Ethics of our Corporation Tax

PeadarCo

Cookie_Monster wrote:

I've been out of Ireland too long to be current on this but surely it's still more tax efficient to setup a company and rail as many expenses through it as possible and pay yourself a lower salary as a result, thus saving a lot overall? Can also claim VAT on any expense.

You can rail all the expenses you want but ultimately you will be taxed at your normal tax rate when you try to withdraw the money from the company/legal entity . So you will pay corporation tax and then you will end up paying standard income taxes. Whereas if you were just a sole trader you would just pay your income tax and no corporation tax. You also have to factor in the close company surcharge on retained earnings which off the top of my head to get away from a company needs 5 or more unconnected shareholders. The issue fundamentally is how to get money out of company/legal entity. There is a career there with the topic alone.

prawnsambo

Rologyro wrote: »

Agree that the best thing to do for Ireland is to leave our corporation tax the way it is.

If these companies were taxed based on where they made their sales it would solve this without Ireland having to touch its tax rate. There would be huge resistance to that though.

You don't appear to grasp the essentials of taxation. You can base tax on where sales are made, but you can't apply that tax to non-existent profits. Or impute a profit to something that wasn't created where the sale was made. It's not that complicated.

Schnitzler Hiyori Geta

Rologyro wrote: »

I think you’re saying the same thing as I am, but your conclusion is that it is a good thing because our economy benefits.

My argument is that it is not a good thing, because we are helping large corporations avoid paying a fair amount of tax.

You haven’t anything so wrong in your life?

No we aren't. We're simply enforcing our own tax policy.

it isn't the tax rate as such, it is the numerous loopholes that the multinationals use to avoid paying tax.

https://en.wikipedia.org/wiki/Double_Irish_arrangement

it seems that as quick as they are being shut down,new ones are being created. That is where the ethical question comes in.

There is a lot said about the offshore tax havens like the Caymen Islands and the Bahamas, but Ireland is the channel these companies use to get the money there in the first place.

Amirani

Rologyro wrote: »

If these companies were taxed based on where they made their sales it would solve this without Ireland having to touch its tax rate. There would be huge resistance to that though.

This "solves" nothing. You've already shown a certain naivety towards how taxation works, but this just makes it clear.

For example - you have an Irish producer of widgets, that they fully export to the UK. They're owned by a group of people living in Meath and they employ 1000 people in Ireland. They utilise Irish utilities, and are very much an Irish company. They're pretty successful, and make profits of about 10 million per year. Under your proposal, they pay €0 in corporation tax in Ireland. Instead, they must pay tax at whatever rate Brexit "Singapore of Europe" Britain decides to set its ultra competitive tax rates at because all their sales are there?

This is a nonsense proposal and offers perverse incentives for national Governments. Why should taxation revenue on what is clearly Irish entrepreneurship go to the UK Government in this scenario?

James Brown

The ultimate verdict regarding ethics and corporation tax is if it benefits the general public. That's the only thing we should be concerning ourselves with. I think too often we use, 'not breaking the law or doing anything wrong' in situations where the tax payer feels the brunt. Also we need a sense of fair play to ensure nobody is getting unfair advantage. A good example is lower taxes on vulture funds which make buying up on the Irish market attractive. This may help the economy but makes the housing crisis worse. If small business is having to fight harder against multinationals that too would stunt any potential growth. We can't leave it at low taxation equals more jobs. It's got many more levels.

Wanderer78

I completely agree with apple founder steve wozniak, that all corporations should be paying at least 50% tax, and I would add, in all jurisdictions. Unfortunately we re nowhere near trying to achieve this, and by the looks of things, we potentially could be going in the opposite direction.

I do think the best way to start tackling this is by partially accepting tax revenues as stocks and shares from the corporations active in our jurisdiction, and placing them into a sovereign wealth fund.

Wanderer78

Matt Barrett wrote:

The ultimate verdict regarding ethics and corporation tax is if it benefits the general public. That's the only thing we should be concerning ourselves with. I think too often we use, 'not breaking the law or doing anything wrong' in situations where the tax payer feels the brunt. Also we need a sense of fair play to ensure nobody is getting unfair advantage. A good example is lower taxes on vulture funds which make buying up on the Irish market attractive. This may help the economy but makes the housing crisis worse. If small business is having to fight harder against multinationals that too would stunt any potential growth. We can't leave it at low taxation equals more jobs. It's got many more levels.

Is there a disconnection going on between our economic needs and our social needs?

James Brown

Wanderer78 wrote: »

Is there a disconnection going on between our economic needs and our social needs?

Completely. Look at the economy and job numbers and compare that to the worsening crises. There's a disconnect for certain.

Wanderer78

Matt Barrett wrote:

Completely. Look at the economy a job numbers and compare that to the worsening crises. There's a disconnect for certain.

Completely agree, I'm not convinced the general public, and those in a position of power, including within our political institutions, realise this yet, if this is true, what will cause the turning point!

James Brown

Wanderer78 wrote: »

Completely agree, I'm not convinced the general public, and those in a position of power, including within our political institutions, realise this yet, if this is true, what will cause the turning point!

FG/FF are no fools. They are well aware. Some members of the public in the throws of the housing crisis might see the connection but we've the PR spin of 'forever homes' and 'them that want something for nothing' fooling many into believing any working tax payer having a hard time is some how separate from any crisis and the crises only relate to Ne'er-do-wells, so in effect isn't really a crisis. While news of big corporations opening up and new jobs are announced theres less pressure to tackle societal problems. That's another knock on effect of making corporation taxes attractive. We're putting a glaze on a rotting cake.
The turning point will come when we reach the bottom and enough working tax payers are finding it tough to pay their way. Then we can blame FF/FG pandering to the left and vote FF/FG

oscarBravo

Wanderer78 wrote: »

...all corporations should be paying at least 50% tax...

As a part-owner of a small business employing 20-odd people, I'll respectfully disagree. With 50% corporation tax, I wouldn't employ anyone.

paul71

Matt Barrett wrote: »

FG/FF are no fools. They are well aware. Some members of the public in the throws of the housing crisis might see the connection but we've the PR spin of 'forever homes' and 'them that want something for nothing' fooling many into believing any working tax payer having a hard time is some how separate from any crisis and the crises only relate to Ne'er-do-wells, so in effect isn't really a crisis. While news of big corporations opening up and new jobs are announced theres less pressure to tackle societal problems. That's another knock on effect of making corporation taxes attractive. We're putting a glaze on a rotting cake.
The turning point will come when we reach the bottom and enough working tax payers are finding it tough to pay their way. Then we can blame FF/FG pandering to the left and vote FF/FG

The disconnect may come at the point where low paid workers (not unemployed) providing vital services to higher paid workers can no longer afford to live in the same city. Essentially a teacher or accountant cannot buy food because the supermarket employee cannot afford to live within 60 miles of a commercial city center.

PeadarCo

Matt Barrett wrote:

Completely. Look at the economy and job numbers and compare that to the worsening crises. There's a disconnect for certain.

I assume you are referring to the housing crisis. That is caused in part by the booming economy and that house building has not kept up. Back in the recession there were plenty of unemployment and lots of empty houses. For anyone renting or buying it was a tenants/buyers market. The two housing crisis and employment boom are linked. Now if you were to massively increase corporation tax you could definitely sort out the housing crisis over night. However you would face an issue with the resulting unemployment and emigration. Then again emigration is one way to reduce hospital waiting lists and housing shortages.

The impact of minor increases in the rate and changes to any reliefs available would be interesting to see though.

Geuze

Wanderer78 wrote: »

I completely agree with apple founder steve wozniak, that all corporations should be paying at least 50% tax, and I would add, in all jurisdictions. Unfortunately we re nowhere near trying to achieve this, and by the looks of things, we potentially could be going in the opposite direction.

I do think the best way to start tackling this is by partially accepting tax revenues as stocks and shares from the corporations active in our jurisdiction, and placing them into a sovereign wealth fund.

Who would you like or hope bears the incidence of this higher CT rate?

The workers, via lower pay rises?

The customers, via higher selling prices?

The shareholders, via lower profits/dividends?

Wanderer78

oscarBravo wrote:

As a part-owner of a small business employing 20-odd people, I'll respectfully disagree. With 50% corporation tax, I wouldn't employ anyone.

Is a small business, a large corporation? I'm actually in favour of the introduction of policies that try benefit your business, as many smaller, indigenous businesses, struggle to compete against larger global monopolies and corporations, its currently not a level playing field. have the abilities of creating and promoting our own, I'm also in favour of the promotion of cooperatives.

Geuze wrote:

The shareholders, via lower profits/dividends?

There's clearly methods of wealth extraction occuring with large corporations, regarding avoidance of tax revenues etc, and not only in this country. It's getting to the point of being dangerous now, there's a reason why companies such as apple have multiples of billions sitting in bank accounts around the world, in tax havens such as ourselves. Large corporations are hugely beneficial for our societies in many ways, job creation and the creation of much needed goods and services being such benefits, but what they are truly dreadful at, is wealth distribution. It's important to bear in mind where the 50% figure came from, an actual apple founder!

Some large corporations are so wealthy now, that a large proportion of their business is in fact based in the activities of the financial sector, they're effectively behaving like banks, creating their own wealth, and arguably, money, via methods such as 'share buy backs' etc .

Please be aware, I don't think there's a hope in hell of ever making corporation taxes 50%, not in my lifetime anyway, and an immediate introduction of this would be catastrophic, it would probably lead to a major economic crisis, possibly depression, but this problem isn't going away, expect it to rare it's ugly head again, very soon.

Cryptopagan

Manic Moran wrote: »

I would presume that an decision to locate anywhere is a multitude of factors, of which corporate tax is only one. Being in the EU with an English language workforce is probably worth paying a few percent extra on tax than setting up in Bulgaria. On the other hand, raising corporate tax to the extent that it becomes a decisive decision criterion will result not in an extra +10% or whatever revenue, but could result in an loss of everything if they up and leave. Not to mention the unemployment costs... Ireland has a bird in the hand right now, and seems to be doing well enough out of it. Is it ready to risk it for greed?

Bringing it into line with our European partners wouldn't be greed though, would it? They would argue that it's greed that keeps it low - greed for investment that might otherwise go to some other EU state. People don't argue that Ireland should raise its corporation tax rates because we'll get loads of extra revenue (Ireland is already heavily dependent on revenue from multinational companies); they argue that it's unfair that Ireland competes on this basis.

James Brown

PeadarCo wrote: »

I assume you are referring to the housing crisis. That is caused in part by the booming economy and that house building has not kept up. Back in the recession there were plenty of unemployment and lots of empty houses. For anyone renting or buying it was a tenants/buyers market. The two housing crisis and employment boom are linked. Now if you were to massively increase corporation tax you could definitely sort out the housing crisis over night. However you would face an issue with the resulting unemployment and emigration. Then again emigration is one way to reduce hospital waiting lists and housing shortages.

The impact of minor increases in the rate and changes to any reliefs available would be interesting to see though.

So the government are actively purposefully going ahead with policies to make the economy boomier despite full knowledge that they are exacerbating the housing crisis and lowering the quality of life for the tax payer? You'll note there isn't a direct link between the two. We've not reached the boom of the Celtic Tiger, yet we consistently break records for children homeless, homeless, hospital trolleys etc. There is no parity.
The idea that we can't grow the economy without causing societal suffering tells me we've a big problem with 'the way we do business' and there certainly is a disconnect. It's not acceptable and bad management.

We need look at if making the state attractive to large corporations is fully benefiting the state or is it only doing so in some areas while making others worse?

prawnsambo

Matt Barrett wrote: »

So the government are actively purposefully going ahead with policies to make the economy boomier despite full knowledge that they are exacerbating the housing crisis and lowering the quality of life for the tax payer? You'll note there isn't a direct link between the two. We've not reached the boom of the Celtic Tiger, yet we consistently break records for children homeless, homeless, hospital trolleys etc. There is no parity.
The idea that we can't grow the economy without causing societal suffering tells me we've a big problem with 'the way we do business' and there certainly is a disconnect. It's not acceptable and bad management.

We need look at if making the state attractive to large corporations is fully benefiting the state or is it only doing so in some areas while making others worse?

There's obvious time lags you seem to be missing. The economy starts to pick up, this leads to an increase in tax revenue (time lag 1), then there's government incentives/investment in housing (time lag 2) and fiinally completion of extra housing (time lag 3).

James Brown

prawnsambo wrote: »

There's obvious time lags you seem to be missing. The economy starts to pick up, this leads to an increase in tax revenue (time lag 1), then there's government incentives/investment in housing (time lag 2) and fiinally completion of extra housing (time lag 3).

I'm responding to the premise of another. We never had this bad a set of crises under, leading up to any boom when the state was doing well economically. My point is the pay off for the economy doing well need not be society suffering to an equal degree. That's all I'm saying.
The idea that society must ultimately suffer for the good of the economy negates the whole point of a growing economy, which is the betterment of society.

I don't buy the 'these things take time' spiel. It's a complete con when the moves aren't made and an excuse for dragging heels.

prawnsambo

Matt Barrett wrote: »

I'm responding to the premise of another. We never had this bad a set of crises under, leading up to any boom when the state was doing well economically. My point is the pay off for the economy doing well need not be society suffering to an equal degree. That's all I'm saying.
The idea that society must ultimately suffer for the good of the economy negates the whole point of a growing economy, which is the betterment of society.

I don't buy the 'these things take time' spiel. It's a complete con when the moves aren't made and an excuse for dragging heels.

I'm not sure what you're saying tbh. Your first sentence doesn't make sense to me. 'another' what?. 'crises under' what?. And the 'pay off' bit, what do you mean? Because it sounds like what I've tried to explain to you.

And these things DO take time. You can't just magic large infrastructural projects out of nothing. Would you be able to go out and buy a bigger house the day you got a pay increase?

PeadarCo

Matt Barrett wrote:

I'm responding to the premise of another. We never had this bad a set of crises under, leading up to any boom when the state was doing well economically. My point is the pay off for the economy doing well need not be society suffering to an equal degree. That's all I'm saying. The idea that society must ultimately suffer for the good of the economy negates the whole point of a growing economy, which is the betterment of society.

Who said the economy has to suffer. What I don't think you understand is things are complicated. As I said if you want to sort out the housing crisis it could be done tomorrow. Now if you want to sort out the housing crisis in a sustainable way you are going to have to deal with a multitude of different legitimate interests all of them competing. The fact you think any government is going out of its way to cause the situation shows a complete lack of knowledge or understanding of the issues involved and the fundamentals of . It's very easy to shout slogans but that doesn't work for big problems.

Bringing the thread back to corporation tax its a complex area. Its a very easy topic to shout slogans but there plenty of people who spend their entire careers working on subsections alone.

Geuze

I'm not very well read on optimal taxation.

Does anybody know the optimal CT rate?

This suggests that the optimal capital taxation rate is 0%:

https://scholar.harvard.edu/files/mankiw/files/optimal_taxation_in_theory.pdf

James Brown

prawnsambo wrote: »

I'm not sure what you're saying tbh. Your first sentence doesn't make sense to me. 'another' what?. 'crises under' what?. And the 'pay off' bit, what do you mean? Because it sounds like what I've tried to explain to you.

And these things DO take time. You can't just magic large infrastructural projects out of nothing. Would you be able to go out and buy a bigger house the day you got a pay increase?

A growing economy should not mean worsening crises.

We should not take worsening crises as part of a growing economy. If that's the premise, that to me means we need work at 'changing the way we do business'.

These things take time, but they take longer when you don't start them, pay lip service to them or start them piecemeal.
Magic talk, another nonsense nobody ever suggests. What part of things taking time is only true if you actually make a start relates to magic or instant anything?

James Brown

PeadarCo wrote: »

Who said the economy has to suffer. What I don't think you understand is things are complicated. As I said if you want to sort out the housing crisis it could be done tomorrow. Now if you want to sort out the housing crisis in a sustainable way you are going to have to deal with a multitude of different legitimate interests all of them competing. The fact you think any government is going out of its way to cause the situation shows a complete lack of knowledge or understanding of the issues involved and the fundamentals of . It's very easy to shout slogans but that doesn't work for big problems.

Bringing the thread back to corporation tax its a complex area. Its a very easy topic to shout slogans but there plenty of people who spend their entire careers working on subsections alone.

No, the idea seems to be society has to suffer if the economy improves.

PeadarCo wrote: »

I assume you are referring to the housing crisis. That is caused in part by the booming economy and that house building has not kept up.

If I misunderstood, okay.
You do seem to go on to say that social issues are borne out of a growing economy.

PeadarCo wrote: »

Back in the recession there were plenty of unemployment and lots of empty houses. For anyone renting or buying it was a tenants/buyers market. The two housing crisis and employment boom are linked.

This relates to my point that in times of equal or greater economic growth we never reached the record breaking crises levels we have currently. That aside, for many years we have had a crisis in housing and looking to the private market has made matters worse. 'These things take time' won't change that and is a con if 'these things' amount to more of the same.
So how is that explained away? Would you say there's a disconnect and that a growing economy should mean society improves?

PeadarCo wrote: »

Now if you were to massively increase corporation tax you could definitely sort out the housing crisis over night. However you would face an issue with the resulting unemployment and emigration. Then again emigration is one way to reduce hospital waiting lists and housing shortages.

The impact of minor increases in the rate and changes to any reliefs available would be interesting to see though.

All I said on this was is we need look at how we do business and ensure luring corporations with favourable low tax although seeming to aid the economy, isn't making societal problems worse. Do you disagree?

prawnsambo

Matt Barrett wrote: »

A growing economy should not mean worsening crises.

We should not take worsening crises as part of a growing economy. If that's the premise, that to me means we need work at 'changing the way we do business'.

These things take time, but they take longer when you don't start them, pay lip service to them or start them piecemeal.
Magic talk, another nonsense nobody ever suggests. What part of things taking time is only true if you actually make a start relates to magic or instant anything?

You're not actually saying anything here that amounts to any kind of rational analysis or an actual proposition for a solution. It's just sloganeering. "Changing the way we do business" being a case in point.

James Brown

prawnsambo wrote: »

You're not actually saying anything here that amounts to any kind of rational analysis or an actual proposition for a solution. It's just sloganeering. "Changing the way we do business" being a case in point.

I'm paraphrasing the FG 2011 election slogan.
You are choosing to ignore my point which I've now repeated a number of times for you. A growing economy should not mean worsening crises or any crises for that matter, to record breaking levels and over a sustained period.
We should ensure what's good for business and the economy is also good for society. I feel there is a disconnect. I can see housing becoming a problem and tackling it over time, but the state has engaged in polices that have made it record breakingly bad. Suggesting this is part and parcel of a growing economy means we need 'change the way we do business' IMO and also look at corporate taxation in that regard.

prawnsambo

Matt Barrett wrote: »

I'm paraphrasing the FG 2011 election slogan.

Well you should have said that. An election slogan posted a propos of nothing is just confusing.

Matt Barrett wrote: »

You are choosing to ignore my point which I've now repeated a number of times for you. A growing economy should not mean worsening crises or any crises for that matter, to record breaking levels and over a sustained period.

No. I'm not choosing to ignore it. You left sentences unfinished and I couldn't parse their meanings as a result. I said so, which YOU ignored.

And now that you've clarified it, the answer is that the economy is growing, but directly after a sustained period of contraction/low growth and austerity. You can't just wave that away as if it never happened. We have a housing crisis as a direct result of a construction industry crash. There are still rumblings of that crisis continuing today in shortage of tradesmen, builders and other ancillary businesses.

It's not part and parcel of a growing economy, it's part and parcel of the almost complete wipe out of the industry and increased restrictions and caution in lending to both buyers and the industry.

oscarBravo

Wanderer78 wrote: »

Is a small business, a large corporation?

You didn't say "large corporations", you explicitly said "all corporations", and my limited company is a small corporation.

If you're arguing for a progressive corporation tax, make that argument. Lazy slogans like "raise corporation tax!" are chilling for business owners like me, because the people shouting the loudest are the same people who don't seem to understand exactly what it is that they are demanding.

James Brown

prawnsambo wrote: »

Well you should have said that. An election slogan posted a propos of nothing is just confusing.

Shouldn't be. We would need to change the way we do business if economic success was joined by problems for society.

prawnsambo wrote: »

No. I'm not choosing to ignore it. You left sentences unfinished and I couldn't parse their meanings as a result. I said so, which YOU ignored.

And now that you've clarified it, the answer is that the economy is growing, but directly after a sustained period of contraction/low growth and austerity. You can't just wave that away as if it never happened. We have a housing crisis as a direct result of a construction industry crash. There are still rumblings of that crisis continuing today in shortage of tradesmen, builders and other ancillary businesses.

Not related to my query regarding social problems needing to be a result of economic growth, (they shouldn't) but a reasonable explanation of why we found ourselves in a housing crisis after the last crash. Not why we've record breaking worsening crises ongoing. This all relates back to possibly looking at the economy but ignoring or paying little heed to those crises? I would suggest there's a disconnect, which is my conclusion.

prawnsambo wrote: »

It's not part and parcel of a growing economy, it's part and parcel of the almost complete wipe out of the industry and increased restrictions and caution in lending to both buyers and the industry.

Maybe initially, but we can see policies are making social matters worse not better. At this point we can't continue to blame the crash, unless the economy start rebuilding itself? My point is we need look at how economic decisions effect society not just the economic growth. If one is doing well and the other isn't we've got problems time won't solve.