Why is corporation tax so low in Ireland?

armabelle

The obvious reason I can think of is that it is to grow the economy right? So has this worked and was the economy in Ireland not growing without such a low corporation tax?

Geuze

armabelle wrote: »

The obvious reason I can think of is that it is to grow the economy right? So has this worked and was the economy in Ireland not growing without such a low corporation tax?

The history of our low CTR goes back to the mid-50s.

It is basically aimed at attracting FDI and boosting exports.

The low CT was initially aimed only at exporters, and/or MNCs.

It now applies to all firms.

Has it worked? Broadly, yes.

Although no doubt people will challenge that statement.

Suryavarman

armabelle wrote: »

The obvious reason I can think of is that it is to grow the economy right?

Yes. There's also reason to believe that taxing corporations, at least at high levels, is a bad idea apart from its effects on economic growth.

So has this worked

Yes.

and was the economy in Ireland not growing without such a low corporation tax?

It sometimes was but not as fast.

Jimbob1977

Originally, IFSC companies were given a preferential 12.5% rate to attract Foreign Direct Investment. We needed to stimulate a stagnant economy. Meanwhile the Corporation Tax rate for regular companies was about 30% if I recall.

When it worked beautifully, the decision was taken to bring Corporation Tax to 12.5% across the board. Every year, about 2% was slashed off Corporation Tax until it became 12.5% over a period of time.

The logic is that Corporations will set up in Ireland and create employment. Jobs generate PAYE and PRSI. They also stimulate VAT and reduce social welfare.

Socialism, however, would dictate that taxes should be much higher to pay for services and the welfare.

Suryavarman

Jimbob1977 wrote: »

Socialism, however, would dictate that taxes should be much higher to pay for services and the welfare.

Socialism is redundant. It matters little what socialism would dictate, to those of us trying to improve the world.

EverythingGood

Suryavarman wrote: »

Socialism is redundant. It matters little what socialism would dictate, to those of us trying to improve the world.

Socialists in Ireland do not like taxes - property or water!

Marcusm

Jimbob1977 wrote: »

Originally, IFSC companies were given a preferential 12.5% rate to attract Foreign Direct Investment. We needed to stimulate a stagnant economy. Meanwhile the Corporation Tax rate for regular companies was about 30% if I recall.

When it worked beautifully, the decision was taken to bring Corporation Tax to 12.5% across the board. Every year, about 2% was slashed off Corporation Tax until it became 12.5% over a period of time.

The logic is that Corporations will set up in Ireland and create employment. Jobs generate PAYE and PRSI. They also stimulate VAT and reduce social welfare.

Socialism, however, would dictate that taxes should be much higher to pay for services and the welfare.

Firstly Exports Sales companies had a nil rate and Shannon operations were exempt (there is a subtle distinction). Then in 1980, when CT was at 50%, a 10% effective rate was introduced for manufacturing companies. In 1988, this was extended to international financial services and software development/data processing. At this stage the CT rate was heading down to 40% then from 2003, a 12.5% rate was introduced although manufacturing companies continued to availa of 10% until 2010. Non trading income of companies together with profits from developing land is taxed at 25%.

Mr. Incognito

Low corporation tax together with the r and d credits attract international companies.

It is all that separated us from Greece and Portugal when they went to the wall.

Companies will never pay tax. They are mobile. If we raised it they would leave with about 70 percent of our GDP.

They provide most of the private sector employment.

Dinarius

Thinking of the likes of our corporate tax rate (amongst other things) and its aim to create jobs at all costs - even at the expense of giving the State less money for day-to-day expenditure, my late father used to say that...

"Ireland is a Socialist state spelt with Capitalist letters.",

...which I thought was rather brilliant, and more than a little true.

D.

Wanderer78

has it worked, absolutely, is it problematic, absolutely. i think its becoming a question of ethics and morality. as these corporations increase their profit margins, are we getting a fair share of these earnings? i dont think so, i personally believe these policies are quickly becoming large scale extraction and exploitation processes. the activity of tax avoidance is unethical and immoral. the only idea ive discovered so far that seems workable in dealing with the corporate tax issue is david mcwilliams, i.e. receiving payment in stocks and shares, it probably would work favourably for all involved. i do think we need to act on this asap, as by not doing so will escalate these issues.

Geuze

Note that our 12.5% rate can no longer be called very low, as other countries have cut their rates.

The UK CT rate is 19%, and due to fall further.