The European Tribune is a forum for thoughtful dialogue of European and international issues. You are invited to post comments and your own articles.
Please REGISTER to post.
They further argue that other small European states like Luxembourg and Switzerland have even lower effective corporate tax rates and that lower taxes is the only way that smaller (and particularly more peripheral) economies have of competing against larger economies with much larger domestic markets and economies of scale. They further argue that if Ireland were to increase its corporate tax rates, many mobile businesses would leave - not to elsewhere in Europe - but to even lower tax countries in the far East and Caribbean. - resulting in a net loss of output and tax revenue for Europe as a whole.
I wonder how significant a factor the tax rate is to foreign companies investing in Ireland. I'd really love to see figures showing where these multinationals setting up Irish bases have come from. The line trotted out here is that they are primarily US firms, attracted also by the shared language, proximity, and Eurozone membership. Were this to be true, a modest rise should be palatable enough; at least to those with existing operations.
You're raising another issue - funding and devolution to local authorities. Rates are a significant income source for local authorities and one of the few things they can tinker with. Your suggestion couldn't really be called revenue-neutral as the likely result would be cuts to local services as central funds get siphoned off into the banks. I can't corporate tax income being ring-fenced. That's not a argument against the abolition of rates though, just a cynical observation.
So, yes, I do think the low tax rate is an important component of why major companies located here, although it may not be enough in the future. I don't have a problem with major companies like Google, Microsoft, Oracle,or Wyeth locating here because they brought real investment, major numbers of jobs, and net increases in tax revenue. I do think the Financial Services Centre was largely a tax avoidance scam and has rightly annoyed other Eurozone countries.
Guinness/aka Diageo is actually incorporated in Holland because various exemptions means the tax cost is even lower there. Some countries just keep a lower profile when it comes to tax competition.
Index of Frank's Diaries
And that is not a long term plan anyway: Slovakia already imitated you Ireland on the corporation tax rate.
And of course in most countries there are thinks like commercial rates. In Germany e. g. you would add the corporation tax, solidarity surcharge and local corporation tax together and get a tax rate of 29-31%.
So the argument that commercial rates are a special Irish burden on business is not that persuasive.
S you argue that Ireland - one of the richest countries in the union - should get a special dispensation to a low corporation tax policy?
Firstly - there is no question of a "special dispensation". Corporate taxation (and most other forms of national taxation) are outside the scope of any EU Treaties and so any attempt to force Ireland to change its rates is not a function of the EU, but of imperial dominance by more powerful nations seeking to impose their interests.
Secondly, my argument is that the manner in which commercial rates are applied in Ireland is inequitable, capricious, regressive and economically inefficient. It is a matter for Ireland, and Ireland alone, to remedy this if it so chooses, and my suggestion is a revenue neutral rebalancing from struggling to profitable businesses.
Thirdly, you are correct in identify a trend for peripheral EU states to lower their rates - I suggest this is because that is the only way they can compete with the larger powers - and so in the absence of a fiscal transfer Union, this is a trend which will indeed continue.
Index of Frank's Diaries
And if just discussing this violates the sovereignity of Ireland, then perhaps you should not complain about effective tax rates in the Netherlands.
It isn't a long term strategy anyway: Tomorrow Slovakia or Estonia or indeed the Netherlands will undercut Ireland and what then? Offer a -12,5% tax rate?
Spare me the nationalistic blather
And measured in gdp pro head, Ireland is still number two in the EU behind Luxemburg.
Now you could argue that gdp per head is meaningless. But that just shows how hollow this whole "lure multinationals with low taxes and lax regulation" to Ireland strategy was. It did produce high gdp numbers, but did it produce national wealth?
In the end, Ireland is richer then e. g. Slovakia or Estonia or Portugal, surely in the top quarter of the EU.
I'm not defending the corporation tax rate - or any other Irish tax policy - either: the whole thing is part of the dumbass lack of an industrial policy, including a proper redistribuion policy, in the EU. However, given an EU that's being run in terms of national self-interest and beggar-your-neighbour economics, the Irish corporate tax rate pretty rational.
Friends come and go. Enemies accumulate.
by Frank Schnittger - Oct 3 18 comments
by IdiotSavant - Sep 15 16 comments
by IdiotSavant - Sep 16 12 comments
by Oui - Sep 24 36 comments
by gmoke - Sep 24 4 comments
by Cat - Sep 19 46 comments
by Oui - Sep 20 37 comments
by gmoke - Sep 12
by Oui - Oct 5
by Oui - Oct 35 comments
by Frank Schnittger - Oct 318 comments
by gmoke - Oct 12 comments
by Oui - Oct 139 comments
by Oui - Sep 281 comment
by Oui - Sep 2848 comments
by Oui - Sep 2729 comments
by Oui - Sep 2436 comments
by gmoke - Sep 244 comments
by Oui - Sep 2350 comments
by Oui - Sep 22
by Oui - Sep 2037 comments
by Cat - Sep 1946 comments
by gmoke - Sep 19
by Oui - Sep 1815 comments
by Oui - Sep 1616 comments
by IdiotSavant - Sep 1612 comments
by Oui - Sep 1524 comments
by Oui - Sep 1516 comments