In some cultures failing to pay one's taxes is regarded as a disgrace, but not so in ours, where 'tax fugitives' are feted as heroes, writes FINTAN O'TOOLE
I RECENTLY came across an interesting passage in John Berendt's book on Venice, The City of Falling Angels. Berendt is writing about the Save Venice committee, a very high-toned organisation of super-rich, mostly American philanthropists, dedicated to protecting and restoring the artistic and architectural treasures of that marvellous city. Save Venice did very good work, but it was also the epitome of philanthropic glamour, heavily freighted with aristocrats and heiresses, and supported by luxury brands like Tiffany, Escada, Piaget and Moet Chandon.
In 1997, however, Save Venice was itself threatened by a rising tide of acrimony. The row concerned the chairman, an American billionaire called Larry Lovett. Lovett was the perfect figurehead for a super-refined charity. He inherited a fortune, spoke beautifully, dressed perfectly, was an accomplished classical pianist, and graduated from Harvard law school.
But then his fellow socialites discovered his dark secret, something so terrible that it made it impossible for him to continue as chairman of Save Venice.
Berendt takes up the story: “It had been discovered that Larry Lovett had quietly renounced his American citizenship some years before. He was now a citizen of Ireland and no longer paid American taxes. Several board members were incensed. ‘If you want to be a philanthropist and lead a life of luxury, fine’, said one of them, ‘but first you pay your taxes’. Terry Stanfill, wife of the former head of 20th Century Fox and MGM, told Lovett that she could not in conscience renominate him for another term as chairman. Lovett protested, but it was a losing battle. The board felt it unwise for a tax-exempt American charity to be headed by someone the IRS might view as a tax fugitive.”
I have no interest in sentimentalising the super-rich. It is, nonetheless, rather startling to realise that, even in those rarefied circles, there was a consensus that being a “tax fugitive” is a personal disgrace. (I would propose that from here on in we adopt the term “tax fugitive”. “Tax exile” makes these people sound like they’re heroic dissidents or refugees from a famine.) It is telling that, even a decade ago, becoming an Irish citizen was a sign that your tax affairs were probably not on the level. It is even more striking to realise that there are business cultures in which paying one’s taxes is regarded as a mark, not of stupidity, but of honour.
The question of “tax fugitives” is generally regarded by those in the know as a non-issue, good for a bit of populist grandstanding, but entirely marginal to the larger crisis that has engulfed us.
It is not. It matters deeply, both in substance and in symbolism.
The issue of substance is that the number of wealthy “tax fugitives” is not merely high, but growing. For a long time, of course, we were denied the most basic information about what was going on. Charlie McCreevy as minister for finance, completely refused to reveal the numbers involved: “It is,” he told the Dáil in 2004, “not possible to identify the number of Irish citizens claiming to be non-resident for tax purposes”.
This was patently untrue, and after McCreevy’s departure we began to get the figures.
What they show is a steady year-on-year increase. In 2005, there were 3,050 people claiming non-residency for tax purposes. In 2006, there were 3,996. In 2007, there were 5,142. And in 2008, as we learned last week, there were 5,803.
We don’t know how much tax these people are avoiding, but most of them are likely to be very well-off, and the Revenue believes that 440 of them are “high net worth”, which is to say super-rich. Given that there were 330 people in Ireland last year with personal wealth of more than €30 million each, it is likely that these “tax fugitives” account for a very large proportion of the accumulated wealth of the boom years.
Being non-resident for tax purposes is far from the only way in which those who made €75 billion in personal wealth over the boom years managed to pay so little tax, but it is the most flagrant way of avoiding any social responsibility.
Even aside from this real money, however, the “tax fugitives” have been a big factor in the ruinous amorality of so much of our business culture. It says something that one of the few leading business figures ever to openly challenge the swaggering pride of the “tax fugitives” was that delicate moral arbiter, Michael O’Leary. Far too often, even socially conscious and tax compliant business people have gone along with the feting of the “tax fugitives” as heroes and exemplars who have the right to lecture the rest of us on what the State they decline to support should and should not do.
If we had a culture in which a committee of the great and the good would be “incensed” at the revelation that one of their number was not paying tax, we might not have one in which cooking the books and manipulating shares are all in a day’s work.