Let us not understate the importance of our low CT rate

[Duke of Marmalade]

This is a kind of a side bar to the Lisbon Treaty debate. Apologies in advance for its tedium but I am on holiday and the weather is awful.

Ireland's low CT rate is the be all and end all of the Celtic Tiger (remember her)
Ireland is at the periphery of Europe and has very few natural advantages, a fishing coastline and a convenient stop-over for US troops are the only two that spring to mind. As a result Ireland has been the poor man of Europe from the famine up to the early 1990s. What has been the dominant differentiating feature of the last 15 years?

Trying to minimise the importance of the CT rate, we have sought for other more noble reasons. Like we are highly educated. Such arrogance, and anyway are we really better educated now than 20 years ago? Do we really think Intel would chose Leixlip over Luton if Irish CT was 30% and UK CT was 12.5%.

We speak the Queen's English. A bit more substance to this one, but would Intel chose Leixlip over Lyon if Irish CT was 34% and French CT was 12.5%. Again we didn't learn to speak English in the last 15 years.

The EU is oft cited as a factor in raising the Tiger but we were in the EU for the dark years of the 70s and 80s. The EU factor needed the catalyst of the low CT rate to really bloom.

Thank you both Charlies for Ireland's greatest artificial asset which has more than offset our deficiency in natural assets.

Let this penny drop and I leave you with two corollaries.

1) We do not want Barack Obama as president of the US. In recessionary America CT piracy will be a soft target for any Democrat and it will not matter a jot to BO that he will be plunging Ireland back 30 years. This is the Brendan Keenan argument.

2) To be sure we are not guaranteed this concession in Europe and there are already those rumbling against it. Rejection of Lisbon would be gris to their mill. In short, Lisbon is the best prospect for the longevity of our favourable CT status and this is an overwhelming reason for voting Yes. Now do you understand why Bertie says voting for the status quo would be a disaster for Ireland?

 

[GeneralZod]

All good points. It has an unfortunate corollary for those Irish that naturally seem to support the democrats; John McCain is best for the Irish economy based on his support for a lower US corporate tax rate instead of targeting the shifting of profits to low tax economies.

 

[ubiquitous]

It has an unfortunate corollary for those Irish that naturally seem to support the democrats.

I think this tendency or perception has as much to do with the left, liberal bias of the "official Ireland" media as anything else.

 

[polaris]

2) To be sure we are not guaranteed this concession in Europe and there are already those rumbling against it. Rejection of Lisbon would be gris to their mill. In short, Lisbon is the best prospect for the longevity of our favourable CT status and this is an overwhelming reason for voting Yes. Now do you understand why Bertie says voting for the status quo would be a disaster for Ireland?

Kevin Myer's in his article in the Indo argues that the Lisbon Treaty allows the EU revoke our favourable CT status:

"And I than Anthony Coughlan for pointing out the following provision to me: "The Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market and to avoid distortion of competition."

No wonder the public are so confused by this treaty.

 

[GeneralZod]

That says it must be unanimous.

The Irish Government member at least on the Council will not agree, ergo it will not be unanimous.

 

[ubiquitous]

That says it must be unanimous.

The Irish Government member at least on the Council will not agree, ergo it will not be unanimous.

Why is this measure in the treaty then?

One could just as easily argue that the Council has acted unanimously by adopting the treaty in the first instance.

 

[Duke of Marmalade]

Kevin Myer's in his article in the Indo argues that the Lisbon Treaty allows the EU revoke our favourable CT status:

"And I thank Anthony Coughlan for pointing out the following provision to me: "The Council shall, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, adopt provisions for the harmonisation of legislation concerning turnover taxes, excise duties and other forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market and to avoid distortion of competition."

No wonder the public are so confused by this treaty.

Kevin Myers should stick to single mothers and leave economics to Brendan Keenan. BK in the same paper points out the very clear ommission in this clause of direct taxes. CT is a direct tax and not any of the taxes mentioned in this Article.

 

[polaris]

Thanks for the clarification, Harchibald.

With all the misrepresentations (in most cases, deliberate) of the treaty being put forward by those opposing this treaty, it's no wonder people are confused.

 

[ubiquitous]

Kevin Myers should stick to single mothers and leave economics to Brendan Keenan. BK in the same paper points out the very clear ommission in this clause of direct taxes. CT is a direct tax and not any of the taxes mentioned in this Article.

I greatly admired Keenan's article and indeed linked it here earlier today. That said, I still think that the wording quoted above is very loose. I'm not sure how one can achieve harmonisation of indirect taxes across the entire EU without affecting the various mechanisms and systems for direct taxes in member states.

 

[Duke of Marmalade]

I greatly admired Keenan's article and indeed linked it here earlier today. That said, I still think that the wording quoted above is very loose. I'm not sure how one can achieve harmonisation of indirect taxes across the entire EU without affecting the various mechanisms and systems for direct taxes in member states.

Ubi, I picked up BK's article from your helpful link. BK did go on to mention the linkage between direct taxation and indirect taxation. If Ireland is required e.g. to reduce VRT (please, please) something has to give but it does not have to be CT, it would probably be personal income tax.

I like BK myself but I got a bit lost in this particular article which seemed to be straining highlighting paradoxes and anomalies which we had all missed.

There is also GeneralZod's unanimity point.

 

[GeneralZod]

Why is this measure in the treaty then?

One could just as easily argue that the Council has acted unanimously by adopting the treaty in the first instance.

I'd imagine it was a sop to the tax harmonisation crowd during the negotiations which was conceded because there's a snowball's chance of it being unanimous.

Polaris's point about people being confused by it is well made.

 

[Complainer]

Don't some of the Baltic countries already undercut Ireland on CT? I suppose it is inevitable when you start the race to the bottom that someone else is going to beat you to it.

 

[BillK]

Am I the only one concerned that the Council has only to consult the Parliament i.e. is not bound by the decision of the people elected by the citizens?

 

[Purple]

Don't some of the Baltic countries already undercut Ireland on CT? I suppose it is inevitable when you start the race to the bottom that someone else is going to beat you to it.

What is a race to the bottom? Does it imply in this context that low taxes are a bad thing? I know in Union Land it stands for opposition to open markets in the EU and affording new EU entrants the same access to labour markets that we were afforded upon joining. Personally I do not think that moving towards equality is a race to the bottom. And before anyone accuses me of being a capitalist pig (or whatever) I doubt that there is another poster on AAM who would benefit more from the sort of protectionism that those in Union Land want.
Anyway, back on topic, Harchibald is completely correct; our economic success over the last 15 years is down to CGT cuts and all of the tax we stole from the Americans, Germans, French etc and not much else.

 

[michaelm]

Anyway, back on topic, Harchibald is completely correct; our economic success over the last 15 years is down to CGT cuts and all of the tax we stole from the Americans, Germans, French etc and not much else.

I agree with the above statement but must differ on the claim that that supporting Lisbon is the way to protect our control over CT. If the EU courts deem our CT to be uncompetitive then me may be forced to increase same, veto notwithstanding.

 

[Purple]

I agree with the above statement but must differ on the claim that that supporting Lisbon is the way to protect our control over CT. If the EU courts deem our CT to be uncompetitive then me may be forced to increase same, veto notwithstanding.

Not true but nothing in Lisbon (or any other treaty) stops countries within the EU from enacting multilateral agreements, which impose corporation tax in the country where the goods or services are consumed. Our only option if this happens is to take a case to the European Court claiming that such agreements are in breach of single market legislation. This may or may not succeed. In order to stop such a situation arising we have to use our political capital (for want of a better phrase). A no vote for Lisbon would weaken our position as good EU members. Those Irish politicians from all parties who play the game in the EU know how things work and they are all* pressing for a yes vote.

* the exceptions are the same ones who are against all EU treaties.

 

[ubiquitous]

In order to stop such a situation arising we have to use our political capital (for want of a better phrase). A no vote for Lisbon would weaken our position as good EU members.

Did the previous No votes against the EU constitution in France and the Netherlands weaken these countries position as good EU members?

 

[Purple]

Did the previous No votes against the EU constitution in France and the Netherlands weaken these countries position as good EU members?

They are bigger and didn't build their economy by harvesting tax from other EU members.

 

[Complainer]

What is a race to the bottom?

I thought it was fairly obvious, but perhaps not. In this context, the race to the bottom is where one country (Ireland) thinks it has a strategic advantage by setting a lower tax rate, and then (not surprisingly) other countries follow suit (Cyprus, Montenegro, parts of Bosnia). Eventually, as happened in parts of the US, countries are falling over themselves to compete with each other and end up with zero corporate tax income (check out corporate tax rates for Nevada and Delaware).

The corporates struggle to keep a straight face as they stiff a series of Governments in succession. That's the race to the bottom, and we started it.

 

[Purple]

The corporates struggle to keep a straight face as they stiff a series of Governments in succession. That's the race to the bottom, and we started it.

And since we started it our corporation tax take has gone up and our economy has taken off. Are you saying that we should now take a moralistic stance and try to stop the next poor guy into the club from playing by our rules or should we increase it and try to get back to the good old days of the 1980's?
By the way countries and cities have used tax rates to attract investment and capital for hundreds(maybe thousands) of years; we didn’t invent it.