A low corporate tax rate, while morally dubious, culturally runs deep in Ireland. Having become intertwined with a narrative of post-independence progress and reconciliation with a history of emigration, unless altered, this myth may hinder closer integration.
A Comment by Grace McLoughlin
As the reaction to the Apple Tax debate has made clear, Ireland is unlikely to surrender its eye-wateringly low corporate tax rate without a fight. While the debate is actually about the legality of sweetheart deals and state aid, the Irish reaction – to jump to the defence of its fiscal sovereignty – demonstrates that it is aware of Brussels’ disapproval, and unwilling to budge.
While such a visceral reaction, on the face of it, speaks of economic avarice, there are in fact deep cultural reasons behind it. A low corporate tax rate and foreign direct investment have been central to Irish economic policy almost since the founding of the Republic, and have come to symbolise not only postcolonial transformation and global participation, but also the transcendence and inversion of a fraught history of emigration. This narrative has been spun in such a way that Ireland has managed to preserve its essential vision of itself as the land of the “Céad Míle Fáilte“, or one hundred thousand welcomes – pastoral, intimate and welcoming. Unless addressed and altered, this narrative may ultimately prove to be destructive, with the potential for driving a wedge between Ireland and the rest of Europe.
From Emigration to Globalisation-Transformation
From the time of the Great Famine of the 1840s until the 1990s, Ireland was dogged by a history of emigration and dependence on others, particularly America, to take in the children it could offer nothing to. This year’s St. Patrick’s Day address illustrates the lingering effect of this on the Irish psyche. Taoiseach (Prime Minister) Enda Kenny emphasised at the St. Patrick’s Day celebrations in the White House last month that in the past the Irish were the “wretched refuse on the teeming shore”, searching for opportunity when “deprived of liberty, deprived of opportunity, of safety, of even food itself” at home. The advent of the age of foreign direct investment, mostly from American multinationals, announced a new era for Ireland – of progress and plenty rather than shame and scarcity.
“The Ireland That We Dreamed of”
Former Taoiseach and President Eamon de Valera’s oft-invoked description of the Ireland that we dreamed of in 1943 was of “a land… whose fields and villages would be joyous with the sounds of industry”. Apple and Intel plants nestled amongst the rolling Irish hills seem a contemporary invocation of such a vision, with the greenery that the fertile soil supports being not only grass but dollars too. The low rate of corporate tax is interpreted in Ireland as the route to a realisation of the culture of Céad Míle Fáilte, of welcome and hospitality. In public consciousness, it is not considered a means of undercutting neighbours, but rather a way of returning a favour to, and accommodating, previous hosts. This myth provides a method of living out a self-concept of generosity and inclusivity, while also reconciling with, and reversing, a painful past.
No Man Is an Island
A crucial ingredient missing from this narrative, however, is Europe. While foreign direct investment and low-tax incentives pre-date EU membership, it was not until accession to the EU that progress gained true momentum. In the period 1973-2003, GNP in real terms more than tripled, the population increased from 2.9 million people to 3.9 million, and five times more people went on to third level education. With regard both to the Apple debacle and to discussions of closer fiscal integration in the Eurozone, the danger is that the Irish people will forget on which side their bread is buttered. The corporation tax rate will be passionately defended if challenged due to its symbolic value and the emotional attachment to it. This narrative fails to acknowledge that it is access to the single market which underpins foreign direct investment – the tax rate is an additional incentive.
Furthermore, Ireland’s economic transformation could not have come about if it had not been for EU support and structural funds. It is often overlooked that these funds were “the seed capital of our economic development” and formed the “foundations on which we built today’s economy” – a point which has been emphasised by former Prime Minister Albert Reynolds. If Ireland has reason to demonstrate gratitude and reciprocity in relations with America, it has at least just as much to thank Europe for. In a similar vein, community, cooperation and solidarity based on mutual values and interests with Europe is a far more worthy investment than fickle business relations with international corporations.
The Good European
There are several blatant reasons for Ireland to revise its economic model. Merely taking the global trend towards protectionism into account, reform and reflection is a far more prudent strategy than defence and denial. Brexit has placed Ireland in a precarious position, in terms of the future of the Northern Irish border, the future of trade, its identity and a sudden loss of a close European ally. Closer integration with Europe has arguably never been more important, strategically, ideologically and in terms of negotiating its “neurotic relations with Britain”, which have once again come to the fore. Inconveniently for Ireland, however, it is likely that closer fiscal integration will be the only valid solution to challenges facing the Eurozone.
Between Idealism and Fantasy
While a low rate of corporation tax is about more than hard economics to Ireland, given turning global tides and changing policies in Europe, it will likely be unsustainable for the tax system and economic model to maintain its current shape. Reform should therefore be pursued, for the sake of European ties and moral credibility, now, independently of external pressures. Ireland, as the island of Poets and Patriots, has always thought of itself as an idealistic nation. One can only hope that it has the confidence to make a clear break with history, and the foresight to realise that it is with Europe that real idealism can be found, instead of in the mere transactions which underlie the Céad Míle Fáilte fantasy.
The Polis Blog serves as a platform at the disposal of Polis180’s members. Published comments express solely the authors’ opinions and shall not be confounded with the opinions of the editors or of Polis180. Image source: “Protesting Against Apple’s Tax Policy – Dublin Street Art”, William Murphy, http://bit.ly/2qfz6Wj, lizensiert unter Creative Commons license 2.0.: https://creativecommons.org/licenses/by/2.0/.