Irish Bailout–impact on taxes uncertain
by Linda Beale
Irish Bailout–impact on taxes uncertain
crossposted with Ataxingmatter
As plans for the $100 billion bailout of the Irish economy and banking system by the European Commission, International Monetary Fund and European Central Bank continues, Ireland’s downtrodden prime minister (who will call elections after the budget is finalized) has said that it “will not” change its corporate tax haven status–its corporate tax rate of 12.5 percent will remain for now. At the same time, however, Daily Tax RealTime reports this evening comments today by Eurogroup President Juncker that discussions about Ireland’s low corporate tax scheme are ongoing, Both France and Germany would like to see Ireland raise its rate closer to the average 25% EU rate.
I have to think that Ireland has the advantage in this debate. The rest of Europe wants Ireland to take money now that Ireland needs later, in order to narrow borrowing spreads for Portugal, Spain and Greece. As is evident from this week’s events, domestic politics don’t support any IMF-based deal. While Continenta governments may feel the need to say politically useful things at home, the decision on taxes is one for Ireland to make. If Ireland were up against an immediate need to raise money, the story might be different, but the other peripherals, as I understand it, have to raise money sooner than Ireland.
I can’t help but think everytime Ireland and IMF/international loaning comes up that we’ve been there, done that. It never never seems to work out for the citizens that make up the country.
Are we seening Ireland become the first “westernized” economy to be sucked dry of its wealth by the Chicago School ideas? Isn’t this what happened to Chile, Poland, even Russia?
I would like to see an “equalization tariff” whereby for every per cent that a country exporting goods to the U.S. has a corporate tax rate below that in the U.S. that per cent of the price is added to the goods. I really do not care about trade wars this might provoke–comparitive advantage was never intended to spark a race toward the bottom in making corporations pay their fair share of the tax burden. Indeed I wish that states could do it too.
Two separate questions – Will the Irish pay for loans from outside the country, and will the Irish raise their corporate income tax? The answer to the first one is “yes”, unless Ireland defaults. The answer to the second one is uncertain, but I think Ireland has the upper hand.
The question of the “right” corporate tax rate is, from the perspective of good economic management in Ireland right now, wildly irrelevant. The adjustment to 25% tax rate from 12.5% could cost Ireland more because of foreign firms pulling up stakes than it could win in revenue. We don’t know that would happen, but the risk seems pretty big. So this is a policy that risks wrecking Ireland’s economy without saving its budget – heck of a deal.
Ken Rogoff seems pretty sure somebody is going to be doing some defaulting in Europe, and Ireland’s budget ratios make her a great candidate. So while the Irish will pay for saddling up with the IMF in the near term, they may not end up paying as much for the priviledge as some countries have.
Foreign-owned firms accounted for 91% of Ireland’s tradeable exports in 2009; Food & drink exports fell 15%
By Michael Hennigan, Founder and Editor of Finfacts
Nov 24, 2010 – 6:34:36 AM
In current price terms, exports increased from €105bn in 2000 to €151bn in 2009 but there was no net jobs growth in the sector.
The difference of €25bn between the Forfás total for 2009 and the CSO total is accounted for by tourism, transport (mainly airlines e.g Ryanair), re-exports, Irish financial institutions’ foreign earnings and some financial transactions at Dublin’s International Financial Services Centre (IFSC) not covered in the survey, including tax haven activities.
Export earnings for Irish-owned firms was €11.5bn and the earnings for the foreign sector was €114.4bn. Indigenous exports accounted for 8.7% of the total.
Services accounted for €3bn or 28.6% of indigenous exports and 5.3% of total tradeable services exports of €60bn.
Average pay per employee was 20% higher in the foreign sector than in Irish-owned firms.
full article: http://www.finfacts.ie/irishfinancenews/article_1021094.shtml
I don;t believe Ireland can withstand an IMF or IMF-type structural adjustment program — austerity will ressurect The Troubles and perhaps more.