There is a scene from one of the earlier episodes of the Sopranos where Meadow Soprano breaks the news to her younger brother AJ that their father Tony is in the Mafia. She does so by asking him the simple question: “Do you know any other garbage man who lives in a house like this?”
Reading yet another report about how dependent we have become on tax revenues from just a handful of US multinationals, you can’t help feeling it is long past time that we had a similar epiphany. This time the question would be: “Do you know any other small islands on the edge of Europe with few resources that rank fifth in the world for GDP per capita?”
But absent a national awakening we will continue to live in a sort of denial about the consequences – positive and negative – of our symbiosis with corporate America.
A blog post last month by Brian Cronin, an economist with the Irish Fiscal Advisory Council, took the issue of how dependent we are on taxes from these firms to the next level.
He concluded that not only do they pay 87 per cent of corporation tax, but the jobs they create in manufacturing, technology and financial services also contribute €1 out of every €5 collected in income tax, USC, PRSI and VAT.
When you add in the second-round effects – the taxes generated by the after-tax income spent by people working for multinationals and that sort of thing – then something like a third of all Irish taxes come from multinational activity. There are also all the other taxes generated by businesses that depend on the multinational sector.
Thinking that our standard of living is not utterly dependent on these companies is as touchingly naive as AJ Soprano’s belief that his father worked in “waste management”.
US multinationals are the backbone of our economy yet we still cleave to the notion that we have agency and can act in ways that are not in the interest of these companies without incurring a cost.
Instead of being upfront about our predicament – or good fortune depending on your point of view – politicians of every stripe prefer to engage in all sorts of verbal gymnastics.
Decisions such as not extending the proposed boycott of goods from the West Bank to the services sector or welching on the promised right to home-working are put down to practical and legal problems.
The reality was both causes faced opposition from US multinationals. They probably didn’t have to say no because anyone in Government with an iota of common sense understood they would not like it.
It’s an open question as to whether we have reached a point of national maturity where we could be more like the Koreans and openly accept that the national interests lie in shaping policy to support the national champions that have made it also a wealthy country.
The big difference is that Samsung, Hyundai and the rest are home-grown and have much deeper roots in Korea than even US companies, such as Microsoft, that have been here for 40 years.
But the stickiness of US multinationals based here might be stronger than we think. Cronin says many are deeply embedded and have significant manufacturing operations which are compliant with European Union regulations. They also have networks of trusted suppliers, legal and financial advisers and established relationships with regulators.
Multinationals that operate here primarily as part of a strategy to reduce their global taxes are obviously more likely to leave. The intellectual property that underpins a lot of these strategies is easily transferred to other jurisdictions offering a similar or better package.
But the number of other locations that could offer a better deal than Ireland is quite limited. Following the UK’s departure from the EU, we are the only English-speaking member state with a common law legal system – two things valued by US corporations.
It would also be difficult for a potential rival to undercut the low corporation tax rate that underpins our model following the 2021 agreement on a global minimum corporation tax of 15 per cent negotiated by the Organisation for Economic Co-operation and Development (OECD).
Donald Trump may have pulled the US out of the OECD deal on his return to office, but his ability to use tariffs and other mechanisms to get US corporations to onshore manufacturing have been severely curtailed and are unlikely to survive his presidency.
There is no room for complacency and Cronin argues that addressing deficits in areas such as energy, housing and transport infrastructure are probably the most pressing issues for remaining attractive to US multinationals.
Perhaps if we had an AJ Soprano moment then people would be a little less inclined to object to these projects.