….it is odd to find an unnamed official in the Department of Finance saying “Ireland did not give favourable tax treatment to Apple” and “Ireland does not do deals with taxpayers.” Well this may be true now, but on my book shelves I have copies of the Telesis report ” A review of Industrial Policy” dated February 1982, the Government white paper on “Industrial Policy” issued on 12 July, 1984. In view of recent events they make instructive reading, although it should naturally be borne in mind that only the latter was official government policy even at the time.
In the Telesis report we learn on p 190 that “the most distinctive feature of the Irish package [ of incentives ] is the exceptionally low ( 10% ) corporate tax rate for the manufacturing sector. This rate is in effect until the year 2000.” Earlier on the same page the report notes that “During the negotiations between a company and prospective countries for investment, bargaining is the rule. Some powerful companies will encourage countries to outbid each other in order to maximize the benefits derived from incentive schemes” The report concluded that the incentives offered by Ireland to foreign companies too generous.
The 1984 white paper which is in effect a response to the Telesis report notes that the “administrative and marketing headquarters of multi-national companies normally perform activities for other units within a group of companies and are not directly involved in the generation of profits. To improve the opportunities for attracting such activities to Ireland, the Revenue Commissioners will continue to give speedy advanced rulings on the allowability of certain costs to companies planning to set up their administrative and marketing headquarters in Ireland” ( p. 63 ) Does anyone really believe that the Revenue Commissioners, or rather, of course, the officials who worked for them, would not have been mindful of the potential economic benefits to Ireland as they evaluated the potential tax liability that any particular company might face if it chose to locate some of its operations in Ireland?
The White paper identified “information technology, including computer services” as a sector which it wanted to encourage in Ireland. “It is clear,” the White paper emphasised ” that the greatest potential for development is in information technology…information technology will be the fastest growing industry for the remainder of this century.” Consequently the Ministers of Industry, in consultation with the Minister for Communications, “and other appropriate Ministers, will report to Government at an early date on the future and development in this country of information technology services and the detailed steps necessary to that end” ( p.68 ). There is no indication of what these steps might be ( although see 104 ) However elsewhere the White paper indicates that executives of the Industrial Development Agency ” ( I.D.A. ) and other State agencies will develop a closer relationship with selected companies [ emphasis supplied ] and the full range of both financial and non- financial services will be directed towards the company’s key activities” ( p.112, see also p.111, also see Telesis p. 225, 229, 235 )
The White paper NEVER says that tax can be reduced for individual companies. However the Telesis report is more forth coming. In its discussion of “policies for attracting new foreign owned industry to Ireland” the report emphasises the fact that the incentives which the I.D.A.” can use to induce a company to locate in Ireland are varied and substantial.” It goes on to say that the attractions of the 10% tax rate is enhanced by the fact that it “can usually be reduced to a much lower level or eliminated altogether [ emphasis supplied ] through various depreciation and other tax credits.” On the same page ( p.173 ) the report stresses that attracting electronics companies to Ireland has been a particular concern of the I.D.A.
Taken together the Telsis Report and the White Paper paint a picture of highly developed campaign to attract industry, and especially electronics companies to Ireland. in which grants and Ireland’s low tax rate were crucial. This process naturally involved the Revenue Commissioners if only because the companies concerned wanted to know how much tax they would pay if they set up here, as there was robust competition between the various jurisdictions for example Scotland and Wales. The White paper makes it clear that the Revenue Commissioners were empowered to let companies know exactly what costs they could and could not write off against tax. The Telesis report adds that these write offs often, but not always meant, that the effective tax rate paid by the companies concerned was far below 10%.
Nor can it be plausibly argued that these benefits were available to all companies equally. The Telesis notes that “creating and sustaining jobs in indigenous firms is far more difficult and expensive than doing so in foreign-owner firms” ( p.231 ) Consequently it is no surprise that both the Telesis report and the White paper make it clear that the policies of state aid that they favoured were selective. Not all companies were equal ( see Telesis, p 228 ) Foreign companies were favoured over domestic ones ( See, the White Paper, p 62-63 ) , and high tech over “screw driver” operations ( See, the White Paper, p. 36-37 ). I may be wrong, but so far as I can see nothing is said about the importance of increasing tax revenue. The whole thrust of Irish industrial policy at the time was- as the White Paper puts it – “the maximisation of value-added by industry and the capturing of this added value within Ireland for further investment and the creation of employment ( p.19 ) Ireland says the Telesis report “should respond more selectively by bidding very high on the really attractive projects [ such as Apple? ], and significantly lower on the bulk of potential projects” ( Telesis, p. 226 ) The report then goes on ( p.227 ) to describe the sort of project which it favoured.
And what of the EEC and its rules? Telesis ( p. 236 ) notes that the “EEC rules frown [ Emphasis supplied ] upon grants for ongoing operating expenses and on subsidies directed only to indigenous but not foreign owner companies.” ( p. 236 ) And the gist of much of the next page is that because every body else was bending the rules – examples are given- there was no reason why Ireland should not do so as well. The EEC rules were not seen as a major problem, although Irish policy makers were conscious of them. They seem to have been more nervous about the GATT rules and the OECD guidelines ( p.337 ).
Unless then there is convincing evidence to show that situation was radically less selective in 1990 when Apple arrived here, than what it had been in the eighties, it is, how best can I put it, easy to see why the authorities in Brussels might have been misled into thinking that Ireland did indeed do deals with tax payers, and that Apple, being the “powerful” company it was, might perhaps have been a beneficiary of such a transaction.
What, one wonders- would happen if the EU were to put some of our retried officials from ( say ) the Revenue Commissioners or the IDA under oath? The tale they told might be interesting.