Companies always pay close attention to corporate tax. Legally minimize the overall tax burden can maximize shareholder returns and these is what most companies eager for. A few countries’ corporate taxes are very low, such as Cayman Islands, Cyprus, and Ireland. These countries, for example, Ireland, has attractive many multinational companies. Many US companies have set up subsidiaries in Ireland and this have create many jobs for Irish.
Recently, due to the gloomy banking landscape, Irish government has to accept the assist from EU/IMF. EU/IMF programme is demanding €3.7bn of tax increases between 2011 and 2014. And almost all European countries especially France and Germany are discussing about the Ireland corporate tax and give pressure to Ireland government to increase the corporate tax.
Although Ireland government is under tension, it insists that the 12.5% corporate tax won’t be changed. Low corporate tax can attract foreign direct investment (FDI) and this is also a part of their economic development strategy. To fulfil the requirement of EU/IMF programme, Ireland government may add other taxes such as VAT, property tax instead of corporate tax.
Now the Irish government is negotiating with the EU/IMF in order to lower the interest rate on the loan. EU/IMF may ask Ireland to make concessions about the corporate tax. But in Ireland, many think preserving the unique corporation tax policy is more important than lowering the interest rate of the bailout package. Indeed, the low corporate tax has not decreased the tax revenue. According to PwC ( the largest professional services firm in Ireland provides integrated Audit, Tax and Advisory services across all industries in Ireland and internationally), as a% of GDP, Ireland’s corporate tax revenue is relatively higher than EU standards (2.9% in 2008, in contrast to Germany at 1.1% and an EU average of 2.7%). (http://www.pwc.)
In my opinion, increasing corporate tax will cause negative effect on countries. The FDI investment will decrease; a lot of people will lose their jobs and affect the economic stability. The 12.5% corporate tax strengthen Ireland’s international competitiveness and stability. That’s why Ireland government defends the corporate tax policy.
Subscribe to:
Post Comments (Atom)
I agree with the negative impacts the tax rise will have on the Irish economy, especially in a time when they are trying to recovery not regress.
ReplyDeleteBut do you think it's fair for the corporation tax to be low? Especially with the tax rate of Northern Ireland being so much higher, some could say a unfair competitive advantage?
As part of the EU is it justified for Ireland to have keep a lower tax rate, when other countries are also in such need?
I do believe your right to think they should maintain their low tax rate, especially after the recent bailout, their economy seems to need a lot more help than others, but its hard to prioritise who needs most help. Especially in a recession.
Thank you for Kelly's questions. In fact, compare with other non-europ countries, Ireland's corporate tax is not the lowest. But it still has attracted many companies from US and other non-eurozone locations. are this also benefit the European Union? and if the corporate tax is increased or to say, as the same level of other Europe countries, then it can't compete with other non europe countries. And will these multinational companies still want to stay in Ireland, or move to other countries? If this happen, will this also damage the economic market of European Union?
ReplyDeleteAlso, the 12.5% tax rate has been corfirmed that in compliance with the EU CODE OF Conduct on harmful tax practices. In the end, there are also the EU Commissioner Semeta has admitted that' tax competition is part of the EU Single Market.'
what is more important do you think? Minimizing the tax burden to maximize the wealth of shareholders or take the social responsibility to pay the tax to your country?
ReplyDeleteLaura: Why not both? Only if the corporate tax in one country is to high, and if I have a company and I have sufficient funds, then I would like to set up my subsidiaries in other low tax countries to lower our corporate tax burden.
ReplyDelete