# Is it time to give in and allow Corporate Tax rate to be increased



## Mpsox (11 Mar 2011)

The Irish Corporate Tax rate has become a Holy Grail in Ireland, it can't be touched because if it were to be increased, we'd all be doomed (or so the media and politicians have us believe. Is this a correct view?

Tax after all, is a cost to a business. As someone who works for a multinational, I know if the rate was raised, I'd be expected to try and find savings elsewhere to compensate, and the obvious area would be staffing, with either paycuts or redundancies. Not good news for the staff affected, but as a nation, would it be a price worth paying if the result was a significantly better deal from the IMF?

If you take tax as a cost, could the 12.5% rate be raised and that increase offset by savings elsewhere from the Govt, eg, tax credits against future local council rates increases for a number of years or a reduction in employers PRSI.? I don't think Merkel or Sarkosy actually care about the tax take implications of raising CRT and how it is delivered in Ireland, as long as it is delivered. They need to be seen internally and politically to be delivering something for all the money they are putting forward in bailouts to countries like ourselves.

If it were to be raised, we may lose some domicilled companies here, but again, would that be a bad thing if the bailout deal was better.?

I don't know what the answer to this question is, I'm really playing devils advocate here and wondering what people think


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## 44brendan (11 Mar 2011)

Irish Corporation Tax is a "one size fits all" rate. french CT on the other hand is more complex with a high notional rate but in many cases a much lower "effective" rate to some key companies. Commentators have indicated that many of the multinationals prefer the Irish rate due to the clarity and certainty. However as far as I am aware there is no reason why the system cannot be changed to a tiered one where different sector rates could apply or where the Gov could agree a discount rate for a period for multi nationals. I agree that this "sacred Cow" needs to be tested further rather than regarding it as something that we should sell our souls for.


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## Purple (11 Mar 2011)

The French have no credibility in this area and Sarkozy has a cheek complaining about our rate. 25% of the companies listed on the French CAC pay no corporation tax at all while the effective rate for the rest of them is 8%. 

Even the Germans have jumped on the bandwagon with Angela Merkel telling lies about how our low corporation tax rate contributed to our current economic woes. She’s not stupid and it’s a hot topic so I’m sure she knows that a low CT rate has been in place for decades. 
I didn’t expect anything better from that little French weasel but I was disappointed with her comments.

If our CT rate is to be increased then we should abolish business rates in a revenue neutral way thus shifting the tax burden from struggling the SME sector to the more profitable MNC sector. The problem is that so many SME companies depend on the multinational sector for business.


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## 44brendan (11 Mar 2011)

Always sounds good that the "fat cats" should pay more tax. Unfortunately the "fat cats" including the MN's are far more mobile than the rest.In theory Joe Higgins has the right solution but if you impose too severe a burden on the rich they will all leave. As you say we all have a high dependancy on these MN's and the other "Rich" so that is why the Socialist system only works in theory


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## Firefly (11 Mar 2011)

My line to Enda...There's nothing stopping Germany reducing their corporation tax rates!


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## DerKaiser (11 Mar 2011)

Mpsox said:


> The Irish Corporate Tax rate has become a Holy Grail in Ireland, it can't be touched because if it were to be increased, we'd all be doomed (or so the media and politicians have us believe. Is this a correct view?


 
Yes.  We can choose to completely destroy our economy on the faint hope we can bum cash off the EU for the next 100 years or we can at least retain the one credible jobs stimulus we have.

If we stick to our guns we might even start to become a more attractive place for multinationals to set up if we continue to address the costs of doing business here, lower wages, lower rents, etc.

If we throw away a few hundred thousand more jobs by becoming a high tax economy we'll be screwed as an economy for generations.

We may have a large debt at the moment but at least we still have 1.8m people at work.  

Our debts might be sorted with a bit of inflation, a structured default or some form of europewide banking rescue. The debt isn't something that's guaranteed to cripple us for generations.  In fact, if you add debts to public sector pension liabilities, germany is in a far worse situation than us because we are a youngish economy.

No point in selling out the country forever due to short term panic.  Germany and the EU won't be the task masters forever.


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## Howitzer (11 Mar 2011)

Last year Barclays Bank paid approximately 1% of it's profits in Corporation Tax. The UK has a Corporation Tax rate of 35%.

If we raised our Corporation tax rate to 20, 30 or even 40% what real rate do you think the major multinationals based here would pay? I would say more or less the same as what they currently pay.

This is a complete red herring.


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## Chris (14 Mar 2011)

First of all I think that the whole idea of renegotiating the interest rate on the EU/IMF bailout is futile. Whether we pay 5.8% or 4.8% will make very little difference to the fact that a predicted €200bn debt level by 2014 is totally unmanageable.

This rhetoric of coming from Europe about Ireland's "anti-competitive" corporation tax rate is total and utter economic nonsense used solely for political purposes. Undercutting your competition with lower prices is the very idea of being competitive.

I fully agree with Firefly's comment, if these countries want to improve the competitive environment, then they should just go ahead and lower their own tax rates to compete with Ireland, that is what competition is all about.

What I think Ireland should do is actually lower the corporate tax rate over a period of say 4 years to exactly 0%. The whole idea of taxing a corporation makes no sense whatsoever when you look at the effects on a company and the economy as a whole. Corporation tax has the effect of lowering the profitability of a company. This results in lower wages for the workers, higher prices for customers, less income to the owners, less money to reinvest in the business. It is not the corporation that is taxed, but rather the owners, workers and customers; the corporation is merely an abstract.


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## csirl (14 Mar 2011)

I just cant understand why our Government isnt pointing out that the cause of this problem is that German and French pension fund managers invested in high risk/high return ventures which failed.

People talk about lack of regulation in Ireland etc. etc., but even if our regulation was perfect, would it have made any difference? People are entitled to invest in high risk ventures if they wish. The profits that Anglo were promising in return for investments were just too much to resist for greedy German and French pension fund managers. Then to make things worse, the ECB decided to lend loads of money to Anglo, even though the Irish Government recommended against it (the NTMA would not even put money on deposit in Anglo because it was too risky). This is the fault of the ECB for chosing to ignore our advice. We, as Eurozone members, should be insisting on the resignation of Trichet and any other senior figures involved in this lending spree for their stupidity. 

In short, we should not be paying for the greed and stupidity of others.


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## Ancutza (14 Mar 2011)

Rock on Chris.  I totally agree with you.


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## Firefly (15 Mar 2011)

I agree too. It's the first thing I thought of when we were being bailed out and there was a mention of our corp tax...we should have the b@lls to drop it to 10% immediately.


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## Purple (15 Mar 2011)

Hi Csirl,
Who are the French fund managers and how much did they invest?


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## csirl (15 Mar 2011)

Purple said:


> Hi Csirl,
> Who are the French fund managers and how much did they invest?


 
List of all the bond holders is available on various websites e.g.

http://www.sovereignindependent.com/?p=11046

None are Irish.


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## Sunny (15 Mar 2011)

csirl said:


> List of all the bond holders is available on various websites e.g.
> 
> http://www.sovereignindependent.com/?p=11046
> 
> None are Irish.


 
It's not a list of all the bondholders. It's a list of funds who publically reveal their holdings and the holdings that each fund held would be very small.


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## Purple (15 Mar 2011)

I thought that French pensions were almost all publically funded (from current expenditure) and therefore there were few if any French fund managers.


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