British taxpayers are picking up the tab for Ireland’s policy failures
Ireland is squandering the benefits of its low-tax status by undermining American security interests. That’s a warning to Britain, says Ticiana Alencar
Politicians and media often speak with confidence about the benefits of our ‘special relationship’ with the USA. Ireland has long counted on similar cultural ties– but, through their economic and foreign policy decisions, their politicians have put in danger the benefits they derive from those ties.
Policy Exchange has today released Peak Ireland, the first comprehensive study of Ireland’s peculiar geostrategic positioning. The report, backed by Trump’s former National Security Advisor Robert O’Brien, lays out just how precarious Ireland’s position has become and should serve as a serious warning to British policymakers.
Ireland’s tax haven status has delivered gains by being able to draw international business, offering sweetheart tax deals for tech and pharmaceutical firms. This has successfully encouraged major American companies to ‘offshore’ activities there, providing a huge boost for the Irish economy; just ten American multinationals account for 60 per cent of Irish corporate tax revenue. Ireland has subsequently developed the fourth highest trade surplus of any country with the US – of $50bn.
Just ten American multinationals account for 60 per cent of Irish corporate tax revenue
Here, Ireland’s vulnerabilities are most apparent. Trump’s economic policy of reshoring key industries and reducing trade deficits means that Ireland becomes an obvious target. Policy Exchange has calculated that if the tax income from those companies domiciled in Ireland were recouped, the US Treasury could raise over $30bn. The loss to Irish coffers and business would be significant.
At the same time, as O’Brien points out in his Foreword for Policy Exchange’s new report, ‘Ireland pursues an increasingly activist foreign policy that is marked by its divergence from everything the Trump administration stands for.’ It spends less than any other European country on defence — at just 0.2 per cent of GDP — despite its waters containing three quarters of all cables that run through the northern hemisphere, as outlined in Policy Exchange’s previous report ‘From Space to Seabed’. Ireland is one of the Western European countries that most often departs from the US at the UN, especially on votes related to Israel, and appears to ‘cosy up’ to China.
Freeloading
Meanwhile, Britain and the US have ended up picking up the tab for Ireland’s policy failures. American taxpayers pay for Irish tax haven status whilst British taxpayers pay for their lack of investment in defence by being on hand to defend Irish waters. Here’s the question now being asked in DC: why should Trump’s administration continue to offer favours to Ireland when it so clearly undermines American interests?
Britain has to date navigated these challenges better. We have not expected unconditional American favours on tariffs by relying simply on cultural ties or the vague concept of ‘the special relationship’. Similarly, we should not be complacent about legitimate American grievances on the Digital Services Tax, the Online Safety Act, free speech, or pharmaceutical pricing.
Investment from the tech and pharma sectors is hugely beneficial for our economy, and we cannot allow ourselves to become vulnerable to loss in those spaces. All of this means that we should expect greater scrutiny from the Trump administration and understand that disagreements on foreign policy do not go unnoticed in the White House.
We cannot be blind to the fact that Ireland’s freeloading has caused its privileged standing with the US to come under unprecedented strain. Indeed, there is no reason why Ireland should be afforded better treatment when it obviously fails to cooperate in so many ways.
Ticiana Alencar is a researcher at Policy Exchange