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Friday, February 20, 2009

Ireland's rich take their money with them

Today at the Public Accounts Committee the Chairperson of the Revenue Commissioners Ms Josephine Feehily gave details of Ireland’s tax exiles. She gave figures about Irish citizens who absent themselves from what is actually a low tax environment in this country in favour of the bright lights of the Mediterranean. Revenue use media monitoring to determine whether individuals are complying with the Cinderella clause by which if they’re out of the country by mid night then their day doesn’t count as one of the 183 days that they must be resident in the country for tax purposes. In Ireland taxation of an individual's income is what liberal politicians like to call "progressive." The higher the income, the higher the rate of tax payable. In Ireland the tax rates for an individual in 2007 were between 20% and 41%. But in order to be considered a resident for tax purposes one of two tests must apply; residency of more than 183 days a year in Ireland or residency of more than 280 days over a period of two years. To make things easier there is no €10 travel charge on your private jet.
Denis O’Brien, JP McManus, Tony O’Reilly, Denis Desmond all form this column of modern wild geese who find the call of their pocket louder than their interest in their country of birth, but there’s more, much more. Although Ireland’s tax rates are relatively low by global standards, an increasing number of high-net-worth individuals are deciding to leave the country of their birth and move to places with lower income tax and no capital gains taxes
In fact there’s over 5,800 Irish citizens who live outside this state despite the fact that personal taxes here are some of the lowest in any member states of the EU. This figure has climbed significantly in the last 12 months. We may owe a debt to Michael Smurfit for bringing the Ryder Cup to Ireland but rest assured he owes us nothing back and he’s got an accountant who can prove that. Other residents in Ireland who are actually resident overseas include Michael Flately, John Magnier, Hugh MacKeown Who can ever forget the doorsteping by RTE of Bono at UCC when the reporter asked him to reconcile pontificating about Irish overseas aid with his offshore tax arrangements in Holland.
The reality is that the 440 super rich that Ms Feehily identified in her report seem to feel entitled to decide how their contribution to our society if at all is to be made. Yet these tax tourists are feted as hero’s when ever they return to grace us with their presence or even better share their wisdom or bring their sporting friends to the golf pro-ams they organise. To ignore the scandal of the tax exile holding their money off shore while those citizens in the state that made these people so wealthy lie on hospital trolleys or sit in over crowded class rooms is surely more noteworthy than the practise of appeasing ones ego by name buildings after the tax exile. Is it not undemocratic about our state that we allow these people own our media and influence policies that affect our how our tax is spent while they remain abroad and make no contribution? Before the 2007 General Election both the serving and future Taoisigh Ahern and Cowen met with Tony O’Reilly to discuss treatment of their party Fianna Fail by the Independent Group of newspapers during that campaign. Who’ll forget the infamous Indo headline of “Its Payback Time” targeted at Labour from the 1997 GE?.
I have reached the conclusion that holding an Irish passport should be contingent on being tax compliant. Joan Burton says that we should pursue the 33,000 cash millionaires who are Irish citizens to pay their fairs share. She’s right. The passport remains the property of the Minister for Foreign Affairs and can be withdrawn as the minister sees fit. This happened a number of years ago after a scandal involving Irish passports for sale in the UK. So why not when some one declares themselves to be a tax exile withdraw their passport? But then you remember that previous Ministers for Foreign Affairs were Ray Burke and then you understand why.
However our government instead of refusing these tax exiles passports in Michael Smurfit’s case actually put him in charge of issuing passports by appointing him Honorary Consulate to Monaco where he is resident! More to the point at a time when our Revenue Commissioners see a collapse in the tax take, should we not invest a few euro by buying the Irish section of the DVD sold to German tax authorities by a disgruntled German working at a Liechtenstein bank where some of out tax exiles are legally if not actually domiciled?
Surely those of us who stay here from Michael O’Leary to Joe the Plumber are entitled to fairness and equity in our dealings with the tax authorities and vice versa? The days of the golden circle must be surely numbered

3 comments:

THE EMERALD ISLANDER said...

Fully agree with you. We need a drastic change of system, as it is obvious that capitalism does not (or no longer) work.

If some of the super-rich and super-Oirish wish to live somewhere else, then we should let them go, and good riddens to them.

But if they want to be regarded as Irish, they need to contribute a fair share to the nation they pretend to be part of.

Liam said...

To Emerald Islander it is also an issue that really annoys me, and the biggest itch is the artist's tax that that rouge Haughy brought in.

However, just a point, you tell the superrich to either pay or leave...if they leave are we not losing out in big VAT receipts and other such wealth they bring to the economy when they are staying here and presumably spend a lot more to the economy more than the average joe soap when they are here?

THE EMERALD ISLANDER said...

I am not an economist, but I do have a lot of work that involves economic decisions. Thus I think I have some good ideas about it.

The 'art' of taxation is to offer the right sort of incentives to the rich and super-rich (so they come and spend their money) without going to make the 'normal' people pay for that.
There are many countries - and quite a few of them much smaller than Ireland - who manage taxation a lot better than we do. Perhaps Brian Lenihan (or whoever will be his successor) might want to go to Luxembourg for a couple of weeks and learn how it's done.

Apart from any concerns for the world's super-rich and where they spend their money, there are many areas where our tax system is just not fit for purpose. Whole areas of Irish economy and taxation were created in the 19th century, when this island in its entirety was occupied by the British and part of their empire.
This is no longer the case, but we still have the same economic and taxation structure as we had 100 or 150 years ago. 90 years of the Dail and Irish independence have - sadly - not a lot to show for in this area.

If we like it or not, we are - and will remain - a country whose rate of wealth depends on exports. So I think we should focus on that more strongly. Right now we still buy a lot of things from abroad which we could and should produce here and export to other countries. To give you just one example: Ireland is the home of many well-known and successful writers (and even a lot more who are not that well known). We also have plenty of printers in the country, and many book shops, as the Irish are a reading nation.
However, there are only very few publishers in Ireland. So most of Ireland's writers - and all of the prominent names - are published by British and American publishers. It means that our people, writing about our country, have to venture abroad to get published. We - the Irish readers - then have to pay higher prices for imported books of our own writers, which also has a negative impact on tax revenue.

Instead of wasting millions on US multi-nationals who usually leave after their special tax incentives run out, we should create an Irish publishing industry. Our writers could then be published in their own country, their books would be cheaper in our shops, and when we export them - since many Irish writers are popular around the world - we would create a lot of extra income, including tax revenue.

This is just one example, and there are many more. As I said, I am no economist. And thus I would never apply for a job in the Dept. of Finance. But it is shocking to learn that the whole department is employing currently one one fully qualified economist. It is thus no surprise that they don't understand what economy - and with that taxation - is all about. And just thinking that the Dept. for Enterprise, Trade & Employment is headed by Ireland's answer to Sarah Palin makes me shiver...

Our system is broken, the current government disgraced and exposed as incompetent. So we need a new government - urgently - that is able and willing to create a new system. Though I am independent and not member of any party, for me this task could only performed by a government of the left. Both FF and FG are right-of-centre capitalist parties. Capitalism as we knew it has been destroyed and disgraced by the world's greedy bankers. So now the only hope for a new beginning can come from the left, which means in Ireland the Labour Party (perhaps with some help from Sinn Fein).
I am very impressed by Eamon Gilmore, and he and his party are rising in the opinion polls. But unfortunately it appears that the new popularity of Labour is not matched by the party's grass-root organisation. I am happy to vote for Eamon Gilmore and support the Labour Party on a national level. But locally I would find it very difficult to support Labour, as it is controlled by a bunch of 'old duffers' who are blocking the way for new and better people as well as new and better ideas.