Sorley McCaughey on the the EU's proposals to tax digital companies

Oireachtas Finance Committee hearing on EU digital tax plan

Sorley McCaughey, Christian Aid Ireland's Head of Policy and Advocacy blogs

Last week Christian aid spoke at the Oireachtas Finance Committee, as part of the Committee’s deliberations into the EU’ s proposals to tax big digital companies. In an increasingly digitised economy where companies can have no actual bricks and mortar presence in a country, but yet still make masses of sales, its’s difficult to know how to tax them. Our opening statement is here.

These hearings can often throw up a mixture of very expert and niche questions, and questions from left field that sometimes make you wonder has the deputy or senator in question wandered into the wrong Committee by mistake.

One of the questions that came up, was of the more general variety, and about the public policy making space on tax and whether we had any views on that.  

It’s a good question because over the last ten years tax has become an issue that has been pushed out of the shadows and corridors of stuffy big companies into the spotlight and thrust nerdy geeks (with apologies to all my dear tax friends) centre stage in the full glare of public scrutiny.

The tax geeks are having their moment in the sun and playing a blinder at explaining to all the rest of us, what the Double Irish looks like, how Apple managed to get away with not paying tax for as long as it did, and why places like the Isle of Man and Jersey are so attractive to people who want to keep their activities under the radar.

But in the main, traditionally it’s been a very narrow group of sectors and people who set the tax public policy agenda, and has been viewed as a dry technical subject, best left to those who enjoy numbers, and complicated formulae.

But a very narrow and limited group of people setting the public policy agenda will lead to very narrow and limited outcomes and limits the possibility of the tax system fulfilling its key functions.

The role of tax is more than finding ways to minimise your contribution to the state (something that is ultimately self-defeating as governments struggle to balance budgets as a consequence in part of the clever avoidance schemes of big multinationals and wealthy individuals, leaving less money for states to build roads, schools etc on which wealthy people and companies also depend) - it’s about the generation of resources for the state to enable them to ensure that citizens enjoy the full spectrum of rights - everything from a health system, housing, to a functioning judiciary and garda force. It’s about redistributing wealth, and it’s about incentivising ‘good’ behaviour over ‘harmful’ behaviour. And it’s about the social contract between citizen and state - that mutual accountability - you pay your tax to the state and the state delivers its obligations to deliver public services - a fundamental part of a democracy.

Which is why, in response to the question at the Finance Committee last week, Christian Aid, once again, floated the idea of the establishment of a multi stakeholder body on tax, that would include academics, civil society, human rights experts, international law experts, private sector, political economists and more, reporting to the Minister for Finance.

It would have the capacity and resources to commission its own research and would play an important role in identifying some of the gaps in the Irish corporation tax policy (which is the area of taxation that is subject to most international criticism) that might leave Ireland open to accusations of being a tax haven, or worse.

Yes, it’s time to take the tax public policy out of the offices of big 4 accountancy firms, or even the corridors of the Department of Finance on Merrion Street, and to situate it firmly back in the middle of the people for whom it is intended to serve.

 

Author: Sorley McCaughey, Head of Policy & Advocacy at Christian Aid Ireland