23 Feb Corporate Tax Summit “Corporate Tax Equity – Leading with Responsibility”
Minister Zappone speech presented at Inaugural Corporate Tax Summit, 16th February 2017.
I would like to begin by acknowledging the work of the Taoiseach and his Department for organising this important and timely event. I believe this conference will serve as an important milestone in the future evolution of Ireland’s position on corporate taxation – It is something that the campaigners and NGOs working in this area have been calling for and I am happy to have been involved in progressing this.The title for the Conference – ‘Corporate Tax: Fairness, Responsibility and Leadership’ signals the commitment by this Government to take a leading role in Corporate Tax Fairness in Ireland, in Europe and beyond.
I believe that the engagement here today, with our impressive line-up of speakers, international taxation experts and campaigners, together with representatives from the corporate sector, our State agencies, and speakers from relevant arms of the EU, UN and the OECD, will assist us in transforming our corporate tax code to one that is more transparent and more equitable.
This morning we have heard from experts on international developments on this area and perspectives on Tax fairness on global and domestic terms. Along with our own reputation as a fair and open tax economy, Ireland’s interests include securing the jobs that the multinational companies bring here, but we also shoulder a responsibility as a member of the international community to ensure that the tax system we employ does not work against the interests of the Global South. It is important that all stakeholders contribute to these discussions – and that includes the corporate sector, that as we know, provides many jobs here in Ireland that are vital to our economy.
I wish to acknowledge the efforts of my Government colleague the Minister for Finance, Michael Noonan, and his Department to review and enhance the consistency of our corporate tax code by closing tax loopholes and eliminating irregularities. And I look forward to the conclusion of the review of corporate taxation that he commissioned, currently being undertaken by Mr. Séamus Coffey and shortly to include public consultations.
I see the conference as the natural next step, it follows up on the progress we have already made and will help inform our continuing efforts.
The Irish Tax policy in the changing world:
We need to ensure our tax policies and practices evolve further to assure our reputation internationally as a trustworthy and stable economy in the European Union as the world around us is changing rapidly and unpredictably attributable to the on-going BREXIT negotiations and the Trump Presidency.Our sovereign tax policy is a key tool for our Government to respond to economic challenges affecting us from inside and outside our borders. We need foreign investment to provide work and wealth for our country. However, perhaps more importantly, Taxation is a tool of Government to re-distribute wealth more evenly among our citizens.We need a balanced approach – to provide the right environment for wealth to be created within our jurisdiction, as well as collect fair and justifiable tax revenues from the companies and individuals who create wealth here, with the support of our social, technological and economic infrastructure and our educated and skilled labour force.
I have never believed that our low corporate tax rate should be the central part of our strategy to attract foreign investment. Tax certainty and competition has a role to play, but Ireland has much more to offer. Perhaps now we are ready to acknowledge our strengths more comprehensively. Many of the speakers have made this point here this morning.There are other ways for us to achieve and maintain a competitive edge: For example, Investment in Early Years Education and Care will improve our competitiveness through greater productivity by allowing highly skilled women to return to the labour market.It can also transform our future work force.The most competitive economies in Europe – Finland, Sweden, and Denmark – have built their competitiveness on high productivity resulting from the significant investment in human capital and innovation, starting from a universal right to early years education.Investments in tomorrow’s labour force should begin in early childhood as it provides the best returns for the state for long-term investment and a right footing to move towards a knowledge-based economy.Our perceived over-reliance on our corporate tax competition has dented our reputation. We must not allow the ‘renegade’ stereotype created by the so-called ‘Double Irish’ and other such practices lead to our isolation. Instead, we must continue to build our reputation and strong relationships within the EU and beyond.
Hence, it is vital our engagement with the collaborative negotiations on international tax policy practices such as OECD’s BEPS process, that we are fully signed up to – demonstrate strong commitment to tax fairness going forward.
Changing attitudes towards tax avoidance:
I believe we are living in a water-shed moment in corporate taxation. I believe the so far dominant narrative in this debate is coming to an end. A new consensus is emerging that acknowledges that aggressive and unsustainable tax avoidance by certain multinational companies is simply unsustainable.Tax avoidance leaves governments with less revenue to finance public services and hence, cannot continue. The public and political leaders demand a much more responsible and just approach.A wider realisation of the strong connection between taxation policies and human rights record of any given country is emerging, and that policies addressing social and economic rights can no longer be discussed separately from the economic and financial matters.
This is part of my mission as a public representative and I bring this perspective to bear in the Government:
As a Minister for Children, my most urgent priority is to ensure that the rights of all children are respected and cherished.The UN Convention on the Rights of the Child states that in relations to the implementation of economic, social and cultural rights – such as the right to an adequate standard of living for their family, including adequate food, clothing and housing, and to the continuous improvement of living conditions; – the right to the enjoyment of the highest attainable standard of physical and mental health; – right to education and – to take part in cultural life, Ireland is obliged to “undertake such measures to the maximum extent of our available resources”.Our taxation policies impact these maximum resources available to make enjoyment of economic and social rights possible for all.This is why I, as the Minister responsible for safety and welfare of our nation’s children, have a duty to use my voice in this debate.
New priorities for Ireland:
Inadequate taxation results in inadequate resources to fund basic public services such as housing, social welfare and education.I believe that the decisions we make regarding taxation and spending priorities reflect our priorities as a nation – what groups and activities we choose to privilege and which groups we choose to ignore.If were to fail to collect taxes that are due to the state, we should make no mistake that we are at the same time choosing to penalise groups that need those resources most.While, Ireland is a wealthy country in global terms – and as we have heard from the speakers today, we are hugely attractive to international investors, we still struggle with our responsibilities to our most vulnerable citizens.
I trust we all agree, our child poverty rates are hugely concerning and the growing phenomenon of family homelessness is probably the most alarming of dispossession and inequality experienced by those most deprived in our society.Our tax policies need to be developed in light of broader priorities that we have as a society.Outstanding among those to me is our responsibility to ensure the protection on basic levels of social and economic rights for all of our citizens and residents, including children.I believe Child poverty is a result of policy choices – not necessity.
In the past, there have always seemed to be valid reasons why alternative goals needed to take priority to basic human rights. The sanctity of our tax policies has too often been unquestioned in expense of our core values.So far this debate has been at the margins and completely disconnected from the financial and economic policy debate that is central to our governance, but I believe this is about to change.Incorporating these values to our economic governance does not only make ethical sense but can contribute to sustainable economic growth domestically and worldwide.As our own history has been touched by famine, hardship and war, we Irish greatly value our role as a member of the international community. There is hardly another small country in the world as active and visible on the global stage when it comes to peace-keeping and humanitarian aid.However, we need to acknowledge the negative influence our former tax policies have had on developing countries and move forward expecting more from ourselves.
Next steps: I am pleased to announce two new measures that the Government will progress over the coming period.
Firstly, today’s conference provides an opportunity for civil society groups working in the tax justice space to interact with policy makers and business groups on international taxation issues of mutual interest. I recently raised the issue with the Minister for Finance and I am delighted to say that we have agreed to explore ways to continue this engagement.One possible way this could be done would be through inviting a small number of the civil society groups with an interest in tax justice to participate in the National Economic Dialogue and this is something that we are actively exploring.
Secondly, I am pleased to announce Ireland’s commitment to the Addis Tax Initiative as a continuation of Ireland’s long history of providing overseas aid and assistance to developing countries that was decided by the Government on Tuesday.The Initiative is a multilateral commitment to strengthen international cooperation in the area of tax and development. It was launched at the Financing for Development summit held in Ethiopia in July 2015. The aim of the Initiative is to generate more resources to help developing countries improve their tax administration and collect more taxes.
Domestic Resource Mobilisation, the process through which countries raise and spend their own funds to provide for their own people, is recognised as the long-term path to sustainable development finance.Signing up to the Addis Initiative represents a commitment to double Ireland’s support for domestic revenue mobilisation by 2020. It also reaffirms Ireland’s long standing commitment to ensure a coherent policy approach is taken towards global development.Irish Aid currently spends some €300,000 on initiatives in this area through a variety of mechanisms. This spending will be doubled over the coming years to comply with Ireland’s obligations under the Initiative.
Tracking down tax avoidance and increasing our tax transparency will not hurt Ireland’s economy. On the contrary it will strengthen Ireland’s reputation as a transparent, corporate- friendly economy and assist us in defending our legitimate and sovereign tax decisions such as our low corporate tax rate.We must ensure that we effectively close all loopholes and continue to create a tax regime that allows us to attract sustainable Foreign Direct Investment, as well as collect the proper taxes on profits made here to be used to invest in our social and economic infrastructure.This is the way we will fully reap the benefits of the investment – by creating an equal and just society – not by allowing our social infrastructures to crumble around office towers built for stateless corporate elites.In concluding, I hope this Conference will lead to a wider debate about priorities for our tax policy and recognition that tax system we employ needs to reflect our core values as a nation.
For my part I’m determined to work with my colleagues in Government, independent experts and the civil society to find ways to continue this dialogue that I believe can assist us in achieving better relationships and enhanced reputation for Ireland on the world stage and most importantly a more just and fair economy.