It is time for a new deal with the multinationals

The arrest of Meng Wanzhou, the chief finance officer and the daughter of the founder of Huawei, one of China’s richest men, by Canadian authorities on spying charges could be a game-changer for the global multilateral trading system. The Canadians are acting on behalf of the Americans here. Washington is pulling the strings.

Huawei is the world’s largest telecom manufacturer, and the second largest smartphone maker after Apple. America accuses it of stealing American technology; most likely Apple’s technology.

This move is a serious upping of the ante in the on/off trade war between the two superpowers. If you were an American multinational executive sitting in your hotel room in Shanghai you’d be right to worry about an unexpected knock on the door from Chinese internal security.

Such an obviously mercantile move in Canada, dressed up as a political act, focuses attention again on large multinational companies, international trade and the potential for a breakdown in global commerce.

Stock markets have plunged around the world. When stocks are falling, you might find it a little odd that the column is returning to the issue of what best to do with the profits of multinationals based here.

I believe, despite recent volatility, that Ireland should seek to get paid by multinationals not just in tax revenue but in a split between tax revenue and company stock options. The reason is very simple: history proves that stocks constitute wealth that is permanent, while tax revenue is income which is transitory.

Above target

Ireland collected €8.2 billion in corporation tax in 2017 (2.7 per cent of GDP and 11.6 per cent of total tax receipts). This is an increase of €849 million (11.5 per cent) on 2016. In the last quarter the expected tax take jumped nearly €500 million above target for November.

The number of companies paying corporation tax in Ireland rose to more than 50,000 – with manufacturing the largest sector, accounting for 27 per cent of receipts. However, the top 10 largest corporation tax contributors accounted for 39 per cent of total receipts, and foreign-owned multinationals accounted for 80 per cent of corporation tax receipts in 2017.

Yet the US Bureau of Economic Analysis shows that majority-owned foreign affiliates of US multinational enterprises operating in Ireland generated $149 billion in net profit in 2016. So, allowing for exchange rates, US firms made around €130 billion profit last year here. On this they are supposed to pay 12.5 per cent tax or €16.25 billion. But they paid only €8.2 billion.

So around €8 billion is missing. This is the €8 billion that the EU wants us to collect. And so does Washington, but for itself, not for us.

The multinationals are well aware that both the EU and the US want more revenue from them, so what are they to do?

Maybe we give them an exit strategy and tell them that, using our own sovereign tax regime, we will take the difference between what they actually pay us (€8.2 billion) and what they ought to pay us (€16.25 billion) in stock options to be exercised sometime in the future.

These options go into the start-up fund and, given the way share prices have been going historically despite crashes, very soon this fund would be worth serious money.

Oil find

We could treat the wealth from the multinationals as a one-off source of wealth in the same way the Norwegians treat their oil find, they use it to bolster a national wealth fund. But whereas the Norwegians pledge the wealth to pay future pensions, what about using the wealth as a kick-starter fund – not a winding down fund?

Imagine each citizen would have small bit of this wealth fund so long as it is pledged as liquid collateral to a bank in order to fund a start-up? We could transform society into an entrepreneurial trading entrepôt, open to the world, with easy available finance for people to innovate and create businesses.

Setting up trading companies is what makes societies rich. Lack of start-up financing is a regular impediment to new companies. A national kick-starter fund would eliminate the initial financing problem that bedevils many new businesses.

From the multinationals’ perspective, any corporate chief financial officer faced with the prospect of having to pay hard cash today in extra taxes or an IOU tomorrow in stock options would always vouch for options.

Obviously, there are many technicalities to figure out, but the idea of using multinational windfalls as wealth not income to kick-start companies could redefine the whole relationship between the nation state and the global corporation at precisely the time it is under threat and needs to be redefined.

Socially beneficial

Speaking of current revenue, while we are at it why not also use the Apple money, the €14 billion which is lying idle in an account to (a) do something socially beneficial and (b) make more legitimate Apple’s business here? Why not use it all to build houses? (€14 billion could build close to 50,000 units). This would be corporate social responsibility on a monumental scale!

In short, Ireland is in a very strong position even if there are clouds on the global trade front. We have the scope to use our tax system intelligently. Using tax-owed as a medium-term wealth gives us much-needed kick-starter cash for young entrepreneurs who will make the place tick.

This could be totally transformative for the country. Imagine post-Brexit a country with full access to all markets, and kick-starter funds available to every citizen to have a go?

In addition, if we used the Apple money on housing we could go a long way to solving the housing crisis, building State-owned homes, bringing down the cost of accommodation and the overall cost of doing business in Ireland for a generation. This has to be a national prize worth considering.

It is time for a new deal with the multinationals

The arrest of Meng Wanzhou, the chief finance officer and the daughter of the founder of Huawei, one of China’s richest men, by Canadian authorities on spying charges could be a game-changer for the global multilateral trading system. The Canadians are acting on behalf of the Americans here. Washington is pulling the strings.

Huawei is the world’s largest telecom manufacturer, and the second largest smartphone maker after Apple. America accuses it of stealing American technology; most likely Apple’s technology.

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Sanders is building a new political movement and could run again

Burlington Vermont is cold in late November. Huge mounds of recently cleared snow attest to the coming of winter, which in this part of the world, just below the Canadian border and far from the warming influence of the oceans, is long, dark and absolutely freezing.

The shops of Church Street are doing a brisk business in quilted jackets, boots and woolly hats. With its open log fires, law-abiding citizens and reusable coffee mugs, there’s a touch of a little Denmark in North America about this place. That is until you see the row upon row of F-16 fighter jets in the airport terminal.

This is definitely America; but it’s not the America we have come to expect in the era of Trump. Vermont is a tolerant, wealthy, almost Trudeauesque corner of the US. It was the first state to abolish slavery, is home to the hippy ice cream moguls Ben and Jerry, and has returned Bernie Sanders to the Senate for the past two decades.

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Why stock in Facebook, Apple and Google has fallen

The share prices of Facebook, Apple and Google have slumped. Apple’s is down almost 20 per cent in a few weeks, and the story for the other two isn’t much better.

Over the past few weeks, the so-called Faangs – Facebook, Amazon, Apple, Netflix and Google – have lost $1 trillion in value.

Before examining the situation on Wall Street, let’s step back and examine the process whereby world-beating companies go from rude health to fragility in short order; the process is so much more interesting than the event.

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Brexit provides Ireland with a commercial opportunity

Rosenthaler Platz in Berlin is a busy hub to the northeast of the city centre. The last time I sat on the U-Bahn here, the train slowed down and then passed through a creepy, dimly-lit and empty station with only East German border guards on the platform. It was the summer of 1989, just three months before the wall came down. Rosenthaler Platz was what was called a “ghost station”. The underground was constructed before the wall went up in 1962 and this was one of the stations which was boarded up when the city was divided. The trains from West Berlin passed through East Berlin, weaving right through the middle of the city, only to re-emerge back into the West and literally into the light.

Today it is buzzing with foreign students, start-ups and cafes that have turned themselves into communal workspaces. In fact, the one I am in, Oberholz provides a vision of what much of work life in the future may be like: semi-autonomous, creative teams working together on a project by project basis, hiring space in a cafe for a limited time rather than being full-time employees with full-time tenancy in a fixed office. Right now this is still only a small minority of workers but it could become the norm.

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Want to find the cause of the housing crisis? Look in the mirror

Let’s look at the housing shortage through the lens of planning permission objections. We rarely think about the impact on house prices of individuals or groups of individuals opposing planning permission.

Each objection may be legitimate but, in the aggregate, planning objections have a knock-on effect on the availability and cost of housing. Indeed, the trade-off between individual rights and the collective good, so evident when planning restrictions are sought via objections, goes to the very heart of macroeconomics.

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Dublin generates 56% of Irish tax, but can’t keep a cent of it

Mayer Amschel Rothschild, founder of the Rothschild banking dynasty, is said to have declared: “Permit me to issue and control the money of a nation, and I care not who makes the laws”. The implication is that parliaments can talk about laws or indeed change them, but the real power in a country or a city lies with whoever controls the money. Everything flows from this.

The story of Rothschild’s ascent from the closed, embattled, ghetto – the Judengasse of Frankfurt – to the seats of power in London, Paris and Madrid is one of the most fantastic entrepreneurial odysseys imaginable. His ability, courage and daring were extraordinary and he took advantage of exceptional circumstances and world-shattering events.

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We have witnessed the Dún Laoghaire-isation of Ireland

It’s 9am in the Dominican Convent in Dún Laoghaire, Co Dublin. A patient column of people runs all the way down the street as far as the Chinese-run New Paddy phone repair shop. The only other shop doing business so early on a Friday morning is May’s Occasions, which is busy selling communion dresses, tiaras and parasols to cater for the last-minute panic ahead of the big celebratory weekend.

Irish citizens might be about to repeal the constitutional amendment on abortion, but no one would lay a finger on our divine right to host a full-on, over-the-top communion, replete with bouncy castles, gazebos and Instagram poses.

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Under the bonnet of Trump’s purring economic engine

Mystic, Connecticut is one of those beautiful New England fishing villages, all wooden clapboards and two-storey homes. US flags fly from at least half of them. Cars slow down 10 yards from zebra crossings, as young mothers push outsized strollers to organised playdates.

The Mystic river flows into the Atlantic here, and most riverside homes have their own boats, tied up to family piers. People here are ridiculously helpful. Mystic doesn’t do surly. Pumpkins are everywhere, and the colours are gorgeous, but it’s getting cold.

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