Burger King is moving to Canada. Well, not exactly moving to Canada, but rather buying a Canadian company – Tim Horton's – and the new merged entity will be a Canadian company. Oh, and it will have a much smaller tax bill.
I am sure President Obama heard the news, but I wonder if he took note of the fact that Burger King is moving to Canada and not Ireland.
A few short weeks ago, in a CNBC interview, the president denounced these so-called “tax inversion deals,” where a big American company buys a smaller non-American company and the new merged company establishes its tax residence outside the US, but he did so with a specific mention of Ireland.
“If you simply acquire a company in Ireland or some other country to take advantage of the low tax rate, you start saying we are now magically an Irish company despite the fact that you may only have a hundred employees there and you've got 10,000 in the United States; you are just gaming the system. You are an American company, you continue to benefit in all kinds of ways from being an American company.”
I've mentioned this before, but the problem is not Ireland's. It's America's. The Irish people don't make the rules of the global marketplace. They simply abide by them.
The Irish control their own tax laws and they've drawn them up in such a way that allows them to be as competitive in the global market as possible. They accept the tradeoff of higher personal taxes – income taxes are high, the sales tax is 23.5%! - in order to have a low corporate tax rate. No state with a 23.5% sales tax can be termed a “tax haven” as so many American politicians (and journalists) like to say of Ireland.
That low corporate tax rate is available and of benefit to all Irish companies regardless of whether the company is a small indigenous cheese maker, a large Irish airline or an Irish subsidiary of a massive American company. The laws are the same for all. That's how it's supposed to work.
Ireland is not unique in having a low corporate tax rate, although I do think the simplicity and clarity of the Irish law probably helps Ireland to compete as many countries employ a range of subsidies and tax breaks to counteract higher nominal tax rates which only confuses matters. (See here for the effective corporate tax rates in the EU.)
So Ireland isn't doing anything wrong or illegal nor is it the only country where tax inversion deals have been done by American companies. So why is President Obama bringing down the hate on Ireland?
He knows the Irish people adore him. He was feted like a god during his 8-hour visit back in 2011 and Michelle and their two children received a rock star welcome when they visited in 2013. {Literally a rock star welcome – Ireland's biggest rock star, Bono, hosted a lunch for the the president's wife and daughters in his hometown.}
The president also knows Ireland is small and powerless and I am sure he appreciates that the Irish have not fixed the rules of international commerce to suit themselves.
He also said that companies doing these tax inversion deals were “magically” becoming Irish, as if they were using some Irish fairy dust to change their home address. They're not. They're using the law, which, as President, he can actually change. {Besides, one of these companies could shout back at him, “Look who's talking about 'magically' becoming Irish?”}
The president sounds like a football coach whose team never deviates from 3 yards and a cloud of dust complaining because the little team they're playing wins by passing the ball.
Give me a break.
There is absolutely no justification for any American politician, and especially the president, to be bad-mouthing Ireland. If you're a member of the House of Representatives or the United States Senate or, especially, if you're the President of the United States you have sufficient influence to (a) change the laws in your own land to be more competitive and (b) lobby for changes in the rules of international trade.
That the American government cannot get that done is not Ireland's fault. It's America's.
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