affairs to its European colleagues. It is likely that the political pressure will mount to the extent that Ireland must act or face being cast in the same renegade status as Hungary and Poland.
In the aftermath of Brexit, with our traditional ally on lower corporation tax now gone, it would be feared that any continued foot-stamping by Ireland on the issue would isolate us from our single biggest source of business activity. As Commissioner Mairead McGuinness stated, the EU believes that “its time has come”. Ireland must not be oblivious to this new reality.
Enhancing our ecosystem
Minister for Finance Paschal Donohoe recently stated that he had “reservations” about the impact of a minimum global tax on SMEs and I would broadly share this view. Ireland has prided itself on having a young educated workforce.
Yes, it is obvious we have utilised our tax advantage to enhance our competitiveness but, equally, we have the labour talent available to meet the needs of the leading global firms. Ireland needs to do more to enhance its indigenous business ecosystem.
There is much that can be done, far outside the scope of this piece. Strategically, however, we must future-proof and enhance our Irish business ecosystem by providing incentives to grow and develop businesses fit for the 21st century.
Such actions are not incompatible with the changing global landscape. Executed in a holistic manner, such initiatives would be complementary and justifiable in the new global tax regime.
Fixing our cost of living to ensure competitiveness
Ireland is becoming uncompetitive and is losing business to other countries as a direct consequence of our lack of housing and key infrastructure. According to the National Competitiveness Council, Ireland is not performing and, under some measurements, is the worst performer when it comes to investing in key infrastructure.
We need to ensure that we have effective systems in place which enable the rapid rollout of public investment. The Covid-19 pandemic has changed our sense of what it means to live a meaningful life. We can no longer afford to neglect public investment. It is key to a happier life and is good for business.
Under a changed corporate tax regime, Ireland could lose out significantly on tax revenue if it does not comply. Faced with a competitiveness problem, where both the state and businesses are losing out due to a lack of investment, it may become prudent for Ireland to explore charging such a higher rate of corporation tax to meet our competitiveness needs.
If the money will be re-directed elsewhere, it would be foolish not to work with business to create a win-win situation.
James O’Connor is a Fianna Fáil TD for Cork East