Corporation tax: Unfair Advantage?

gollem_1975

big b wrote: »

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.

yeah perhaps my post would have been a more fitting reply to

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.

so despite the advantage of low CT ( it is an advantage ) we have u/e of 13%. we would certainly have higher u/e if the MNCs weren't here.

1) CT is a major reason for the MNCs to be here
2) there are several domestic jobs relying on each MNC job
3) 12.5% of their profits going to Irish coffers is better than the neglible amount we'd have if we had a comparable rate of CT to the UK or Netherlands.

southsiderosie

thebman wrote: »

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.

gandalf wrote: »

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.

I'm not buying the 'poor location' story. Smart countries make the most of where they are; the Low Countries exist today because of human ingenuity. If Ireland had spent the boom years making major upgrades to their national and international transport infrastructure instead of building ghost estates, they could be a major transfer point between the US and Europe/the Middle East and Asia. Plus Ireland is a small country that is not only part of one of the second-richest economic zone in the world, it has unusually close ties to the world's biggest economy.

I've said it in other threads, but at this point, I think Ireland is going to have to really choose what kind of economic model it wants going forward. It cannot simultaneously be a low tax haven and a Swedish-style welfare state with a large public sector - it has to choose. So maybe the question regarding the corporate tax rate shouldn't be 'Is it unfair', it should be 'Is it enough?".

two wheels good

http://www.bbc.co.uk/programmes/b00vhgpl

I'd like to draw your attention to a very interesting BBC Radio 4 program about corporations chasing low tax rates in Zug, Switzerland and Dublin where listed corporations consist of financial assets only; no fixed assets, no employees.

In Zug, Boots (the chemist) now owned by an Equity fund are registered to a PO Box number. Once they paid £128m per annum to the exchequer now they pay £28m yet they continue to avail of all the advantages of trading in the UK.

Also discussed: Barclays "double dipping" tax allowances in Dublin and the USA; Teams of tax avoidance experts in London working to exploit every loophole.

Corporations need to pay their share too, loopholes and tax havens need to be closed. And playing off one country against another is a strategy that will cost the national taxpayer in the long run.

Liam Byrne

If we are forced to change our corporation taxes to match the EU then we should also be forced to get rid of **** like VRT and other things that make this country less competitive and more expensive to live in.

gandalf

southsiderosie wrote: »

I'm not buying the 'poor location' story. Smart countries make the most of where they are; the Low Countries exist today because of human ingenuity. If Ireland had spent the boom years making major upgrades to their national and international transport infrastructure instead of building ghost estates, they could be a major transfer point between the US and Europe/the Middle East and Asia. Plus Ireland is a small country that is not only part of one of the second-richest economic zone in the world, it has unusually close ties to the world's biggest economy.

I've said it in other threads, but at this point, I think Ireland is going to have to really choose what kind of economic model it wants going forward. It cannot simultaneously be a low tax haven and a Swedish-style welfare state with a large public sector - it has to choose. So maybe the question regarding the corporate tax rate shouldn't be 'Is it unfair', it should be 'Is it enough?".

Of course it is an issue its called Geography. We are seen as a gateway into Europe and for software or paper based products it is not an issue however for manufactured physical goods then yes there are significant cost differences if an organisation wants to deal with the whole EU.

If the base themselves in Poland (like Dell did in the Foxconn plant from Limerick) they can reach the majority of the European market via the road networks cutting down on shipping costs dramatically. Now you factor in the difference in costs for labour for example then you see the real problems that Ireland is facing to attract investment from MNCs. Lose the advantage of the low corporation tax and then we are in big trouble.

All those who say we can raise the corporation tax further are basing their arguement on a very dangerous assumption. That all businesses will remain in Ireland if that happens. If they aren't what is an acceptable loss of companies. 10%, 20%, 50% and all the jobs that go with them both directly and indirectly.

Whatever this government do next they had better make sure that they ring fence our Corporate Tax rate and do not barter it away to save foreign bondholders.

K-9

gandalf wrote: »

Of course it is an issue its called Geography. We are seen as a gateway into Europe and for software or paper based products it is not an issue however for manufactured physical goods then yes there are significant cost differences if an organisation wants to deal with the whole EU.

If the base themselves in Poland (like Dell did in the Foxconn plant from Limerick) they can reach the majority of the European market via the road networks cutting down on shipping costs dramatically. Now you factor in the difference in costs for labour for example then you see the real problems that Ireland is facing to attract investment from MNCs. Lose the advantage of the low corporation tax and then we are in big trouble.

All those who say we can raise the corporation tax further are basing their arguement on a very dangerous assumption. That all businesses will remain in Ireland if that happens. If they aren't what is an acceptable loss of companies. 10%, 20%, 50% and all the jobs that go with them both directly and indirectly.

Whatever this government do next they had better make sure that they ring fence our Corporate Tax rate and do not barter it away to save foreign bondholders.

Economist's base raising Corporation Tax on certain elasticities. I don't think they apply to us!

thebman

southsiderosie wrote: »

I'm not buying the 'poor location' story. Smart countries make the most of where they are; the Low Countries exist today because of human ingenuity. If Ireland had spent the boom years making major upgrades to their national and international transport infrastructure instead of building ghost estates, they could be a major transfer point between the US and Europe/the Middle East and Asia. Plus Ireland is a small country that is not only part of one of the second-richest economic zone in the world, it has unusually close ties to the world's biggest economy.

I've said it in other threads, but at this point, I think Ireland is going to have to really choose what kind of economic model it wants going forward. It cannot simultaneously be a low tax haven and a Swedish-style welfare state with a large public sector - it has to choose. So maybe the question regarding the corporate tax rate shouldn't be 'Is it unfair', it should be 'Is it enough?".

We are an island, completely disconnected from mainland Europe.

Why would anyone locate here instead of Britain if not because we are cheaper to do business with because of tax rates or lower wages?

southsiderosie

gandalf wrote: »

Of course it is an issue its called Geography. We are seen as a gateway into Europe and for software or paper based products it is not an issue however for manufactured physical goods then yes there are significant cost differences if an organisation wants to deal with the whole EU.

If the base themselves in Poland (like Dell did in the Foxconn plant from Limerick) they can reach the majority of the European market via the road networks cutting down on shipping costs dramatically. Now you factor in the difference in costs for labour for example then you see the real problems that Ireland is facing to attract investment from MNCs. Lose the advantage of the low corporation tax and then we are in big trouble.

All those who say we can raise the corporation tax further are basing their arguement on a very dangerous assumption. That all businesses will remain in Ireland if that happens. If they aren't what is an acceptable loss of companies. 10%, 20%, 50% and all the jobs that go with them both directly and indirectly.

Whatever this government do next they had better make sure that they ring fence our Corporate Tax rate and do not barter it away to save foreign bondholders.

And like I said, smart countries deal with the geography and use it to their advantage. The Dutch learned to control the rivers and sea, and control shipping to and from Europe. The Finns live in a small cold country, and have focused on education and technology, to great effect. Ireland was never going to be a manufacturing powerhouse; its population is too small, and its infrastructure is not good enough. But it is English-speaking and has rich neighbors. It should not be as much of a basket-case as it is today.

I agree that Ireland should protect its corporate tax rates. Like I said though, they need to pick a model. I don't think they offer enough value to have a Swedish-style system, nor do they have enough indigenous industry. In the long term, I think it makes more sense to de-regulate more, and try to position themselves as the Hong Kong of Europe. But that would mean scrapping the clientelist political model, and staring down the unions, and I highly doubt either will happen.

Amhran Nua

Cool Mo D wrote: »

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.

Nail on the head and well said sir. Its all very well for these larger European countries to be complaining about our CT rate, but they are tring to close the door after they have their own industrial base well and truly established. Thats what I call unfair.

yoshytoshy

Not sure if other people heard on the pat kenny show ,a guy mentioning that ireland will probably have to increase it's corporation tax ,he said it was ridiculous that we were so low in the euro zone and in such bad financial ways.

Could this be part of the cost of a bailout for us ?

gandalf

yoshytoshy wrote: »

Not sure if other people heard on the pat kenny show ,a guy mentioning that ireland will probably have to increase it's corporation tax ,he said it was ridiculous that we were so low in the euro zone and in such bad financial ways.

Could this be part of the cost of a bailout for us ?

It could be especially if the ECB are running the bailout as they are subject to political interference from France & Germany. If the IMF are leading it probably not as all they will be interested in is that we can pay the money back and they would have the intelligence that FDI creates an awful lot of jobs in Ireland and is directly linked to our low corporation tax.

Austrian Finance Minister Josef Proell, however, was quoted as saying the Irish corporate tax rate would have to be discussed in any talks on aid, foreshadowing tough negotiations.

source here

yoshytoshy

Thanks ,when I heard that coming from an English spokesperson ,I was wondering if England was going to push for an increase in return for their help.

K-9

gandalf wrote: »

It could be especially if the ECB are running the bailout as they are subject to political interference from France & Germany. If the IMF are leading it probably not as all they will be interested in is that we can pay the money back and they would have the intelligence that FDI creates an awful lot of jobs in Ireland and is directly linked to our low corporation tax.


source here

An Austrian politician does not equate to the ECB.

Anything anyway concrete Gandalf, barring an Austrian source?

Nobody is in any doubt certain French and German politicians would love to see a rise in our CT rates.

The IMF is a small part of the fund. No doubt when this claim proves a non runner, it'll still get thrown out there, as inevitable sometime in the future.

gandalf

yoshytoshy wrote: »

Thanks ,when I heard that coming from an English spokesperson ,I was wondering if England was going to push for an increase in return for their help.

Yes I believe it is an issue for the UK however they are in a precarious situation with Irish debt as Royal Bank of Scotland are on the hook for £50 billion worth of outstanding loans to Ireland and the UK government are the majority shareholder. So I do not see them pushing for it to be changed.

It is a target for the French and for the Germans as well though.

yoshytoshy

gandalf wrote: »

Yes I believe it is an issue for the UK however they are in a precarious situation with Irish debt as Royal Bank of Scotland are on the hook for £50 billion worth of outstanding loans to Ireland and the UK government are the majority shareholder. So I do not see them pushing for it to be changed.

It is a target for the French and for the Germans as well though.

Phew , I was worried about that. For once Debt is on our side.

Amhran Nua

gandalf wrote: »

It could be especially if the ECB are running the bailout as they are subject to political interference from France & Germany.

Actually prior to the economic problems of the recession, the ECB was infamously inversely likely to take action according to the pressure put on it, in particular with reference to large European countries. It's probably more independent than the IMF.

HellFireClub

bob the bob wrote: »

<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" )

Our CT rate of 12.5% is just plain stupid. It's like having 3 rooms in your house, a PAYE room where the tenant pays you fair market rate PAYE/Rent, a VAT room where the tenant pays you fair and market-rate VAT/Rent, but you've a CT room where the tenant pays very little by way of contribution to the mortgage you've to pay for the overall house...

When you are a few hundred Euro shy for the mortgage at the end of the month and you went looking for bail out to pay the difference, any half decent bank manager would tell you to get your act together and get fair rent off all three tenants before he/she would bail you out with a loan.

We are failing to look at our primary concern here when we look at CT, which is running our country and having the income to do so without borrowing huge sums. We are pandering and people pleasing again to a gang of employers who want to have the US FDI tail wagging the Irish sovereign dog. We employ approximately 1.5 million people in this country, US multinationals employ around 100K of those workers, which is around 6% of the workforce, and it's long since past time their commentry, chestbeating and "arms length" lobbying activities via IBEC and the American Chamber of Commerce in Ireland were viewed in that particular context.

Pandering and people pleasing got us nowhere in relation to the construction industry and it will get us nowhere in relation to the US MNC's... I don't recall seeing a box for DELL, Google or Microsoft on the last ballot paper I ticked...

Amhran Nua

HellFireClub wrote: »

Our CT rate of 12.5% is just plain stupid.

Stupid like employing hundreds of thousands of people, or stupid like a half thought out post on boards?

dRNk SAnTA

HellFireClub wrote: »

Our CT rate of 12.5% is just plain stupid. It's like having 3 rooms in your house, a PAYE room where the tenant pays you fair market rate PAYE/Rent, a VAT room where the tenant pays you fair and market-rate VAT/Rent, but you've a CT room where the tenant pays very little by way of contribution to the mortgage you've to pay for the overall house...

Nutty post but I'm tempted to play along. The first tenant is employed by the third tenant, by raising the "rent" and driving him away, you're also going to lose the now unemployed first tenant.

Here's another analogy. Germany complaining about Irelands corporation tax is like Lufthansa complaining about Ryanairs low fares. We aren't stealing anything, it's called ****ing competing. And we're doing great.

Ryanair carry the most passengers in the world, and Ireland creates the most FDI jobs (per capita) in the world. Do you reckon it makes long term business sense for Ryanair to increase their fares? We are a raging success in this area and everyone else has the serious green eye going on.

Ronan Lyons has a great post about the issue here: http://www.ronanlyons.com/2010/11/16/and-its-hard-to-craft-a-budget-when-youre-watched-by-olli-rehn-open-letter-to-soon-to-be-european-overlords/

HellFireClub

dRNk SAnTA wrote: »

Nutty post but I'm tempted to play along. The first tenant is employed by the third tenant, by raising the "rent" and driving him away, you're also going to lose the now unemployed first tenant.

Here's another analogy. Germany complaining about Irelands corporation tax is like Lufthansa complaining about Ryanairs low fares. We aren't stealing anything, it's called ****ing competing. And we're doing great.

Ryanair carry the most passengers in the world, and Ireland creates the most FDI jobs (per capita) in the world. Do you reckon it makes long term business sense for Ryanair to increase their fares? We are a raging success in this area and everyone else has the serious green eye going on.

Ronan Lyons has a great post about the issue here: http://www.ronanlyons.com/2010/11/16/and-its-hard-to-craft-a-budget-when-youre-watched-by-olli-rehn-open-letter-to-soon-to-be-european-overlords/

We are not "****ing competing" as you have put it, by any stretch of the imagination when we have to get bailed out by a whole load of other states. That isn't competing, that's the opposite of competition, that's called subsidising economic growth.

Think about how utterly stupid this policy is... In order to pander to and people please the US MNC employers of around 100,000 employees in the state, (who are going to be operaing from another continent anyway in 15 years time), we selfishly protect the employers of the remaining 1.4 million employees in the state. How stupid is that??? The only employers who consistently threaten this state with assured capital flight in the event of the CT rate being increased are the US multinationals and their minions in IBEC and AmCham... You never hear any of the indigenous Irish employers threatening to throw their toys out of the pram if they are subjected to more tax at a time of the most serious crisis that the state has encountered...

If you want to debate this point with me, debate it on merit or otherwise, and preferably not on the illogical and selfish whims/press releases/sabre rattling tactics of Ibec et al...

dRNk SAnTA

HellFireClub wrote: »

We are not "****ing competing" as you have put it, by any stretch of the imagination when we have to get bailed out by a whole load of other states. That isn't competing, that's the opposite of competition, that's called subsidising economic growth.

Think about how utterly stupid this policy is... In order to pander to and people please the US MNC employers of around 100,000 employees in the state, (who are going to be operaing from another continent anyway in 15 years time), we selfishly protect the employers of the remaining 1.4 million employees in the state. How stupid is that??? The only employers who consistently threaten this state with assured capital flight in the event of the CT rate being increased are the US multinationals and their minions in IBEC and AmCham... You never hear any of the indigenous Irish employers threatening to throw their toys out of the pram if they are subjected to more tax at a time of the most serious crisis that the state has encountered...

If you want to debate this point with me, debate it on merit or otherwise, and preferably not on the illogical and selfish whims/press releases/sabre rattling tactics of Ibec et al...

Heh. Alright I'll keep this brief.

If you look at the link I posted you'll see that our corporation tax recepits as a % of GDP was one of the highest in the EU in 2008. Germany is close to the bottom, its 30%+ doesn't yield as much as Irelands.

When it comes to FDI, investment is obviously incredibly elastic because they can invest anywhere. You said we're not competing for FDI, I don't know what you're on about because we're the biggest receivers of FDI in the world (per capita), and have been for more than a decade.

The national bankrupty and bailout has nothing to do with our CT rate or FDI. As the link I posted shows, fiscally that area is overperforming for us. Since the beginning of the recession, the strongest growth in our economy has been in exports led by multinationals. CT receipts have outgrown other areas so far this year.

FDI has absolutely nothing to do with the bank bailout. FDI was responsible for the real celtic tiger - the growth pre-2002 property bubble.

I'm off to bed.

keithclancy

dRNk SAnTA wrote: »

Here's another analogy. Germany complaining about Irelands corporation tax is like Lufthansa complaining about Ryanairs low fares. We aren't stealing anything, it's called ****ing competing. And we're doing great.

Thats a bad comparison.
Germany has paid Trillions of Euro for Re-Unification, has a top notch rail and road network and a good health system.

Ireland has a quarter of the population stuffed into one part of the country, Massive housing estates in the middle of nowhere with no public transport links or facilities and a population that is hell bent on owning a house.

In Germany they are still building infrastructure for public transport all over the country, in Ireland they built the Luas.

Ireland is not "doing great" its a flawed economy built on a property bubble. While the times were good, taxes should have been raised to develop cities and areas outside of Dublin, rail networks should have been developed. Mechanisms should have been put in place to encourage town growth.

Encourage business to move to those towns and decentralise the population. Everyone ended up in Dublin and thats a big problem as it drove the cost of living up very quickly.

I've never seen a housing estates in Continental Europe like in Ireland. i.e. in Lucan its just housing estates and maybe a Spar, a Chinese Takeaway and a Pub ?

Ryanair carry the most passengers in the world, and Ireland creates the most FDI jobs (per capita) in the world. Do you reckon it makes long term business sense for Ryanair to increase their fares? We are a raging success in this area and everyone else has the serious green eye going on.

Yes it would make long term sense for Ryanair to increase their fares to match their costs, otherwise they would go out of business. The idea is to remain more attractive (in Ryanairs case, cheaper) than everyone else.

At the end of the day you have to balance the books.

enda1

dRNk SAnTA wrote: »

snip

Ryanair carry the most passengers in the world, and Ireland creates the most FDI jobs (per capita) in the world. Do you reckon it makes long term business sense for Ryanair to increase their fares? We are a raging success in this area and everyone else has the serious green eye going on.

Ryanair carry the 8th most passengers.

from 7 -> 1

China Southern airlines
AirFrance - KLM
Lufthansa
United Airlines
American Airlines
Southwest Airlines
Delta Air Lines

Amhran Nua

keithclancy wrote: »

Ireland is not "doing great" its a flawed economy built on a property bubble.

I believe he was referring to the FDI-attracting corporate tax rate in particular.

keithclancy

Amhran Nua wrote: »

I believe he was referring to the FDI-attracting corporate tax rate in particular.

FDI ? Tax Haven does not equal foreign direct investment.
Unemployment is at 13.7%.

Why would you base the majority of your employees in Ireland if the country did not have the infrastructure to support your business.

Intel, Pfizer, Eli Lilly, Microsoft to name a few are all scaling down Operations to move to Greener pastures, if the Corporate Tax rate is the driver then why are they leaving ?

Amhran Nua

keithclancy wrote: »

FDI ? Tax Haven does not equal foreign direct investment.
Unemployment is at 13.7%.

You just mentioned the construction bubble collapse one post up. I suspect you are trolling at this stage tbh. Can you tell us, in one sentence, why you feel so strongly that Ireland should do something as colossally stupid as hiking up its corporate tax rate. What is your interest in the matter.

keithclancy wrote: »

Why would you base the majority of your employees in Ireland if the country did not have the infrastructure to support your business.

Who said anything about the majority? And demonstrably the situation in Ireland hasn't stopped FDI companies setting up and employing hundreds of thousands of people here.

keithclancy wrote: »

Intel, Pfizer, Eli Lilly, Microsoft to name a few are all scaling down Operations to move to Greener pastures, if the Corporate Tax rate is the driver then why are they leaving ?

Google and the medical and pharma companies, to name but a few, are increasing their investments here.

jimmycrackcorm

keithclancy wrote: »

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

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

I was thinking of something about CT adjustments when I read your post. If we were forced to increase CT then we could institute a loophole by allowing more offsets in the costs of operations. e.g. an exporter employee lower tax rate which would allow exporters to hire people at much lower rates thereby balancing out any increase in CT. Of course it favours MNC's that depend on labour, which would suit our highly educated workforce. It would affect those shell companies that funnel huge amounts of profits through our tax system yet only employ a handful of people; do we really need those companies when they are the ones that are seriously pissing off our neighbours?

keithclancy

jimmycrackcorm wrote: »

I was thinking of something about CT adjustments when I read your post. If we were forced to increase CT then we could institute a loophole by allowing more offsets in the costs of operations. e.g. an exporter employee lower tax rate which would allow exporters to hire people at much lower rates thereby balancing out any increase in CT. Of course it favours MNC's that depend on labour, which would suit our highly educated workforce. It would affect those shell companies that funnel huge amounts of profits through our tax system yet only employ a handful of people; do we really need those companies when they are the ones that are seriously pissing off our neighbours?

Exactly, make it favorable to companies who are going to bring Jobs into the country. At the moment alot of the companies here, are here because of the low corporate tax rate and not much else. Whats needed is to develop the country to offer other incentives rather than just being a place to process money through.

As I said previously a low rate of tax is a short term solution, you need the money to develop infrastructure to support the business you have coming into the country.

In the past a large company would start up in an industrial estate, with nothing but fields around it, then over the years a load of houses would sprout up around it. Then the company closes and your left with an empty building and people stuck with houses they can no longer afford with no other business close by (e.g. Dell)

Most of those people end up commuting to places futher afield, either abroad or Dublin, Cork, Kerry etc.

Amhran Nua

jimmycrackcorm wrote: »

Of course it favours MNC's that depend on labour

If a MNC is highly dependent on labour, it will be following Dell to Poland, then probably some other Eastern European country, before ending up in India or the Philippines. You end up chasing your own tail down a hole of diminishing returns. The distinguishing factor for many of the MNCs in Ireland is that they are not sensitive to labour costs.

keithclancy wrote: »

As I said previously a low rate of tax is a short term solution, you need the money to develop infrastructure to support the business you have coming into the country.

As has been said to you over and over again, we get plenty of tax from FDI in the form of income tax and other levies.

HellFireClub

Amhran Nua wrote: »

You just mentioned the construction bubble collapse one post up. I suspect you are trolling at this stage tbh. Can you tell us, in one sentence, why you feel so strongly that Ireland should do something as colossally stupid as hiking up its corporate tax rate. What is your interest in the matter.

My interest in the matter is too obvious to be stated, I've friends and relations who are unemployed and are struggling to exist, but I see vastly wealthy businesses dictating the direction that this country is heading in.

And before you come back with, "the social welfare bill is too high in this country and needs to be cut", of course this is the case, but it needs to be cut by giving people hope and getting them off the dole and back into work as opposed to making them homeless because they cannot afford to live on 196 Euro a week and cutting the dole back down to 170 Euro or something similar.

I never suggested hiking up CT as you have incorrectly stated, there is a clear case for it to be increased by a notional degree, in line with every other tax heading that is going to be increased. That means that I think it should be increased by 1% or 2.5% at the maximum.

There is a clear moral hazard in allowing any industry or group of industries to start dictating how we are to set out a tax framework in this country. We have the IMF in town this very day, because we allowed one industry to become too close to government and influence tax policy.