John McManus: We can’t wean ourselves off US multinationals’ taxes even if we wanted

DCM Editorial Summary: This story has been independently rewritten and summarised for DCM readers to highlight key developments relevant to the region. Original reporting by Irish Times, click this post to read the original article.

The State’s financial watchdog published a blog last week that estimated that three American multinationals pay one out of every €10 of tax collected here. To put it another way: Apple, Microsoft and Eli Lilly’s corporation taxes cover the bill for all the schools in the country.

The reasons for our outsize corporation tax haul are well known. What is less talked about are the risks to this cornucopia. The Irish Fiscal Advisory Council (Ifac) added a new one last week; what if the tech sector’s one-way bet on artificial intelligence doesn’t come off.

The blog referenced the International Monetary Fund’s economic outlook from last November which warned that tech company share prices could collapse if the earnings and productivity gains predicted to come about because of the widespread adoption of artificial intelligence don’t materialise. They warn “the impact on finance markets could have broader implications for macro financial stability” which is IMF speak for an economic crash.

[ US firms Apple, Microsoft and Eli Lilly paid almost 50% of State’s corporate tax in 2024Opens in new window ]

Longer term, the IMF is more sanguine about AI, saying the gains in terms of productivity may exceed the adverse implications for employment if governments “put in place adequate regulatory frameworks and offer supportive labour market programs aimed at upskilling and reskilling workers at risk of displacement”.

Ifac hedged its bets, “ … the range of possible outcomes for future tech sector profits, and by extension the corporation tax that these firms pay, is very wide and highly uncertain”. This could be considered a masterly understatement.

New threats to our corporation tax revenues go well beyond AI. Ifac did not go into the whole area of political risks. The biggest one being the mercurial nature of the US president and the political and economic uncertainty he engenders.

The blog was published before the latest example of this phenomena; the shooting down by the US supreme court of Donald Trump’s tariff-led trade policy. Countries including Ireland had just started to get their heads around the tariff regime that the court has now kiboshed. Trump’s administration is planning to employ a number of other statutes to resurrect a policy that the highest US legal authority has made clear to him is only a runner if congress approves of it.

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Tánaiste and Minister for Finance Simon Harris announced a plan this week to introduce a new savings scheme to unlock the €170 billion that people here are keeping in mostly low-yield bank deposit accounts.His plan is to devise a scheme that generates good returns for savers in a way that puts the money on deposit to better use in the economy.Cliff Taylor of The Irish Times covered the story this week, he joins host Ciarán Hancock in studio to assess how such a scheme might work and what might be on the table come budget time.In the second half of this episode, we discuss how visitor numbers to Ireland were down last year, the weather in 2026 has been lousy so far and the country has been getting a reputation as a high-cost location for a holiday.On the flip side of the coin, the Government has decided to scrap the passenger cap at Dublin Airport and has eased rules that would have banned short term holiday lets in rural locations.Eoghan O’Mara Walsh is chief executive of the Irish Tourism Industry Confederation and joined Ciarán on the line to discuss the issues facing the tourism industry this year and its likely asks of Government in the next budget.And with St Patrick’s Day on the horizon and it being the typical starting point of the Irish tourism season, how is the year ahead shaping up for the industry?Produced by John Casey with JJ Vernon on sound.

The net effect is even more uncertainty. It will weigh on the investment decisions of the US companies. The consequences are hard to predict. As with the original scheme it could produce perverse outcomes such as the boom in Irish exports last year to beat the tariff deadline.

How should the Government respond? The most prudent thing would be to try to wean ourselves off multinational-driven corporation tax. It’s probably the thing that would resonate with the electorate. Many feel a little twinge of guilt out of making our living by facilitating tax avoidance by massive companies, some of which appear at times to behave like corporate sociopaths.

The inconvenient truth is that we can’t. There is no viable alternative source of tax revenue, never mind employment and other economic benefits. This is the reality in which the Government and the State operates but refuses to publicly admit. More pertinently we don’t want them to admit it because it does not chime with our view of ourselves.

This duality is on display in the current debate about a social media ban for children under 16 similar to the one introduced in Australia. Three-quarters of voters are in favour of the idea, according to the latest Irish Times/Ipsos opinion poll.

[ Success of Eli Lilly’s weight loss drugs could fatten its Irish corporate tax billOpens in new window ]

Our ever populist Tánaiste, Simon Harris, is making all the right noises in support of a ban. The Taoiseach, Micheál Martin, is more equivocal; suggesting that we need to think a bit more about it and work with our European counterparts. He is clearly looking over his shoulder at the multinational sector and the social media giants with significant operations here paying corporation tax and employing thousands.

Neither man is being truly honest with the electorate. Harris must know that we cannot lead the charge in Europe on this issue without paying a significant economic price. Martin’s preference for slow walking the whole ban is about much more than prudence.

The reason that both men engage in such subterfuge is the disconnect between how we see ourselves and what we want.

The same chasm runs across a gamut of issues.

We want the services funded by multinational corporation tax, we want a Nato security umbrella, we want a Metro, we want Irish unity and hospital workers but we are not prepared to own up to the compromises involved because it does not fit with our national sense of exceptionalism.

US multinationals seem prepared to play along with this national delusion up to a point. Where that point lies is unclear. We may have more leverage than we realise but nobody wants to test the “stickiness” of their commitment.

We cannot escape the fact that we struck a Faustian bargain with the world in the 1980s when we cut corporation tax and it has transformed the country. To paraphrase Abraham Lincoln’s secretary of war Simon Cameron: “An honest country is one which, when it is bought, will stay bought.”