Ireland looks to close a major tax loophole, but some Irish want to keep the money flowing

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Marco Werman: From the Celtic tiger to the declawed Celtic kitten, Ireland may now be getting some of its economic claws back. After dealing with some grueling spending cuts recently, Ireland’s finance minister today rolled out next year’s budget, and there are signs it’s stepping on the gas again. The government is counting on strong economic growth this year. It’s so confident that it’s moving to phase out special tax breaks -- really special, as in allowing multinationals like Apple, Google and Facebook to save billions of dollars in taxes by sticking a lot of untaxed revenue in Ireland. Irish novelist Peter Cunningham has written about the 2008 collapse of the Irish economy and its impact. Peter, how’d you feel about this loophole coming to a likely end?


Peter Cunningham: I feel that Ireland, as a small country, should use all the weapons it can get into its armory to get jobs over here, because it’s all about jobs in Ireland. We’ve very successfully turned a small agricultural country, over 20 years, into a European Silicon Valley by using a lot of things at our disposal -- Irish people are very highly educated, we speak English. But also by using taxes.


Werman: Is it really a Silicon Valley though? Did innovation come about as a result of this loophole?


Cunningham: Well certainly from the point of view of  Irish people, that’s what we refer to it as. But maybe that’s too romantic a description. But it has certainly resulted in tens of thousands of jobs -- very welcomed jobs for the Irish economy. Now, the Irish government has come under huge pressure from the OECD, from the EU and from Britain to change our tax regime. Today, we did partly change by dropping the Double Irish mechanism to reduce tax even further. But we’ve kept our 12 ½% profits tax, which is not up for grabs, we’ve reduced the tax rate on intellectual property. So actually, as a result of today’s budget, there’s going to be little change.


Werman: Why did Ireland establish this loophole in the first place?


Cunningham: “Loophole” - can I, in a very friendly and respectful way -


Werman: You don’t like the use of my word “loophole” there, I can tell.


Cunningham: One man’s loophole is another man’s opportunity, and loophole is a pejorative term. It is simply imaginative and attractive taxation architecture. Ireland is a country with few natural resources. We can’t rely on other people to provide jobs in this open economy. We’ve had to come through the most appalling bust, and we’ve emerged from that remarkably -- we’ve done so on our own, not with the help of any large political power blocks. Of course, if each job which we attract to Ireland using a tax like this is a job lost for Germany, for example, and that’s what it’s all about. It’s about competition in the market. So, we’ve nothing to be ashamed of in using this long established tax architecture, and we should stick to it.


Werman: As you know, none other than Bono said today that this tax privilege brought Ireland its only prosperity ever. But what I want to ask you is what about the cultural prosperity of U2? Not to mention the great novels of people like you and James Joyce. Don’t the Irish want to be known for that, not as a Celtic Cayman Islands?


Cunningham: Look, we have no problem in being culturally vibrant as well -- we’re extraordinarily culturally vibrant. But that doesn’t mean we have to be poor. People are very, really concerned about their own jobs and how much it’s going to cost them to buy a house. It’s the same as everywhere all over the world. Today, for example, in the budget, there was a 2.2 billion Euro social housing scheme announced. So, we’ve come from a point of being in the hands of the IMF, to exiting the IMF program. We did that by gritting our teeth and by working very hard, and we should stick to our knitting, which is by attracting companies by having a favorable tax regime. And that’s what we’re going to continue to do.


Werman: Is there a lesson here about the soul of Ireland somewhere?


Cunningham: Well, the soul of Ireland got tarnished very badly in the time of the Celtic Tiger. As we say over here, “We lost the run of ourselves.” It was just a classic bubble. It wasn’t confined to Ireland, but it hit Ireland very severely. But meanwhile, this is still the Emerald Isle, it’s still the isle of saints and scholars, it’s still the most beautiful country in the world and we’re in business.


Werman: Irish novelist Peter Cunningham. He’s the author of, among many books, “Capital Sins,” a novel set during the Irish financial crisis. Good to talk with you Peter, thank you.


Cunningham: Thank you, Marco.