Sir, – I have often wondered how the five countries with the highest per capita income (Bermuda, Cayman Islands, Jersey, Luxembourg and Switzerland) were all centres of international finance.
Now I have some idea thanks to your excellent reporting in The Irish Times ("Irish companies linked to further Luxembourg tax disclosures", November 7th). These countries all offer international financial services at a multiple of local domestic needs.
For some 40 years, Luxembourg offered bank deposit accounts to the German middle class with the assurance that no Dirt would be deducted and the interest would not be reported to the German tax authorities. From this simple idea, Luxembourg spawned the idea of zero-taxed international investment funds.
A visit to Luxembourg is eye-opening. Imagine a city the size of Cork with hundreds of banks, finance companies and investment management companies. They are there to offer quite legal tax avoidance services to companies and moderately wealthy families – the really wealthy go to Switzerland.
In more recent years multinational companies have developed a culture that treats taxation as another cost, to be reduced by any legal means possible. The benefits of double-tax agreements between countries to aid international investment in employment-creating projects have been hijacked by the international financial services industry, facilitated by the elimination of currency controls by central banks.
A radical rethink is required, otherwise national governments will be forced to impose ever higher taxes on personal incomes and on sales and excise taxes rather than on companies. Companies will pay less and less and individuals will pay more and more tax. Such policies are no longer sustainable. – Yours, etc,
DAVID McCABE,
Blackrock, Co Dublin.
Sir, – The only surprising thing about the recent disclosures of corporate tax avoidance is that people are surprised. Globalisation may have its benefits but its greatest ill-effect has been to allow corporations to grow to a size where they are, in some respects, more powerful than sovereign democratic governments. Hence the sad spectacle of small, and some large, countries desperately competing for minuscule tax takes in a socially destructive race to the bottom.
If we are to redress the balance, we need action on a global scale and we need to reform corporate governance. While the recent, timid, steps of the OECD are to be welcomed, it will take radical change to restore the historical, and economically productive, tension between capital and society.
Two good first steps would be to abolish the secrecy of unlimited companies and to require every multinational to publish full accounts for each subsidiary on a country by country basis. It would be cheering to think that this was on the agenda for the OECD or the transatlantic trade deal talks but somehow I doubt it. – Yours, etc,
Dr KEVIN T RYAN,
Limerick.