While speaking recently in Germany, the left-leaning economist and former Greek finance minister Yanis Varoufakis described Ireland as a tax haven, “free-riding” on the rest of Europe.
Coincidentally, within a few days of his address to the IFO Institute for Economic Research in Munich1 two of Europe’s most powerful right-wing finance ministers launched a proposal to harmonise corporate tax among EU member-states. Olaf Scholz of Germany and his French counterpart, Bruno Le Maire, agreed to open discussions throughout the EU on legislating for this measure.
These are ominous messages for Ireland’s neo-liberal ruling class.
It would be difficult for anyone to deny that there is a long-held and across-the-board consensus that Ireland’s corporate tax rate is seen as a problem by many in the European Union. The Irish establishment may take some temporary consolation from the fact that at present each state’s tax rates are deemed to be a domestic matter, and moreover that Ireland is protected by its ability to veto any attempt to change this situation.
Nevertheless there is no guarantee that, in the face of strong opposition, this position is sustainable in the long term, particularly in the event of a global economic crisis. Just think how the Irish state rolled over in 2010 when ordered by Brussels not to “burn the bondholders.”
Just how precarious the Republic’s tax take is may be judged by reflecting on a few statistics.2 Corporation tax accounts for about 16 per cent of the state’s total income. Last year it gathered approximately €3.2 billion in corporation tax from a mere ten companies, most of which are American transnationals.
This concentration of companies with their head office in the United States adds to the problem mentioned above—a difficulty that is exacerbated by the Trump government’s dramatic slashing of corporation tax, coupled with rising tensions over protectionist trade policies.
The Republic’s ruling elite is subjecting the people of the country to the risks inherent in an economic high-wire act, with no obvious fall-back position. In the event of an economic crisis the Republic has few conventional free-market options. Caught in the euro zone, it cannot use the devaluation route. While it is committed to the EU’s Stability and Growth Pact, deficit funding is severely restricted, while state aid to sustain employment has long been forbidden by EU competition law.
On the other hand, the received wisdom now being promoted by the establishment media is that the Republic is in rude economic health. Clearly this is a tendentious analysis, concentrating on selective and free-market-enhancing statistics. The one-sided story is of falling unemployment, a favourable balance of payments, and a manageable budget deficit.
All of which, of course, ignores a decline in workers’ terms and conditions, increased homelessness, a fractured health service, and growing inequality. Nevertheless, in spite of these difficulties the status quo appears secure for the time being.
Problems will arise when (and with capitalism it is always when) the next economic crisis arrives; and, in the light of the factors mentioned above, that may not be too far distant. Interestingly, the managing director of the International Monetary Fund, Christine Lagarde, was in little doubt about this eventuality on her recent visit to Dublin.
Constrained by adherence to EU treaties, the Republic’s establishment would face serious challenges if they are to retain control of the economy and, by extension, their power and privilege. Let’s be clear, though: the ruling class will battle tenaciously to hold on to its position.
In this respect the omens are worrying. Throughout Europe there is a repositioning of the neo-liberal right as it sets itself out as the only effective foil to the far right or fascism. To an extent, the neo-Thatcherite Emmanuel Macron typifies this tendency. Personalities aside, though, a similar trend is becoming increasingly evident in Germany and the Netherlands and in what is loosely referred to as the modern Hanseatic League, of which—despite our location—Ireland appears to be a member.3
The members of this latter group, in the words of the Financial Times, “share a common outlook on many economic questions, favouring dynamic competition on the single market, and stressing the need for national budgetary responsibility within the eurozone . . .”
It hardly requires a great stretch of the imagination to guess how those in Ireland who subscribe to this latest version of capitalism will react in an economic crisis. There will be another and deeper reduction in workers’ incomes, a slashing of every aspect of the social wage—all done while telling us that it’s for our own good, and that their commitment to liberal values is keeping the continent’s fascist beast from our shores.
In tandem with this trend in neo-liberalism is the continuing degeneration of social democracy. The German Social Democratic Party and the French Socialist Party are now bywords for unprincipled opportunism. Meanwhile the erstwhile radicals of SYRIZA have recently entered into an agreement with Cyprus and Israel that brings together companies from those countries active in the arms industry.4 While it is unlikely that Ireland’s centrist social democrats would go so far as to aid and abet the Israeli arms industry, their position in relation to other important political and economic questions is ambivalent to the point of being frightening.
As always, it is important that working people do not fall into the Mr Micawber trap of hoping for something to turn up. Having a passive response is to have no response. There are options, and they have to be explored and acted upon. Think of the remarkable resistance to the proposed imposition of water charges or, more recently, the positive actions of grass-roots GAA supporters in defence of the oppressed people of Palestine.
In this country we have progressive trade union activists; there are individuals and communities anxious to struggle for a decent and better future; and we have a rich tradition of resistance to exploitation. What we now require is unity of purpose and action, not jut to defend our gains but to strive for a workers’ republic. Karl Kautsky’s observation that we face either a transition to socialism or regression to barbarism remains as true today as when he wrote those words.
- According to the influential Frankfurter Allgemeine Zeitung, this is Germany’s most influential economic research institute.
- Eoin Burke-Kennedy, “Shock to Ireland’s corporation tax base ‘inevitable’,” Irish Times, 16 May 2018.
- Jim Brunsden and Michael Acton, “The Hanseatic League 2.0,” Financial Times, 7 November 2017.
- Morning Star, 23 June 2018.