Tax Exiles and democracy

By | October 14, 2007

I don’t care much for Michael O’Leary: I think he’s rude and arrogant. I don’t like the way he runs his company or treats his customers. But I’ll give him this: he’s an Irish millionaire who lives in this country and pays his taxes. So while his rants about government policy are increasingly irrational and tedious, he has the right to criticise.
His tax residency makes him a rarity in the rich boys’ club that is treated with such reverence in this country. From Smurfit and O’Reilly, to O’Brien and Desmond, we love our entrepreneurs. Their success has turned them into mini-Messiahs. If we could just touch the hem of their cashmere overcoats as they board their private jets, maybe we could capture some of the magic for ourselves.

So we invite them to lecture us on how to run our businesses and even our country. We marvel at their wisdom and spread stories of their good deeds towards the peasantry. How many more anecdotes do we have to hear about JP McManus’s generosity to Limerick-based charities? How many more imposing buildings will have to be called after Sir Anthony O’Reilly? How much of his time and money is Denis O’Brien, whom I know and like, now spending on ventures such as the Special Olympics? Undoubtedly these are generous men doing good things. We even get to chortle at the vanity of O’Reilly making donations conditional on buildings taking his name. Trinity has its O’Reilly Institute, UCD has O’Reilly Hall and soon Queen’s University in Belfast will get its own Sir Anthony O’Reilly Library. It’s fantastically egotistical but still, no harm done; they get good PR and good causes get funded. Where’s the problem?

The problem is, they don’t pay income tax the same way we do. The exiles argue that their donations to charity match the savings they make by living in sunnier climes. But as Enda McDonagh, former professor of moral theology at St Patrick’s College Maynooth argued last week, “however helpful to particular causes” these philanthropic donations maybe, they are “too often overshadowed by the scandal of tax exile”. He
added that the refusal of some millionaires to pay tax in the country they still call home, and which still sustains them, is a clear indication of where their priorities lie, “however many named gifts they offer to prestigious charities and institutions”.

I agree with McDonagh. Regardless of how personally generous these men are, it is fundamentally undemocratic that they can influence politics at home while keeping their tax money abroad. U2 top the list of hypocrites. Bono and the band work to make poverty history around the world, but have reduced their
tax liability in Ireland, when they could help make inequality history at home.

The basic democracy deal is taxation and representation. I pay tax and I vote. Because I care about how my money is spent, I give considerable thought to the spending priorities of political parties. I have to accept that my money may go towards Ray Burke’s pension when I’d prefer it be used on a children’s hospital. I’d like to make the Revenue Commissioners spend my taxes on, say, a free pre-school in west Dublin, but I can’t.

Tax exiles have that choice. They can support, financially and otherwise, political parties who favour private enterprise, low taxation and a hands-off approach to regulation and workers’ rights. They like governments who create a pro-business environment that earns them big profits. Again, there’s nothing wrong with that. Indeed, the exchequer is bursting with the taxes earned through all this economic activity.

But the exiles don’t pay any of that tax, so their interest in government policy is confined to how it benefits themselves, not anyone else. They give large donations to political parties who govern according to business principles and, because they don’t have to write a cheque to the Revenue by October 31, they never have to ask themselves how the government spends the money.

The billionaires then salve their political consciences by writing cheques to Fr Peter McVerry, to disabled organisations, to local schools, to children’s hospitals; all good causes that deserve adequate funding from the exchequer and shouldn’t have to rely on private donations.

As long as we have a political system that is run by rich men’s rules, our society will continue to condemn some children to life-long disadvantage and treat others to a lifetime of opportunity simply because one is born in Moyross and the other in Merrion. As McDonagh said: “In a fair society justice comes before charity and is the necessary precondition of authentic charity.”

The tax exile can operate a private form of justice that comforts him, but it does nothing to make the fundamental changes our society needs. In fact, it’s in their interests that unfairness is perpetuated because
the system suits them as it is.

Of course it’s not just tax exiles who have the luxury of voting to suit their business and donating to ease
their conscience. There are 33,000 millionaires in this country and many of them take advantage of significant tax incentives. A small number manage to live here and pay no tax, while others pay as little as 4-5%. It’s a powerful constituency with a clear political agenda.

Sometimes I wonder what I would do in their circumstances. If I could save millions by moving to a different country for part of the year, would I do what McManus does? Especially if I didn’t like the way the
government spends my taxes? I like to think I wouldn’t, but who knows?

Some had the choice and decided to stay. Apart from O’Leary, others who made millions remained stakeholders in the country they call home. The founders of Iona, Chris Horn and Annrai O’Toole, stayed put, as did Brody Sweeney, the O’Brien’s sandwich man who devotes most of his time to charitable work these days.

Ultimately it’s a free world, for some, and if businessmen make money and choose to live abroad and engage in private philanthropy that’s their business. But it’s our business who gets into government and what their policies should be. The exiles can write all the cheques they want, but they should be prohibited from voting, from donating to political parties and from influencing policy. These rights are the privilege of taxpayers and, when you leave the country, you should leave those rights behind you.

19 thoughts on “Tax Exiles and democracy

  1. P O'Neill

    At the very least you’d hope that the meeja would be less gullible in describing these characters. Does anyone actually know how JP made his money? No. So they should stop reprinting the pub wisdom and leave it at that. No more references to “super gambler” or “currency trader”. If you can’t back it up, shut up. He has lots of money. We don’t know how he got it. That’s it.

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  3. Yolanda

    Is Sir Anto the most reptilian Irishman alive? Discuss.

  4. SerialComplainer

    Perhaps if these multi-millionaires paid their fare share of taxes, we would get appropriate services as a matter of right, not a matter of charidee, with lots of tugging of forelocks to the crumbs dropped from the table by the lord of the manor.

  5. Gordon Davies

    Sarah,

    Would you be trying to undermine the only really consistent policy that FF has implemented over the last 50 years or so! The creation of a New Ascendency has long been on the party’s agenda. Curiously, neither Haughey nor Ahern seem to have wanted to take to much credit for this strategic success.

    The New Ascendency has now totally replaced the older Protestant Ascendency. Thanks to a benign regime of non-regulation the new absentees can flit in and out of the country and continue a long tradition of extracting the countries wealth and redistributing it amongst themselves. FF dignataries are given generous tips (aka as dig-outs or political contributions) and the odd glass of champagne, or a free (effectively paid for by the tax payer) flight to a football match.

    Gordon

  6. Tomaltach

    I agree, not least about Bono. At least the others make no bones about their intentions and make no pious platitudes about poverty.

    Bono, however, has built much of his image on his campaign against poverty in Africa. What is Third World poverty if it is not the uneven distribution of Wealth? The absurdly large earnings of pop stars is a perfect example of how Western Society and Culture have completely lost reason when it comes to distributing wealth. Tax is the only real channel by which some of the wealth flows back to those who have very little, and it’s a very narrow channel indeed. Bono, the self proclaimed champion of the poor, has now to cut off that channel as far as his own private earnings are concerned. The reality is that even if U2 declared all their tax in Ireland, the percentage they’d surrender would be surprisingly small. Clever accounting and Ireland’s comparatively light tax burden mean that Ireland’s wealthy take home, so to speak, most of their earnings anyway. In such circumstances U2’s move offshore makes a joke of Bono’s stance on poverty.

    About the other squillionaires, I certainly agree with Sarah, that they should be prohibited from voting, from donating to political parties and from influencing policy.

    In a sense this is one small aspect of globalisation. It’s easy for these guys now to live in many countries and yet in none for tax purposes. They make their vast wealth at a, b, and c, but stash it in one of the many havens that make themselves available for this kind of tax avoidance – monaco, virgin Islands, etc. In many ways it’s a testament to the power of this ultra-wealthy elite that they have managed to prevent any debate among nation states about how these havens might be closed down.

    The other unpalatable side for Ireland is that we have built our own economic prosperity on a form of “tax haven light” – not quite the Cayman Islands but clearly a low tax zone for corpos and big earners. So we cannot complain if say Holland underbids us for Bono’s cash. We have entered the game and we have to play by its seemingly arbitrary and wholly unfair rules.

  7. Trevor Butterworth

    Um… Tomaltach, “tax the only real channel by which some of the wealth flows back to those who have very little” ? Do you remember the seventies in Ireland – or even the early eighties – when everyone was taxed up the wazoo? Or the U.S. and British economies in the 1970s. Tax is too often taken by the government to support an ever-expanding bureaucracy.

    T

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  9. Dan Sullivan

    “as did Brody Sweeney, the O’Brien’s sandwich man who devotes most of his time to charitable work these days”

    Jaysus, things were tough Sarah but I’m not sure I’d describe standing in a general election for Fine Gael in those terms.

  10. Tomaltach

    Trevor,
    Believe me, I’m not an apologist for the Irish Fiscal regime in that horrendous decade between Lynch’s economic vandalism in ’77 and the start of recovery in ’87.

    If one were to design the tax base from scratch one could do many things without increasing the overall level of taxation. Or one could decrease the overall burden.

    But I stand by my statement that tax is the prime channel for redistribution. Occasionally this is from those who have worked hard to those who are freeriders. But that’s a design flaw and can be minimised. The bulk of the effort is to redistribute from the many who are well, to the few who are sick. From the many who have had the capacity and good fortune to be very rich, to those who are struggling with life.

    In this context I was drawing attention to the hypocracy of Bono campaigning for increased AID – read, your tax and mine – to Africa, while opting out of paying his own.

  11. Crocodile

    As McDonagh said: “In a fair society justice comes before charity and is the necessary precondition of authentic charity.”
    Justice should come before charity, and before competitiveness, too. McDonagh’s comments and Sarah’s piece provide some balance to the ‘if-it’s -good-for-business-it’s-good-for-all-of-us’ stuff propagated all over the media these days, not least in the business section of the same newspaper.
    Private philantropy is a lousy way to finance any public facility or service, becase he who pays the piper can seldom resist calling the tune. And Sarah does not mention the diquieting fact that most of our media are controlled by the men she names and are only too ready to do the calling for them.
    Incidentally, are all philantropists men? If so, is it because women haven’t been able to amass the necessary fortunes or because they’re immune to the ‘my business institute is bigger than your business institute’ macho cockfighting?

  12. The Crewser

    It might be worth bearing in mind Sarah that people like Dermot Desmond and JP McManus do pay their taxes, legitimately to the Irish Revenue Authority. They do not seek publicity for the excellent work they do for several charities all around this country. They also bring in much more wealth to this country than they take out. For example McManus and John Magnier made millions on buying and selling Manchester United. Good on them if they have the ability and the foresight to do deals like that. McManus has a seriously successful currency trading operation based in Switzerland, one of the main centres for such activity in the world. Good for him. He is good for this country and so is Dermot Desmond. Lets not knock them for being successful. When Michael O’Leary starts to provide proper facilities for the disabled on his aeroplanes, I will be the first to salute his achievements also. We need people who take risks. Thats the spirit that has brought this country from being one of the worlds poorest to one of the worlds richest in a short few years.

  13. Tomaltach

    Crewser,
    You reckon that the entrepreneurial character of the magnates you mention “brought this country from being one of the worlds poorest to one of the worlds richest in a short few years. That is a highly questionable assertion. We don’t have the space here to rehash the causes of the Celtic Tiger. It is sufficient to say that they were many. It’s not that our indigenous risk takers don’t deserve credit. But to credit a few major magnates with the economic turnaround is to be very selective with your praise. To take an example, Denis O’Brien made several hundred million from the Sale of a telecoms company that he got for next to nothing. Fair play he took the risk and so on. But he was only playing a game. How does this compare with the net benefit of Intel and its 5000 jobs. Or how about O’Reilly and his newspapers’ relentless drive to lay off journalists, replacing them with staff in offshore locations. How does this compare with the net activity created by say, CRH?

    I dislike the begrudgery towards our successful businessmen. But equally, I dislike the hagiography. Really and truly, how much of our national prosperity is a result of this handful of super rich magnates? And how much is down to major FDI projects, the tens of thousands of small and medium businesses, and indeed, the hard work, flexiblity, and effictivess of hundreds of thousands employees who work for any combination of the above.

  14. sniper

    If you are going to carp and moan about tax exiles then maybe turn your ire on a few of these “tax optimisers”

    1. The Civil Service – Throws money into stupid projects and when they run out of money just charge us more. The more stupid the project the more they want. If it is our duty to pay tax then it is the duty of our politicians to ensure that our money is well spent. I see no evidence of this. Claim back all your allowances because some civil servant has his eye on an interpretive centre or a statue of some old fool nobody has heard of.

    2. Farmers. Biggest welfare spongers of the lot. They whine and moan and whine again about beef prices, milk prices and subsidies, the weather, the colour of tractors. You name it. We pay them to vote for FF. I grew up in the countryside and over-fertilised land, dead streams, Mercedes Jeeps and the smell of cow shit everywhere are a feature of my youth. Farmers and their outstretched hands and keeping FF in power at all costs ruined this country.

    3. Skangers. 23 year old father of three shot dead. WTF? Nobody heard of a condom in Ireland? They need to be sent back to school and told to put a knot in it. Work like the rest of us, not get every slapper in a four mile radius pregnant and shoot your inbred neighbour because he stiffed you on a drug transaction.

    4. American Multinationals. They are avoiding punitive taxes in their own countries and availing of a low tax rate here. Some are not even registered in America. Companies like Accenture are registered in Bermuda. A tax haven.

    Paying tax is all well and good in a modern country like France or Germany where they will actually use the tax to maybe not kill you in hospital, have trains so you don’t get killed or squashed like livestock going to work and maybe even throw in a few bits of smooth tarmac. The tax is high but they actually do things with the money. Here we have glorious monuments to incompetence like the M50 toll bridge.

    I have no money but if what the government limply offers up as evidence of our taxes being well spent then if I were super rich and a businessman who pays on performance not give them a penny either.

    These pompous tax exiles provide employment. They took risks or inherited fortuitous situations. The middle classes like their security and the payoff for this security is paying taxes. Life sucks. Its just fairer than death. Death and taxes. At least some people can cheat one of them. If you want equality either get thee to a nunnery or a commune.

  15. Tomaltach

    Jazuz sniper, you sound like you need to be restrained. I wouldn’t like to be a civil servant when your chains are removed, there’d be flesh under your nails.

  16. Sarah Post author

    Crewser, you picked bad examples.
    JP McManus has not created a business that employs others in Ireland as say O’Brien might claim. What tax does he pay? He is non resident. Magnier is not only non-resident but his entire business pays no tax – at least Desmond’s companies must pay some form of corporation tax and at least Magnier’s business creates jobs in Ireland.

    None of which is the point. The citizens pay tax and the government distributes the tax to pay for public services which benefit everyone – that’s the contract. The people most able to pay weren’t supposed to get off the hook completely. Course the state broke the contract on their side too as they don’t provide the services as poor Susie Long found out.

    At least she directed her anger at the right people – the ones who voted for FF and the continuing destruction of the public health service.

  17. sniper

    I agree wholeheartedly.

    Berties grandstanding the new DeValera book at the weekend out of one side of his mouth and a few days later saying the system had failed Susie Long disgusts me. He couldn’t even look up when he said this. He then launched into classic Bertie figures that mean nothing to nobody.

    The Mother and Child scandal of 1951 should have made Bertie think of keeping a step back and maybe thinking a bit. But no. Political meddling with the sickness service is not a new thing. Nor has it done any good.

    The system fails us all. The HSE gets 5 times the budget it got 10 years back but is still a monumental fuckup with the same losers and petty wasters in blue suits and ticking off clipboards. I worked in a hospital, actually a group of them and resolved then and there not to go back unless I was dead or close to it.

    The front line of the HSE works if it is allowed to. The trouble is the D team in the office. D for dunces. And they are killing people. Death by a thousand cuts. Not even logical cuts at that.

    So what if Tony O Reilly wants a wing of Bonos tower named after him or everyone to throw petals at his feet. At least he does something that has an identifiable result to someone and we know what he is about. Making money for his shareholders and himself. The government hides and fudges and manages to piss away more money than any of the tax exiles could imagine having. We have no idea what they do apart from knowing they are going to fuck it up.

    Tax exiles. Who cares. The govermnent kills people with incompetence and when they are found out the fudge.

    I cannot understand why people are not angrier than they are.

  18. The Crewser

    Sarah, I know its a national pastime for people to slag off those who are enterprising and successful but it is people like McManus, Desmond and others who have brought this country to the state of prosperity which we all now enjoy. JP McManus and Dermot Desmond have always paid whatever taxes they owe to the state. If they have operations abroad then they are quite right to avail of whatever legitmitate measures are available to reduce their tax burden. Its your example, Michael O’Leary who has been found wanting, by his failure to provide reasonable facilities for those who are disabled and who might wish to use his Airline. But I am not prepared to condemn the man completely for this, he has contributed much to Ireland’s success story too. He just needs to tweak a few small details which would not reduce Ryanair’s profitability to any appreciable extent. By and large O’Leary like the others has been an influence for good.
    Let’s applaud them for their efforts, not denigrate them for becoming wealthy.

  19. Pat Donnelly

    Banking is also a way of redistributing wealth. Access to loans at times of least economic activity ensures maximum returns on money invested. Politicians seem to be able to obtain massive sums at these times. The right to usury is one conferred by the state. But if it is regulated by the managers of the state, the temptation is obviously too great for some!

    Others can benefit by conferral of monopoly rights to certain wavelengths, export credit etc.

    Tax is for the little people, government is for the rich!

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