Phantom menace

The Irish economy as a model for Northern Ireland’s future? 

Much of the chatter around the anti-Brexit voices in Northern Ireland, has been around the notion that Northern Ireland will benefit from the “all-Ireland” economy closely alined to the EU.

The all-Ireland economy is a nationalist fiction. It conflates the geography of the island or Ireland with some notion of an integrated economy. That doesn’t stand up to any exploration of facts. The much talked about ‘all Ireland’ energy market conveniently ignores energy links to GB, and seems to conflate the State-owned ESB with a market. Animal and plant health checks long precede the EU for Northern Ireland, and siren calls of the threat to food hygiene conveniently forgets that the horsemeat scandal of 2013 originated in the Republic of Ireland from meat sourced elsewhere in Europe – not the only food scandal to be talked down or forgotten.

The debate focusing on an “all-Ireland” economy is useful to the Irish Republic. It is self-promoting, and self-congratulatory. It impresses upon anyone who listens that the Irish economy is the success story and that ties to GB are of less importance that those to the EU, of which the Republic makes itself to be a successful small nation in the Club.

The Republic of Ireland barely acknowledges the value of the ‘ALL-ISLANDS’ economy to which it is largely integrated and on which it depends. East West links, far more than in just goods and services, are way far more important to both the NI economy and the ROI economy that either is reliant on North South trade.

The Republic’s view of itself and its economy, however, is coming under increasing scrutiny. The sustainability of the economic model it has used to take itself out of the meltdown at the end of the Celtic Tiger years is being questioned. Rightly.

The proposition that Northern Ireland would be ‘better off’ in a united Ireland with the Republic of Ireland are little more than phantom menaces.

There has been a number of points over the past year that have not been commented upon individually, but taken together raise significant doubts as to the strength and stability of the Republic’s economy going forward.

The Republic of Ireland is lauded for its high growth and business friendly economy – particularly the low level of corporation tax.

A shot across the bows of this strategy was taken by the EU Commission and the Apple case, with a decision that: “Ireland granted illegal tax benefits to Apple” ordering Apple to pay €13m plus interest for unpaid tax 2004-2014. That case rumbles on, with Ireland appealing (unsurprisingly).

Why does this matter?

The Republic’s focus on GDP growth enables it to make the case that its National Debt to GDP ratio is declining. This is true. It is also true that the actual debt remains at about the same level as it was at the time of the banking crisis in 2010. The per-capita debt is higher than Greece.

The impact of Apple adjusting its accounting procedures to run all of its European sales through its Irish office was to cause a leap in Irish GDP of 25%, though it generated zero income for the Government.

No wonder than that an IMF study reported that almost two-thirds of Irish FDI is “phantom’.  Yes, Luxembourg and the Netherlands account for half of global phantom FDI, but not to the extent represented within the Irish economic balance sheet.

The Dutch have already recognised the way the world is turning and is starting to make changes to it tax structures, though high profile tax investigations by the EU Commission and their out-workings will be a duel that has lots of cross and parry.

Maybe not tomorrow; a day of reckoning is coming.

The debate on corporate taxation goes beyond the EU. The OECD has made proposals on global tax policy that includes more than just the high profile US tech companies.

In some ways the proposals can be seen to be a shift in economic activity to online purchases, a focus on consumer behaviour rather than physical assets of corporations and goods production.

Whatever the reasons, a perfect storm is heading towards the Irish economy. There are hints that this is understood. The Irish Central Bank has warned that Government spending supported by corporation tax spending is unsustainable. The Irish Department of Finance acknowledges the concern highlighted in the paper and says that the surge in revenues from corporation tax had left public finances “somewhat exposed to a potential shock to these receipts.” No kidding!

The nature of the Irish economy is outlined in a new report from Global Britain. Much of this is technical, outlining the Effective Tax Rates (ETR), Base Erosion and Profit Shifting (BEP) and the various models used by global businesses to ‘manage’ their tax liabilities though Ireland.

The paper concludes that:

“Ireland has materially gamed global tax codes and norms and thereby inflated its GDP by in excess of €130 bn per annum to its benefit. This has moved production and other business activity from other European countries to Ireland that would not otherwise have been there.”

“Given the sheer scale of the Irish ‘flag of convenience’ it is not credible to believe it is sustainable in the long term. Other EU countries will sooner or later not tolerate the loss of revenues and employment to Ireland. The numbers are increasingly materially well beyond the ‘blind eye’ that might initially have been turned.”

So much for ‘level playing field’ Ireland demands in Brexit talks. With the UK out of the EU, which will happen at some point, a significant blockage to more level taxation within the EU will have left the room. Though internationally, the UK, France and Germany remain broadly on the same page on global tax issues.

That is possibly the reason for the incoming (German) EU President making tax reform a key part of her manifesto.

hashtag #FairTaxation
hashtag #QualifiedMajority (that National Veto on taxation is going to be tackled too).

It would be easy to dismiss the manifesto of Van von der Leyen as of no real consequence – what manifesto is ever the basis of future policy enactment. It is however a direction of travel, and likely to reflect the ideas of the German government – von der Leyen was the nominee of the EPP, which is dominated by Angela Merkel’s CDU. Germany is a loser in the global tax shifting game.

All this gives added pause to those who might wish to jump on board the great success of the Irish economy. Not everyone is on board that train.

Those suggesting adoption of the low corporation tax regime of the Republic as a panacea to Northern Ireland’s ‘weaker’ economy miss the point. The Irish model is a short-term fix, accelerating the economy out of a crisis; a clever plan, not a long-term sustainable model.

Wrapping up Northern Ireland into that model, as suggested in the Report commissioned by the Knights of the Red Hand Inc  and favoured by Sinn Fein, falls at the first jump – and the rest. Nor have other suggestions from populist economists such as David McWilliams or other blue sky thinkers provided any real idea of how Northern Ireland is not best to remain an integral part of the UK economy, in every way.

Whether Brexit happens or not, the economy of the Republic of Ireland is not all that its leaders would want you to believe. It is a parasite tax economy, and the pesticide mix of EU and global tax reform is being prepared.

Those believing their future is within a United Ireland should be careful. There is no pot of gold at the end of that rainbow.

Having another word…

Just before meeting @3000Versts to record our second podcast effort, the leader of the Ulster Unionist Party announced he was leaving his role in due course. We consider whether the UUP has any driving sense of purpose.

On lack of purpose we turned to the subject of the Rabble Alliance in Westminster, all powered up and nowhere to go?

We’re at the end of national Party Conference season and there has been one big issue, barely mentioned in the news reports or election pitches, though certainly prominent at the fringe of Conservative Party Conference.

 

Speaking out…

Together with @3000Versts  a new podcast has been created, PoliticalOD because the world needs another podcast (?) and there is always room for a Unionist voice – though we’ll range out of Northern Ireland with a wider and more worldly perspective from time to time. We’ll be local, thinking global.

What else would the first effort be about except “backstop or go”, and whether from the extensive preview of the story of David Cameron by David Cameron enables us to make a determination as to whether he is political ‘Hero or Villain’.

Still ‘experimental’. Think a word or two isn’t quite what was intended here and there – lesson one, no spellcheck. Plus we deliberately aimed at a ‘short’ podcast, 15-20 minutes; almost.

Have a listen. The podcast will also be tweeted out @3000Versts and @thedissenter. Let us know what you think, or join the conversation. Civil discourse only, or Mr Block will intervene.

The numbers matter

Recent days has seen analysis of the recent Local Elections in Northern Ireland almost exclusively in outlined in terms of percentages. Statistical summaries. These focused on percentage shares of the vote, and the number of seats gained/lost by the parties.

The general view is that this was an election where the centre ‘broke through’. This was the ‘Other’ face of Northern Ireland politics.

Looking at the numbers and that isn’t quite the whole story. Read more… »

Think Local 

Enough of Brexit. Avoid thinking about the UK participating in European Elections towards the end of May – might or might not happen.

What do we know with certainty? Only thing we know for certain in UK politics at this moment is that there will be Local Elections, to be held on 2 May, for 270 local councils and six directly elected Mayors in England, and the 11 local councils in Northern Ireland.

It is highly likely national politics will dominate commentary on the local elections in England, particularly on the results and what they will be believed to mean (in the Brexit context, no doubt). Read more… »

Border control

“Let’s get some perspective on that 0.001% risk to the EU single market collapsing in chaos.”

A while back, in January, on the Clare Byrne show a guest who was ex Irish Military made a not often heard point on the Irish Border that so obsesses the EU and virtually every commentator on Brexit.

His point, that there are three types of border. Read more… »

Coddle-wallop

The electorate seems ungrateful. Political leaders embracing the mainstream political presumptions of the later part of the 20th Century seem less sure of themselves beyond the set-piece photo-ops. 

Trump has been a shock to the American system, but a shock that was some time in coming and not altogether impossible even if a little unexpected. Everyone could see it, few believed it. Brexit too, in the UK. 

Read more… »

The Best of Both Worlds?

It was with a complete lack of irony that Sinn Fein’s Martina Anderson MEP supported remaining because the EU brought peace to Europe. This was said at a panel event in Coleraine during the 2016 Referendum on EU membership. Seriously.

What did the murderous gang of thugs, the IRA, do for peace in Europe?

Sadly, one example among many.

And it could have been more.

Read more… »

The Magical Mystery Brexit.

There’s been a Brexit post planned for ages, but things seem to change and each piece in time seems no longer relevant. So . . . time for a recap and quick look at where we are, which might seem not that much further on . . . 

There are a sequence of events that create a mystery in the whole Brexit process to date, and is important to solve going forward. In January 2017 the Lancaster House speech set out what sort of trade and wider relationships the UK might have with the EU and the world.

Read more… »

Review, refresh, re-engage.

The outcry over the attendance of Jamie Bryson at the House of Commons Northern Ireland Select Committee (NIAC) misses the point. This is a hearing as part of the Committee’s look at “Devolution and democracy in Northern Ireland – dealing with the deficit.” in Northern Ireland.

The NIAC look at “dealing with the deficit” in Northern Ireland has most probably been considered timely given the seemingly on-going impasse in discussions through 2017 (and into 2018) towards restoring devolution: or not, as at present. Presumptive or with great foresight, the Review now seems of greater interest in looking forward – notwithstanding the attendance of Mr Bryson and the subsequent Alliance Party hissy fit in that regard.

Read more… »