EU looking at Corporation Tax

liammur

beeno67 wrote: »

That is not the real issue but it is an important issue. After all Ireland will benefit from these changes as well as suffer. Overall effect on the country would not be too great.

The bigger issue is that these changes may affect the decision of multi nationals to locate in The EU at all, never mind Ireland. That is the real issue. This will effect the entire EU economy and as a peripheral part, Ireland will suffer more than most.

Multinationals will always have a presence in each of the continents.

beeno67

liammur wrote: »

Multinationals will always have a presence in each of the continents.

I don't see your logic here. Why will this always be the case? And the multinationals that don't have an EU presence. Will they now get one?

Also you seem to assume multinational must be European or American.

dunsandin

beeno67 wrote: »

That is not the real issue but it is an important issue. After all Ireland will benefit from these changes as well as suffer. Overall effect on the country would not be too great.

The bigger issue is that these changes may affect the decision of multi nationals to locate in The EU at all, never mind Ireland. That is the real issue. This will effect the entire EU economy and as a peripheral part, Ireland will suffer more than most.

Sadly, you are quite wrong in this assumption, we as a nation are
super-productive, especially in the pharma and IT sectors - up until recently we had the highest output (monetary value) per worker(in Pfizer Cork) in the world, and our real boom was export led due to the huge value of our software and pharmaceuticals. This profit was repatriated to the parent nations of our FDI corporations, rightly so, but the amount syphoned off in wages and local expenditure contributed greatly to our economy and will, in the short term, continue to do so. The decision by Schering Plough to make 165 redundant is just one recent example of what is to come. I work for this sector, so I'm not going to shout my mouth off too much. Pooing where you eat and all that.
Anyway, because we export a huge volume at huge values to markets that dwarf us, the forthcoming (and I believe they are forthcoming) changes to tax calculations will hit us far more than benefit us. We just don't have enough consumers in relation to our export markets.

Scofflaw

dunsandin wrote: »

That is not the real issue but it is an important issue. After all Ireland will benefit from these changes as well as suffer. Overall effect on the country would not be too great.

Sadly, you are quite wrong in this assumption, we as a nation are super-productive, especially in the pharma and IT sectors - up until recently we had the highest output (monetary value) per worker(in Pfizer Cork) in the world, and our real boom was export led due to the huge value of our software and pharmaceuticals. This profit was repatriated to the parent nations of our FDI corporations, rightly so, but the amount syphoned off in wages and local expenditure contributed greatly to our economy and will, in the short term, continue to do so. The decision by Schering Plough to make 165 redundant is just one recent example of what is to come. I work for this sector, so I'm not going to shout my mouth off too much. Pooing where you eat and all that.
Anyway, because we export a huge volume at huge values to markets that dwarf us, the forthcoming (and I believe they are forthcoming) changes to tax calculations will hit us far more than benefit us. We just don't have enough consumers in relation to our export markets.

Again, I have to fundamentally agree with dunsandin. We have a very small domestic market, and the MNCs use us as a base to export to the much larger market of the rest of the EU. Currently those MNCs ensure that their profits are "made" here, in our low-tax jurisdiction.

If CCCTB is sufficiently attractive to the multinationals for them to opt for it, then the profits being made in each country will be apportioned on whatever basis is chosen for profit apportionment.

What I don't quite see, though, is why an MNC that is attracted to Ireland because of its low corporation tax rates would find CCCTB so attractive that it chooses to be taxed at the rates of other countries.

Let's take an MNC which makes a billion's worth of sales in the EU, with a profit margin that varies slightly from country to country. Currently, the company uses the usual accounting devices to ensure that 100% of its profit is "made" in Ireland:

Country|Sales|Real Profit|Acct Profit|CCCTB Sales*|CT Rate|CT Paid Now|CT payable now|CT payable w CCCTB
Germany|€200m| €20m|0|22.6|31||6.2|7.01
France|€200m| €18m|0|22.6|33.33||6|7.53
UK|€250m| €30m|0|28.25|25||7.5|7.06
Italy|€250m| €25m|0|28.25|31.4||7.85|8.87
Spain|€100m| €20m|0|11.3|30||6|3.39
Ireland|€0m||113m||12.5|14.13||
Total|€1000m|€113m||||14.13|33.55|33.86


Now, I can't for the life of me see what's in it for the company there. Under a CCCTB formula that divides up taxable profit by gross sales, the outcome there is not significantly different from the current option of paying corporation tax in each country (that's the CT real column)...avoiding which was the whole point of the MNC setting up in Ireland in the first place.

So, I can't really see what the attractions of CCCTB are for an MNC which is based in Ireland to take advantage of Ireland's CT rate, although I appreciate the above is very much a quick sketch. Perhaps someone can explain it to me?

slightly puzzled,
Scofflaw

liammur

beeno67 wrote: »

I don't see your logic here. Why will this always be the case? And the multinationals that don't have an EU presence. Will they now get one?

Also you seem to assume multinational must be European or American.

Tell me a multinational that has all it's plants on 1 continent?

dunsandin

liammur wrote: »

Tell me a multinational that has all it's plants on 1 continent?

Currently I'm not aware of one. A side bar issue of some importance may well be Obama's push for American Corporations to relocate their operations and their Tax Dollar back to the U S of A. Depending on how hard this issue is pushed, it may well provoke a conflict of doctrine between the EU and the USA, and possibly a Trade scuffle(war would be too strong a term) between Obama's need to stimulate the domestic economy with regulation demanding repatriation of a greater proportion of revenue and employment - and the EU's desire to bow to member states who regard a sales location based tax calculus as a possible chink of fiscal light to swell severely depleted coffers.
Regardless, in either scenario, we do not fare well, and in the case of both, we emerge rather badly.

liammur

dunsandin wrote: »

Currently I'm not aware of one. A side bar issue of some importance may well be Obama's push for American Corporations to relocate their operations and their Tax Dollar back to the U S of A. Depending on how hard this issue is pushed, it may well provoke a conflict of doctrine between the EU and the USA, and possibly a Trade scuffle(war would be too strong a term) between Obama's need to stimulate the domestic economy with regulation demanding repatriation of a greater proportion of revenue and employment - and the EU's desire to bow to member states who regard a sales location based tax calculus as a possible chink of fiscal light to swell severely depleted coffers.
Regardless, in either scenario, we do not fare well, and in the case of both, we emerge rather badly.

Correct, we need to be changing our focus on domestic R&D and develop our own industries.

dunsandin

I have always felt that Liam, but the Irish establishment have a very warped view when it comes to domestic businesses, the attitude(with a few notable exception) appears to be that FDI beats HDI every time. I do not know why this is, other than it may be a state-sized version of good old fashioned begrudgery.

liammur

dunsandin wrote: »

I have always felt that Liam, but the Irish establishment have a very warped view when it comes to domestic businesses, the attitude(with a few notable exception) appears to be that FDI beats HDI every time. I do not know why this is, other than it may be a state-sized version of good old fashioned begrudgery.

You mustn't forget the likes of harney and martin were travelling the world on huge expenses in an attempt to lure these MNC's in. Surely, our great great ministers were entitled to this than helping say a business in donegal.