Corporation tax: Unfair Advantage?

bob the bob

<Playing devil's advocate for a minute.....>

Should Ireland be allowed to keep it's corp tax which is lower than other European counterparts?

If the answer is yes, what is the argument for keeping this possibly unfair advantage? (besides "we need it" )

Amhran Nua

bob the bob wrote: »

If the answer is yes, what is the argument for keeping this possibly unfair advantage? (besides "we need it" )

What's unfair about it? Nothing stopping anyone else dropping their own corporate tax rate.

Cookie_Monster

Our Corp Tax is not the big advantage everyone thinks it is TBH. Of much much greater important are all our various double tax treaties with other countries which allows its use for non-Irish derived income.
If they were to go and and the rate stay the same we'd still lose most multinationals.

Black Swan

Source: http://www.google.com/imgres?imgurl=http://pekin.mae.lu/var/fr/storage/images/media/images/total-tax-rates-for-eu2/178812-1-fre-FR/Total-Tax-Rates-for-EU_reference.jpg&imgrefurl=http://pekin.mae.lu/en/Doing-Business-in-Luxembourg-China/Tax-Information-Luxembourg&usg=__agk5PTIgLqzsKnTp6jq3SOsi27I=&h=306&w=500&sz=36&hl=en&start=16&zoom=1&tbnid=m-t_1-KPE8kUeM:&tbnh=103&tbnw=168&prev=/images%3Fq%3Dcorporate%2Btax%2Brates%2BEU%26um%3D1%26hl%3Den%26sa%3DG%26biw%3D1034%26bih%3D619%26tbs%3Disch:10,488&um=1&itbs=1&iact=hc&vpx=301&vpy=136&dur=4509&hovh=176&hovw=287&tx=142&ty=92&ei=2efjTJikK8XbngfAt7mODw&oei=DefjTM-dH8L7lwfnx8mLDg&esq=2&page=2&ndsp=15&ved=1t:429,r:1,s:16&biw=1034&bih=619

bob the bob

Blue_Lagoon wrote: »

Source: http://www.google.com/imgres?imgurl=http://pekin.mae.lu/var/fr/storage/images/media/images/total-tax-rates-for-eu2/178812-1-fre-FR/Total-Tax-Rates-for-EU_reference.jpg&imgrefurl=http://pekin.mae.lu/en/Doing-Business-in-Luxembourg-China/Tax-Information-Luxembourg&usg=__agk5PTIgLqzsKnTp6jq3SOsi27I=&h=306&w=500&sz=36&hl=en&start=16&zoom=1&tbnid=m-t_1-KPE8kUeM:&tbnh=103&tbnw=168&prev=/images%3Fq%3Dcorporate%2Btax%2Brates%2BEU%26um%3D1%26hl%3Den%26sa%3DG%26biw%3D1034%26bih%3D619%26tbs%3Disch:10,488&um=1&itbs=1&iact=hc&vpx=301&vpy=136&dur=4509&hovh=176&hovw=287&tx=142&ty=92&ei=2efjTJikK8XbngfAt7mODw&oei=DefjTM-dH8L7lwfnx8mLDg&esq=2&page=2&ndsp=15&ved=1t:429,r:1,s:16&biw=1034&bih=619

And which category does corp tax fall under?

Laminations

Profit taxes I'd imagine, but overall it looks like there is plenty of scope to be increasing taxes across the board in Ireland and still maintaining competitiveness compared with our high tax counterparts in Europe

Cookie_Monster

bob the bob wrote: »

And which category does corp tax fall under?

Its a tax on profits

enda1

I look at the EU as somewhat analogous to the privatisation of the mobile telecoms industry.

Each provider (country) is free to set its own tariffs (taxes) to an extent, and it is in this freedom and difference between tariff structure (tax base) that customers (people/corporation) can choose their provider.

This competition is necessary to ensure a competitive mobile telecoms market (Europe) and stop potential customers from choosing a completely different alternative solution such as VOIP over wifi (America/Asia etc.)

This analogy is not water-tight but I feel it can be a useful way of looking at things.

enda1

Laminations wrote: »

Profit taxes I'd imagine, but overall it looks like there is plenty of scope to be increasing taxes across the board in Ireland and still maintaining competitiveness compared with our high tax counterparts in Europe

Competitiveness is not entirely tax based. We must provide an extra tax incentive to some of European neighbours because we fall behind in some other categories such as (depending on the industry of course and which neighbour we compare against):

domestic market access,
infrastructure,
ready supply of skilled workers,
transport costs,
employment costs,
bureaucratic issues

LookingFor

Amhran Nua wrote: »

What's unfair about it? Nothing stopping anyone else dropping their own corporate tax rate.

Some argue it is unfair because companies make use of infrastructure and other advantages in one country - things meant to be funded by taxes in that country - but then turn around and pay (less) taxes on as much income as they can in other countries.

They also say that lowering corp tax is just 'race to the bottom' economics, but on that front I personally would prefer us to engage in that particular race, than - say - a race to the bottom on salaries and quality of life. I'd prefer us to compete on tax than on certain other things.

Every country has strengths and weaknesses IMO. Some are innate, and there's nothing you can do about them (like say geography and resources), and some could argue that's unfair. I think we should maximise the ones that are malleable, we kind of have to because we don't have a lot of 'built in' advantages that are policy-independent.

Amhran Nua

LookingFor wrote: »

Some argue it is unfair because companies make use of infrastructure and other advantages in one country - things meant to be funded by taxes in that country - but then turn around and pay (less) taxes on as much income as they can in other countries.

Its not like these companies pay no taxes at all in other countries, the only question is the tax on corporate profits. Again, I don't see that it's unfair - we aren't responsible for those countries, we're only responsible for our own little patch.

gollem_1975

Cookie_Monster wrote: »

Our Corp Tax is not the big advantage everyone thinks it is TBH. Of much much greater important are all our various double tax treaties with other countries which allows its use for non-Irish derived income.
If they were to go and and the rate stay the same we'd still lose most multinationals.

and if the rate was to change upwards..though not a betting man... I would wager we'd lose them too.

gollem_1975

Blue_Lagoon wrote: »

Source: http://www.google.com/imgres?imgurl=http://pekin.mae.lu/var/fr/storage/images/media/images/total-tax-rates-for-eu2/178812-1-fre-FR/Total-Tax-Rates-for-EU_reference.jpg&imgrefurl=http://pekin.mae.lu/en/Doing-Business-in-Luxembourg-China/Tax-Information-Luxembourg&usg=__agk5PTIgLqzsKnTp6jq3SOsi27I=&h=306&w=500&sz=36&hl=en&start=16&zoom=1&tbnid=m-t_1-KPE8kUeM:&tbnh=103&tbnw=168&prev=/images%3Fq%3Dcorporate%2Btax%2Brates%2BEU%26um%3D1%26hl%3Den%26sa%3DG%26biw%3D1034%26bih%3D619%26tbs%3Disch:10,488&um=1&itbs=1&iact=hc&vpx=301&vpy=136&dur=4509&hovh=176&hovw=287&tx=142&ty=92&ei=2efjTJikK8XbngfAt7mODw&oei=DefjTM-dH8L7lwfnx8mLDg&esq=2&page=2&ndsp=15&ved=1t:429,r:1,s:16&biw=1034&bih=619

don't know how useful the above graphic is to the discussion tbh.

tax on profits != corporation tax

otherwise wouldn't the EU be complaining about belgiums low rate!?

ardmacha

Even if the Corporation tax offered some kind of advantage, it should have been removed in 2006. We cannot be said to have an advantage now when unemployment is 15% and growth is negligible.

Inquitus

ardmacha wrote: »

Even if the Corporation tax offered some kind of advantage, it should have been removed in 2006. We cannot be said to have an advantage now when unemployment is 15% and growth is negligible.

Big MNCs brought here by the low Corp Tax and Taxonomy are one of the few bits of our economy actually hiring at the moment. Unemployment is not due to them, rather it is due to the complete collapse of the Construction sector and the knock on of that to other businesses, coupled with the reduction in spending brought about by the lowering of peoples standard of living through both unemployment and budget tax hikes.

keithclancy

gollem_1975 wrote: »

don't know how useful the above graphic is to the discussion tbh.

tax on profits != corporation tax

otherwise wouldn't the EU be complaining about belgiums low rate!?

Corporate Tax Rates
Country %
Ireland 12.50%
Netherlands 25.50%
United Kingdom 30.00%
China 33.00%
Belgium 33.99%
France 34.43%
Germany 38.60%
USA 39.50%
Japan 39.54%

Inquitus

gollem_1975 wrote: »

don't know how useful the above graphic is to the discussion tbh.

tax on profits != corporation tax

otherwise wouldn't the EU be complaining about belgiums low rate!?

keithclancy wrote: »

Corporate Tax Rates
Country %
Ireland 12.50%
Netherlands 25.50%
United Kingdom 30.00%
China 33.00%
Belgium 33.99%
France 34.43%
Germany 38.60%
USA 39.50%
Japan 39.54%

The Graph shows what % of tax revenue is from Taxs on Profits, mainly Corp Tax. not what a country's Corp Tax rate is, as correctly pointed out by MrClancy.

Low Corp Tax can bring in companies and result in a higher Tax Take than if one had a higher Tax Rate etc. etc.

Bob_Latchford

uk corporation tax was cut to 24% coming in sometime in 2014 i think. This would make it the lowest in the G7.

big b

Inquitus wrote: »

Big MNCs brought here by the low Corp Tax and Taxonomy are one of the few bits of our economy actually hiring at the moment. Unemployment is not due to them, rather it is due to the complete collapse of the Construction sector and the knock on of that to other businesses, coupled with the reduction in spending brought about by the lowering of peoples standard of living through both unemployment and budget tax hikes.

Are they though?
Haven't we already lost some of the MNC manufacturing jobs to elsewhere? The cadaver being that "we're still committed to Ireland, we see a great future in our R & D departments"

It's a terrifying prospect, but if we can't get our costs down, I can see us losing a whole lot more production jobs, while the MNC's keep a token workforce here to avail of our low Corpo tax for their worldwide operations.

kmick

CT tax in germany is 15%. Im not sure why they are so antsy about our 12.5% rate.

enda1

Inquitus wrote: »

The Graph shows what % of tax revenue is from Taxs on Profits, mainly Corp Tax. not what a country's Corp Tax rate is, as correctly pointed out by MrClancy.

Low Corp Tax can bring in companies and result in a higher Tax Take than if one had a higher Tax Rate etc. etc.

Which can somewhat be explained by the Laffer Curve.

enda1

kmick wrote: »

CT tax in germany is 15%. Im not sure why they are so antsy about our 12.5% rate.

Doesn't Germany also have a local trade tax around 15% pushing the real tax % close to 30%?

gollem_1975

Inquitus wrote: »

The Graph shows what % of tax revenue is from Taxs on Profits, mainly Corp Tax. not what a country's Corp Tax rate is, as correctly pointed out by MrClancy.

Low Corp Tax can bring in companies and result in a higher Tax Take than if one had a higher Tax Rate etc. etc.

yes I know that..

gollem_1975 wrote:

"!= "

means "does not equal"

I was pointing out that while at first it seemed that the graph was relevant to the discussion.. on further investigation it wasn't

gollem_1975

big b wrote: »

Are they though?
Haven't we already lost some of the MNC manufacturing jobs to elsewhere? The cadaver being that "we're still committed to Ireland, we see a great future in our R & D departments"

It's a terrifying prospect, but if we can't get our costs down, I can see us losing a whole lot more production jobs, while the MNC's keep a token workforce here to avail of our low Corpo tax for their worldwide operations.

12.5% of something is better than 100% of nothing.

opening up discussion about our costs (don't disagree with you on that score btw) is OT

thebman

Our low corporation tax should be viewed for what it is, compensation for our poor location as an island off the coast of Europe.

We need someway to offset our disadvantages or we would not get investment.

Its called competing for investment and there is nothing stopping other countries from doing similar.

I do think for the good of the EU, we should devise a system for measuring equality of locating in different regions and come up with a strategy that suits most countries in the union.

Euro_Kraut

This website has list of Corp Tax rate around the world: http://www.worldwide-tax.com/

This article note that the average rate in the EU has fallen of late: http://www.businessweek.com/globalbiz/content/jun2010/gb20100629_855797.htm

Cool Mo D

enda1 wrote: »

Which can somewhat be explained by the Laffer Curve.

Ecept the Laffer curve isn't a curve. All you can say for sure is that 0% and 100% tax rates both yield no revenue. In between, no-one really knows.

There is a historical reason for why other countries, generally large European countries, have high corporation taxes. Historically, the larger countries industrialized first, and built up a wide range of large companies, which are too ingrained and established into that countries economy to easily move without losing their current organisational knowledge and disrupting their current operations. These large companies are a cash cow for their Governments, who set a moderate to high rate of corporation tax.

Since Ireland does not have these companies, as we did not go through much early industrialization, it cannot profit in the same way from a higher tax. We set a lower rate to attract more mobile global companies. This annoys higher tax countries, as they worry that over time, their large companies may slowly drift to the lower tax regime.

bladespin

I don't see out corporation tax as an unfair advantage, it counteracts the fact that we're an island and the disadvantages that brings.

big b

gollem_1975 wrote: »

12.5% of something is better than 100% of nothing.

opening up discussion about our costs (don't disagree with you on that score btw) is OT

Our costs are indeed OT.

Was just pointing out that, in itself, low CT doesn't guarantee MNC's continuing to provide high levels of employment, as was alluded to above.

keithclancy

I posted this in another thread, but i think its more suited here

http://boards.ie/vbulletin/showpost.php?p=69071280&postcount=39

gandalf

As has been stated given we are on the periphery of Europe with high costs and low quality infrastructure the current rate of Corporation Tax can be seen as a balancing to make us attractive.

However if we continue to allow our costs to be uncompetitive then eventually that will erode whatever positive points of attraction that we have left.