More evidence low taxes didn’t create the Celtic Tiger

The Tax Justice Network has just inaugurated a new blog, Fools’ Gold. It just came out with an excellent piece on taxes and Irish economic success in the “Celtic Tiger” era, written by Nick Shaxson. As I argued in 2011 and in my book Investment Incentives and the Global Competition for Capital, Ireland had low taxes for decades with nothing to show for it, with no improvement relative to EU-15 GDP per capita in 1958-87.

The Fools’ Gold piece updates the data to 2013. Take a look at its Chart 1, which provides a great visualization of Irish income per capita, tax rates, and developments in the European Union.

Chart 1: Ireland’s GNP per capita, relative to European GNP per capita, 1955-2013. 

invisible hand

 

In addition, the chart shows the significance of EU funds flowing into the country, though it only covers the Common Agricultural Policy (CAP) monies. It does not include the Structural Funds, which Frank Barry (via Shaxson) puts at almost 3% of gross domestic product from 1989 to 1999, or about the same as the CAP. The importance of the European Union, in terms of both trade access and transfers, is hard to understate.

Unfortunately, as Shaxson writes, true believers in the low tax myth, and the architects of its tax haven policies, are still in control of Irish policy. So we have scores of billions of dollars of profits hidden in Ireland and continuing pressure to lower tax rates in the rest of the European Union, and the United States, too, despite the fact that low taxes didn’t cause Irish economic success at all.

Don’t forget to follow Fools’ Gold!

Cross-posted at Middle Class Political Economist.

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