Low corporate taxes and poverty

Sli Eile: In a letter to the Irish Times, Justin Kilcullen of Trócaire imagines what it would be like if ‘thousands of Africans, Asians, and Latin Americans – poor farmers, mothers and their hungry children, unemployed men from the immense cities, people living with HIV – have gathered at the Garden of Remembrance’ and proceeded to Dáil Eireann. The scandalous cut in Irish Overseas Development Aid and, with it, the reversal of commitments in regard to 0.7% of GNP by 2012 has received relatively little attention. As public services, in Ireland, enter rationing mode, the recipients of Irish overseas aid are the silent victims of Irish fiscal and banking sins in the recent past.

A significant window into the world of trade, taxation and resource transfer has been opened by research work undertaken on ‘trade misspricing’ and reported in an article by David McNair in the Irish Times recently. The nub of the argument and the main finding of research is that countries – like Ireland – have been party to a huge and difficult-to-quantify resource transfer by means of a combination of multinational price-transferring and low corporate tax. The art of ‘trade mispricing’ or simply tax-dodging is likely to be massive. Research work by Professor Simon Pak and cited in the article by David McNair suggests that

…. between 2005 and 2007, this abuse resulted in a total amount of capital flow from non-EU countries into the EU and US of €850.1 billion. If tax had been levied on this capital at current rates, non-EU countries would have raised €279 billion in revenue.

To put this in perspective:

Together, the total tax loss by emerging and developing countries is more than the annual global development aid budget and much greater than the $40 billion to $60 billion the World Bank has estimated would be required annually to meet the millennium development goals aimed at halving extreme poverty by 2015

So what for Ireland? The report found that

While most of the estimated €5.8 billion mis-priced capital that flowed into Ireland between 2005 and 2007 came from high-income countries, €268 million of that total came from the world’s 49 poorest countries. That figure was more than a quarter of Irish Aid’s total aid budget for 2008 (€899 million).

In summary, what we have been giving with one hand we have been taking back with the other. Now that ODA is being cut back drastically could it be that Ireland becomes a net beneficiary where less economically developed countries are concerned? Certainly, Ireland has benefited from the skills and contribution of immigrants in the boom years and there are other means by which countries such as Ireland benefits directly or indirectly from favourable and unfair trade deals.