“Double Irish” Tax Evasion in Europe.

Tax avoidance in Europe

 

The Irish Government claims that it has, for many years, had a 12.5%  corporate tax rate for all corporations, including international firms.  This compares well with the average for the European Union average of 21.34%. But Apple pays only 2% or less.

However, the following countries offer 0% corporate tax:

Cayman Islands

Bahrain

Bahamas

Bermuda

Jersey and

Vanatu.

The highest world rate is 55% in The United Arab Emirates.  The rate in the USA is 40%. Other European rates are;

France 33%

Germany 29.58%

Italy 21%

Luxembourg 29%

Netherlands 25%

Spain 30%.

United Kingdom 21%

The Luxembourg and Netherlands figures are most interesting because they are also being investigated by the EU for “State Aid”; as is Ireland. So, if Ireland can offer 2% or less to Apple and others, then it seems likely that Luxembourg  and Netherlands are also offering less than their official rates. How does this work?

Under Irish law one can incorporate a company in Ireland, but have a “tax residency” in another country. Only countries charging 0% would be more attractive than Ireland offering less than 2%.  However Ireland’s official 12.5% is still below the above EU rates: and if Apple can negotiate 2% or less, then Ireland must be one of the most attractive countries in the world for low tax.

The only other attraction of the 0% rate is that it makes companies “stateless” for tax purposes. So, only small amounts of American and  British profits are taxed in the countries in which they do business. This produces a massive overall tax saving for the companies. A USA Senate report called this the “Double Irish”. You pay one small amount of tax in America, and another small amount in Ireland.

What is to be done?

The EU wants all it’s 34 countries to be more transparent about tax payments. All large companies will be asked to publish their annual profits on country  by country basis. This should reveal profits in the countries in which they operate; and in the countries in which they have a “tax residency”.

If this exercise is limited to EU countries only, then international tax havens will not become transparent. This is not just an EU problem but a world problem. But the EU is a good place to start. There may well be sharp increases in unemployment in Ireland, and a few other EU countries. Finally, there will be a short increase in employment in all the above countries offering 0%.

Trade Unions recruiting in service sector in UK and USA.

Trade unions recruiting in service industries in UK and USA.

A recent comparison of hotel pay in London and New York shows that  cleaners working for the same global hotels, have different pay rates. The New York cleaners earn roughly 3 times the London cleaners. How can this be so?

Some London cleaners are on the national minimum wage at £6.31 per hour in Park Lane. In New York’s Park Avenue the wage is £17.66 per hour. This produces an estimated annual wage of £32,159.00.

British trade unions recruit about 2% to 4% of hotel workers. American trade unions recruit  70% of hotel workers. This appears to be an answer to the above question. Put differently, being a member of a trade union has a big influence on wage levels.  All this raises the question as to why American unions are so successful relative to British unions?

One measure of union success in recruiting members in a workforce is the “Density” measure. Density measures the number of union members as a percentage of all employees. For the last half of the 20^th century British unions hovered around 40%. This started to reduce in the 1980’s. In the 21^st century it varies between 20% and 29%: in common with 9 other West European countries.

Falling density in Britain had much to do with decline in heavy industry starting in the 1980’s.  But service industries have always been less unionised than manufacturing. Unions in Britain have always found it harder to recruit in banks, insurance, retail, and hotels. So, why do American unions do better?

Density in America was 20.1% in 1983; but only 11.3% in 2013. If one focuses on the service sector only, in 2013 American density was below 7%. This is not so different from the British figures of 2% to 4%.

However, one major difference is that American unions have a long history of coalitions with activists on immigration rights, trade policies, health care, and the living wage movement. Further, recent increases in recruiting are largely in the service sector in the West Coast.

Perhaps this American tradition could be copied in Britain. Campaigns over Low Pay already exist, but much closer relations with activist groups remain to be created and fostered!