The G8 Summit in Northern Ireland, which starts Monday, June 17, has a very broad agenda. The agenda is expansive enough to be daunting even for a group of experienced world leaders to grapple with.
While it can be summed up with the 3Ts -- trade, tax and transparency
-- it will undoubtedly be challenging to make measurable progress in such a short period of time. However, the leaders gathering in Fermanagh will no doubt do their best to make a tangible impact at the policy-making level.
The opportunity to host the summit on the island of Ireland is a welcome opportunity for Northern Ireland and Republic of Ireland authorities to showcase the attributes of their respective economies.
Though the economies share a relatively small geographical patch together, they are very different in terms of structure. While the public sector is one of the largest in the UK economy in Northern Ireland, foreign investment is a major contributor to the employment base in the Republic of Ireland, with over 250,000 people earning a living from activity tied to that segment of the economy.
Throughout the summit, promotion of Northern Ireland will be relatively uncomplicated. However, it has proven a little more complex in the Republic of Ireland as its tax offering has been under scrutiny over recent weeks due to hearings in the U.S. Senate on corporate tax practices.
Some facts are worth reflecting on in this context. All companies in Ireland pay the standard 12.5 percent rate on their trading profits arising in Ireland. Reports of lower effective tax rates appear as a result of combining the profits earned by group companies in Ireland and in other jurisdictions and incorrectly suggesting that Irish tax should apply to both.
Of course certain deductibles and credits are allowed for in the Irish system, including expenditure on research and development (R&D). This can reduce the amount of taxable income, but the rate remains the same and deals are not done according to this rate, which is based on statute.
Despite all these attributes, Ireland's tax system has been placed under a microscope from politicians in the UK and U.S. Why? Because some companies have, in turn, faced scrutiny for their own tax practices.
For some politicians, the focus has been what these companies are doing "wrong". These companies, as a result, have countered with a simple but compelling point: the tax code is ultimately designed via the political system. If the need for change is urgent, politicians from all backgrounds can make those changes, ideally through a multilateral forum like the Organization for Economic Cooperation and Development (OECD).
This includes the Irish government, which is fully supportive of the OECD's process for reforming the global corporation tax system, known as the Base Erosion and Profit Shifting (BEPS) process.
In Ireland, multinationals are actually very significant taxpayers through direct corporation tax payments and taxes paid by their employees. The norm in Europe is for corporations to chip in about 2.5 percent of GDP in taxes, and Ireland's rate is almost identical (2.4 percent).
While it would be overly simplistic to describe the current debate as one between larger countries and smaller countries, the U.S. Senate noted last week that smaller countries tend to have lower rates of corporate tax compared to larger countries. I suspect the size of the internal market in those larger countries means they have less immediate reason to seek foreign direct investment, although this is changing rapidly.
Either way, Ireland is not making apologies for its competitive rate and is very much open for business in the current climate. Ireland does not market itself solely on the basis of tax anyway, for a good reason.
Tax on its own never wins investments. Success results from a combination of factors. Crucial among them is the talent pool and access to staff. For example, Apple employs approximately 4,000 people in Ireland, a large employee base by any standard. Those employees were recently praised for their expertise and work ethic by Apple CEO, Tim Cook.
As the G8 Summit gets underway, a lot of discordant voices will be heard and a good deal of emotional language will be used beyond the confines of the meeting. However, voices that should be heard are those of businesses around the globe. Keeping conditions attractive for business remains a compelling need at a time of high unemployment, continent-wide and globally.
Emmet Oliver is the chief spokesman for IDA Ireland.