Two weeks ago, U.S. pharmaceutical giant Pfizer announced that it was scrapping its $160 billion merger with Irish company Allergan.
The merger was seen as yet another "inversion" deal, something which would have seen Pfizer able to declare more of its profits in Ireland to the detriment of the U.S. Treasury.
Ireland has long been coming in for criticism for its comparatively low 12.5% corporate tax rate. Advocates argue that, aside from the fact that we should be able to set whatever rate we like, such a competitive figure enables job growth and investment that could disappear if it was raised.
But does this mean that other economies are losing out? Is Ireland facilitating corporate tax evasion?
This week, The Right Hook is broadcasting live from Boston College, and today George spoke with Nathan Proctor of Fair Share, a national advocacy organisation that believes everyone - people and corporations alike - should pay their fair share of taxes and play by the same rules.
Proctor suggested that the recently-cancelled merger between Pfizer and Allergan would have absolved the pharmaceutical giant of some $35 billion in tax obligations to the US Treasury.
“There are companies who make hundreds of millions of dollars, paying a negative rate on their corporate income tax while the rest of us foot the bill”, he told The Right Hook. “They're not just American companies; they're the premier American companies: Apple, Google, and Pfizer.”
Proctor estimates that the U.S. Treasyry loses in the region of $100 billion a year as a result of tax inversion schemes. But this only compares with individuals using tax havens to dodge taxes to the tune of $150 billion.
So if individuals are more costly to the world economy, and Irish people are benefiting from the new jobs and investment, why should we care?
Proctor says that it's not about what's best for Ireland: it's about what's fair.
"It’s too easy for a giant multinational company to cook the books in such a way that they pay nothing”, he says. "We think there’s $2.4 trillion parked in offshore companies across the world. I heard estimates that around 5% of the world's GDP is lost to giant sums of money accumulating in offshore bank accounts."
And the loss ultimately trickles into local communities. "Tax haven abuse is drawing resources out of countries like Zambia", Proctor says, "where two children every month die of preventable disease and where there are large multinational companies that don’t pay tax."As a result, Fair Deal work to focus on what the U.S. Congress can do to protect American workers and economy, as well as people across the world.
However, the organisation's job isn't made any easier by the vast wealth these companies control and how they use it to influence government policies. Proctor cites a new report from Oxfam that shows how various Fortune 500 companies have spent around $2.7 billion lobbying Congress to protect favourable tax legislation.
So what's the solution? Proctor believes it's a global tax system befitting of our modern-day global economy: "I think to come up with a global system of taxation has a lot of merits", he says. "At the same time, we’re trying to at least facilitate some co-operation in the major world economies so that there’s at least some level of autonomy."
You can check out the full interview with Nathan Proctor below:
