WHEN President Obama travels to Ireland next week, in between visiting his great-great-great-grandfather’s village of Moneygall and other events, he will undoubtedly face the chaffing issue of the country’s corporate tax scheme.
Currently under duress by the Franco-German alliance to consolidate their corporate tax base as a condition of the EU/IMF bailout, Taoiseach (Prime Minister) Enda Kenny understands the harm this holds for Ireland, and adamantly rejected the idea as tax harmonization by the “back door.”
But at a international financial conference hosted by the Bertelsmann Foundation and the Financial Times in Washington, D.C., French Finance Minister Christine Lagarde announced that she was “pleased” by her recent meeting with Irish Finance Minister Michael Noonan because he signaled that Ireland was willing to negotiate, marking a “step in the right direction.”
While Noonan insisted to Bloomberg news “there’s no question of any concession on the corporate tax rate being made by Ireland,” his willingness to explore possibilities on the matter and failure to mention the status of talks on a consolidated corporate tax base comes as an unpleasant surprise to the Irish electorate who were guaranteed their tax scheme as a condition of their passage of the Lisbon Treaty in 2009.
Ireland needs a big brother to stand by its side, and this could be America’s opportunity to provide some empowerment.
It’s in the U.S. interest to ensure that the Irish corporate tax scheme remain fixed. According to the U.S. Chamber of Commerce in Ireland, U.S. firms have invested over $165 billion in Ireland, and U.S. firms export 90 billion Euro from Ireland to world markets.
This would hardly be the case if it weren’t for a favorable tax scheme and access to EU markets. An increased corporate tax rate or a consolidated corporate tax base will hurt the already flailing country hit by a devastating banking crisis, an emigration rate of about 1,000 people per week, and falling education standards all at once.
With little other recourse for growth in an economy clamoring for liquidity, maintaining a competitive advantage in foreign direct investment is vital to Ireland's recovery. And pressure to do otherwise for the “good” of the EU simply adds insult to injury.
Not to mention the Irish electorate holds the cards when it comes to EU treaty change – any future referendum on necessary changes to the functioning of the EU, as required by the Irish Constitution, could be hampered by a disillusioned people who feel misled and confused.
Obama should recognize this disillusionment and support the Irish on this issue -- to sustain the benefits of this economic partnership -- and as a matter of principle, to remind the EU of the importance of standing good on its promises.
The Irish descendents who helped to build America to prosperity could not have done so without hope for a better day. Now Ireland needs some hope.