Back in the darkest days of the financial crash, I met Marty Baron. At the time, he was still editor of The Boston Globe newspaper, where he had overseen the Pulitzer-winning investigation into sexual abuse in the Catholic Church Boston diocese.
We explained how the 12.5pc rate was seen as untouchable and none of the major political parties were calling for it to go up. Baron looked puzzled and was even more surprised when told that not even left wing parties like Labour or Sinn Féin were calling for it to increase.
Such was the power of the 12.5pc rate, that when the Fianna Fáil administration was cutting the blind pension, an increase to the rate was not seriously considered.
A decade later, it now finally looks to be under threat. So what has changed?
Well, the whole world has changed around it. Global corporations are not paying their fair share of tax. They are allowed to game the system in a way which is undermining the tax take that is necessary for states to provide vital services and invest for the future.
The agreement reached at last week’s G7 meeting is another nail in the coffin of the rate. Two pillars were talked about. One involved giving countries the right to tax a portion of profits relating to sales made in their market. This would dent Ireland’s corporate tax take but probably not blow a big hole in it.
The other pillar relates to a recommended minimum global corporate tax rate. This has yet to be teased out but a minimum rate of 15pc is being discussed.
Ironically, a 15pc rate would not be bad for Ireland especially given the rates that apply in other countries. It isn’t a giant step up from 12.5pc. It would undermine part of Ireland’s investment offering, but not dramatically. If the rate was set at 20pc, that might be a different story.
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Ireland’s 12.5pc rate was never the real problem. Getting giant multinationals to pay 12.5pc would be pretty good. Considerable damage was done to Ireland’s reputation by the fact that various policies facilitated companies in paying next to nothing on billions in profits earned by entities not tax resident here.
The Apple case showed how subsidiaries of multinationals could be legitimately registered in Ireland, but not tax resident here or anywhere that pays corporation tax.
Ireland was far from unique, but my God we got very good at it. We argued that we were not a tax haven because these complex structures were backed up by real investment and real jobs – as they were.
But other more aggressive tax avoidance measures around intellectual property, tax inversions and the so-called “Double Irish” have not been helpful in the long run.
Tax consultants in Ireland came up with incredibly inventive ways of legitimately reducing the corporate tax bills of major firms. They lobbied government that this was all necessary to maintain our foreign direct investment (FDI) offering.
The country has done extremely well out of FDI and hopefully will continue to do so. But how will Ireland have benefitted in the long term from inversions, where US companies are taken over by an Irish-registered vehicle, thereby changing the tax residency of the American parent company?
The first big warning signs came when US president Barack Obama name-checked Ireland in these tax inversions back in 2014.
At the time Irish tax and legal advisers were hawking this structure around America. One piece of literature I saw from an Irish firm promoting the structure said: “While dividends received by an Irish incorporated company are taxed at 12.5pc or 25pc, a flexible credit system usually eliminates any tax liability in Ireland on receipt. In addition, other tax-free cash repatriation techniques are available.”
Other advantages listed portrayed Ireland in a very “light touch” kind of way when it came to business legislation and regulation.
This was the point at which Ireland went beyond intelligent and competitive approaches to genuine foreign direct investment and just tried to be too clever.
While Government policy in recent years has been to dismantle some of the sharper tax avoidance structures that have damaged our reputation and created a lot of tax enemies internationally, the 12.5pc was always seen as beyond reach.
And to be fair it was not really the problem. Specific measures around IP and the tax treatment of acquisitions, which took advantage of weaknesses in the US tax system, did a lot more damage.
The language now is around a level playing field. Unfortunately, there are few level playing fields in the battle for FDI. The new taxation rules will favour larger countries to the detriment of smaller ones.
We were late arrivals to having control over our own affairs. Without population scale like Germany or the UK, or major natural resources like Norway, or secretive global banking like Switzerland, tax was a card we played, and played well.
The deck is being reshuffled and we have to find other cards to play.