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Hey Senator Levin - Ireland is NOT a tax haven

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Senator Carl Levin has been pointing his
finger at Ireland, claiming it is a "tax haven."
{Photo: Christian Science Monitor}
Senator Carl Levin keeps moaning about Ireland and its corporate tax rate, restating his position that Ireland is a tax haven. This is despite the fact that he is only talking about one company - Apple Computers - and the operations he is talking about are not resident in Ireland for tax purposes.

What the Irish do and have been doing is not new and is no secret: they entice companies to locate in Ireland with a low corporate tax rate. Apple computers is actually legally exploiting a crack between the tax codes of Ireland and the United States and for Senator Levin to keep pointing the finger at Ireland for this tells me he's either dishonest or dimwitted, I'm not sure which.

Senator Levin is moaning like a baby about laws over which he actually has more say than just about any other person on Earth. The laws of international commerce are written by the big boys and the United States is the biggest boy in the game.

Senator Levin is a powerful member of the United States Congress and rather than show-boating and pointing fingers at those who are playing the game by the rules he helps set, he should lay out his case to his fellow lawmakers to change the law. If Apple Computers and others are exploiting loopholes in the United States tax code then change the law.

By any objective measure Ireland is NOT one of the big boys. Ireland's control over the laws of international commerce is pretty slight. The Irish are just trying to "compete in the global marketplace."

The global marketplace is like a basketball tournament and Ireland is a team with no uncanny ability or unusual natural advantages for the game. So they do the only thing they can do: examine closely what skills they have and then parse the rule book looking for a way to get an advantage and maximize those skills. The United States is the Miami Heat of international commerce and the Irish are the Princeton Tigers: playing smart and making the most of what little they have.

Ireland has to do something special to "compete" in "the global marketplace." There are only 6.5 million people on the entire island.* Any Irish business making and selling products has only a small potential market before they have to sell "abroad." So before a business has achieved any type of scale they have to master a new legal and cultural environment and often a new currency. This is a significant competitive disadvantage for any Irish business trying to compete with a British or German or American company that can grow much larger before it is forced to export.

In addition, Ireland is not a land blessed with loads of natural advantages. Other than lush green fields ideal for the production of beef and dairy products there are no vast stores of natural resources to enrich the country (until that day when rain water becomes an expensive commodity).

Also, Ireland is an island. That makes the cost of distribution high. There's a good reason nobody makes cars or refrigerators or televisions in Ireland. The Irish market is too small and there are high costs involved in shipping such large items to where there are markets of significant scale. No company making big items would locate in Ireland when there are better locations at the center of Europe (or even in densely populated Britain).

Throw in China and all those cheap manufactured goods and you have the global marketplace in which Ireland competes. Given that the deck is stacked against them the Irish people had only two options: sulk off into unhappy and poverty-stricken economic isolationism or parse the rule book and find a way to compete. They chose the latter.

The Irish government** developed an economic strategy that revolved around being a European base for high value added services and goods with low distribution costs. They shaped their tax laws to entice companies, mostly American companies, to establish their European headquarters in Ireland. The companies the Irish targeted produce the sort of goods for which transport costs are small: computer processors, pharmaceuticals, software and banking services. They have been pursuing this strategy for decades.

Apple Computers has been in Ireland since 1981. If Apple ever got any special deal from the Irish government it was then and at no time over the years did the Irish government hide anything Apple was doing in Ireland from the United States government.

During all those years Carl Levin has been a member of the United States Senate. For 30 years he's been in a position to influence and vote on the United States tax code. For 30 years he's been in a position to vote "Yea" or "Nay" on any and all treaties. Yet he did nothing about the Irish and Apple. Until now and what he chose to do was theater without substance.

I can only imagine that Senator Levin imagines himself as being like Emilio Estevez in Mighty Ducks 2, in which Estevez coaches the American hockey team that overcomes the odds and defeats world power ... Iceland. A laughable premise for a movie, but an even more laughable cause for a member of the United States Senate. Senator Levin should stop playing to an audience and do his job - fix whatever is wrong with the United States tax laws and stop bad-mouthing Ireland.

* It doesn't matter north or south businesses on both sides of the border face pretty much the same challenges.

** This applies to the Republic of Ireland, but there are moves in Northern Ireland to follow suit.

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