A press statement by the United Left Alliance last week, just before the Dail went on its long summer holiday, reported on Richard Boyd Barrett of the ULA who ‘challenged Taoiseach Enda Kenny during leaders questions over the “gross inequality and unfairness” in the manner in which “the pain of austerity policies has been imposed on the least well-off and most vulnerable sections of Irish society, while the wealthiest people in the country have been protected and in some cases have actually increased their incomes. All the promises in the programme for government about “protecting the vulnerable and to burden sharing on an equitable basis” have now been fully exposed as hollow. The government have constantly claimed they have no choices, that austerity and pain for ordinary people was a tragic necessity. Only people power, protests and strikes can challenge this obscene injustice.’
Boyd Barrett is correct to tear into the policies of the government, which favour the rich and places the burden of austerity on the rest of us. He is absolutely right that this is not inevitable and that there are choices. Above all he is right to demand taxation of the rich in order to press this home so that workers should not meekly accept that they suffer while the rich escape.
In my last post I criticised the ULA’s tax proposals but not for any of these reasons. They were criticised for the idea that they could really take the wealth off the rich, that this could fund real protection against austerity, that the rich would not fight back and that the state would not help them do so. Above all they were criticised because they were put forward as being practical, realistic and reasonable because they could be implemented by the state, when in reality all these things are determined by class struggle against the rich and the state. All the points made by Richard Boyd Barrett can be supported precisely because they are all arguments for and within the class struggle. While I may disagree that “only people power, protests and strikes can challenge this obscene injustice” this difference is one of strategy to be adopted by workers, which is of a different character than criticism of a policy based on explicit reliance on the state.
In such strategy the excuses that the rich will evade tax would be turned against the state to demonstrate its incapacity to enforce a fair and just tax system as perceive by the majority. The evasion by the rich would then be held up as a reason to demand expropriation of the source of their wealth and for refusing to pay for austerity in their place.
The policy of taxing the rich is not however what really stands out in the ULA taxation policy. What stands out is the dog that does not bark, for what is most distinctive about tax policy in the Irish State is not its protection of the wealthy but its policy of minimal taxation of corporate profits. This is such an article of faith of the political system that there appears almost universal agreement that while children, the sick, elderly and disabled should suffer from austerity the richest corporations in the world should be protected from even the most modest changes to their taxation. The result is that the taxes paid by them have become voluntary contributions to facilitate the pretence that they are subject to rules and laws like everyone else. Yet the ULA budget proposals simply note that the policy of taxing multinationals at an effective rate of 4 – 7 per cent has failed to develop a sustainable economy.
Some US multinationals pay even less than this. Two years ago it was reported that Google paid only 2.4 per cent on non-US earnings that were routed through Ireland to Bermuda. Apple is a pioneer of a tax strategy called ‘Double Irish with a Dutch Sandwich’ which routes profits through Ireland, the Netherlands and onto the Caribbean. The deliberate lack of controlled foreign company legislation allows the Irish State to collaborate with notorious tax havens to produce such results. Microsoft was reported in 2005 to have made a profit of over €682m on its Irish subsidiary and paid no corporation tax at all (as did Symantec between 2004 and 2005). The company at the heart of this tax structure was based in a solicitor’s office in Dublin. Facebook has five subsidiaries here but only two are required to publish accounts.
These tax structures and systems are not only used by big corporations but also by the world’s corrupt dictators, its non-resident multimillionaires and its international criminal organisations. The offshore tax system, which should include the tax-dodging activities in Dublin’s International Financial Services Centre, has been described by Raymond Baker of the Washington Global Financial Integrity organisation as “the ugliest chapter in global economic affairs since slavery.”
This massive tax avoidance is central to the Irish taxation system yet it is ignored. There are no proposals to raise the headline tax rate, not even for Irish companies many of whom pay no corporation tax either. No proposals for controlled foreign company legislation, steps to tackle transfer pricing or suggestions to close tax breaks for holding companies. All the ULA proposals are aimed at individuals not business or corporations. Why? Why is there no proposal to increase taxation of multinationals? Or proposals to tax the IFSC through which billions are routed in speculation every year, the sort closely associated with the recent global financial crash?
Perhaps the reason is revealed by the justification given by the Revenue Commissioners for continuing with a policy of encouraging corporations to set up their Headquarters in Ireland even though they recognise many pay no tax. They justify it on the basis that these companies may increase real investment later. It is therefore not just fiscal policy that is predicated on minimal corporate taxation but what is laughably called industrial policy, in fact the whole hope of economic growth to get out of the current slump. In essence the reliance on foreign investment is a testament to the continuing failure of native capitalism and a profound expression of its weakness. On this weakness has rested a weak working class and on it sits a weak left, unable to present a convincing policy of taxing multinationals lest they pack up and leave and add perhaps another 100,000 or so to the ranks of the unemployed.
Would this be the result of an increase in corporate taxation? The truthful answer is that this would probably depend on how much it increased. Multinationals locate in Ireland for many reasons including market access to the EU, a relatively skilled and compliant workforce which speaks English and a general pro-business environment. The left can hardly claim that increased tax will not endanger the location of these multinationals because it cannot credibly claim that it would support the continuation of a pro-business political environment which, among other things, ensures the exclusion of union organisation in most multinational plants.
Instead the ULA concentrates on income taxation and in doing so proposes measures that are radical only quantitatively but not qualitatively, in other words they are not in themselves socialist measures. Proposals for increased taxation of the rich have to some degree gone mainstream, supported even by millionaires, conscious of the need to fund their state. A financial transaction tax has been supported by Bill Gates and increased income tax by billionaires Warren Buffett and George Soros. Of course the support of the rich for increased taxation goes nowhere near where the ULA would go. It should however also not be forgotten that in Ireland as recently as the 1980s there was a marginal tax rate including PRSI of 72.5 per cent. In the US during the cold war a tax rate for income ranged up to 92 per cent and was still as high as 70 per cent in 1980.
In other words taxation does not get to the heart of the matter and the way in which it does not was explained by Karl Marx in his ‘Critique of the Gotha Programme’:
“it was in general a mistake to make a fuss about so-called distribution and put the principal stress on it. Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself. The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of nonworkers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labour power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one. Vulgar socialism (and from it in turn a section of the democrats) has taken over from the bourgeois economists the consideration and treatment of distribution as independent of the mode of production and hence the presentation of socialism as turning principally on distribution. After the real relation has long been made clear, why retrogress again?”
What matters fundamentally then is the mode of production. The ULA concentrated in its budget statement on measures purely to do with distribution. It did however raise the question of production and the way it did it will be looked at in the next post.