Sunday, June 16, 2013

16/6/2013: A Minister in Northern Ireland is Fond of Slaying Dragons

Readers of this blog are aware where I stand on excessively aggressive tax optimisation by some companies that the Irish system permits. There is, however, a major distinction implied by my arguments: Irish system of taxation is fully legal and does not violate other nations' laws. From economics point of view it is a form of tax haven. From legal point of view it is not.

This fine distinction is too often lost on some of this blog's readers, some Irish politicians (not readers of this blog) and, self-evidently after the below, to the Northern Ireland's  Finance Minister.


As reported by BBC (http://www.bbc.co.uk/news/uk-northern-ireland-22925772) "...Sammy Wilson has accused the Irish government of "stealing" UK tax revenue. The DUP minister said he was concerned companies were using the Republic of Ireland to pay tax which he claims should be paid in the UK. ..."My view is that the British government does have some leverage on the Irish government there, because they have a £7.5bn loan, that is a lot of leverage," he told the BBC programme Sunday Politics."

The terms of the loans conditions from the UK to Ireland are explained here: http://www.telegraph.co.uk/finance/financialcrisis/8203912/Key-points-terms-of-UK-loan-to-Ireland.html clearly showing the amount extended to be capped at maximum £3.25 billion (€3.76 billion) - subject to the exchange rate differences.

It might be possible that Minister Wilson was referencing some headline he read somewhere, e.g. http://www.independent.ie/business/irish/uk-slashes-its-interest-rate-on-our-7bn-bailout-loans-26863834.html but even the article headlined with '£7 billion loan' cites in the body of the text correct amount of £3.25 billion.

Another similar headline relates to the orignal estimates of the potential loan, e.g. http://www.guardian.co.uk/business/2010/nov/22/ireland-bailout-uk-lends-seven-billion, which was capped less a month after, e.g. http://www.guardian.co.uk/politics/2010/dec/08/george-osborne-cap-uk-loan-ireland ... at £3.25 billion.

NTMA reports the latest drawdown amounts here: http://www.ntma.ie/business-areas/funding-and-debt-management/euimf-programme/
According to the NTMA, Ireland has drawn down only £2.42 billion worth of UK funds so far.

We are, indeed, thankful to the UK taxpayers for providing these loans and for offering them on terms that reflected broader restructuring of these loans by other lenders.


On Minister Wilson's tax 'theft' charge, per Journal.ie report: "The Republic’s junior finance minister Brian Hayes, speaking on the same programme, said it was up to other countries to change their own tax laws if they wished to stop companies headquartered there from being able to avoid tax."

I often disagree with Minister Hayes on many matters, but on this occasion he is correct.

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