Should corporation tax be increased ?

Kevin Doyle

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Heres another question, how much is the CT tax take worth to the exchequer
 


Guangzhoutom

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It seems to me that such a small increase in the tax rate would have little effect on employment but a bigger impact on tax avoidance vehicles operating here.
Just in relation to this, those tax-avoidance vehicles, dubious though they are, do benefit the Irish state. After all, while they are here to avoid corporation tax in their homelands, they do contribute to the Irish Exchequer funds (albeit while employing few if any workers).

So they are of benefit to the Irish economy.
 

HanleyS

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Just in relation to this, those tax-avoidance vehicles, dubious though they are, do benefit the Irish state. After all, while they are here to avoid corporation tax in their homelands, they do contribute to the Irish Exchequer funds (albeit while employing few if any workers).

So they are of benefit to the Irish economy.
Does the exchequer income warrant the focus the issue receives?
 

Guangzhoutom

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Does the exchequer income warrant the focus the issue receives?
That's a good question.

First let me put my hand up and say I have no figures, so I am only throwing out the below as discussion points.

As well as tax-dodging, one person offices for various multi-nationals, Ireland also plays host to a considerable number of genuine operations that employ a large portion of our population (again, no figures, but we all know about Intel, HP, Google, Microsoft etc.).

As Ireland has little by way of a still-functioning domestic private sector (we favoured property focussed companies over more solid industries, like software etc.) I can only assume that MNCs provide a huge chunk of non SME private sector employment.

Given that some of those SMEs are likely to be providing products or services to the MNCs, I think ensuring MNCs stay here is vital.

From my (purely and completely anecdotal) experience of speaking to people working in MNCs, it would appear corpo tax is vital. All our other advantages have been eroded - plenty of Poles now speak english, for example.

Also, I would argue that the left and the unions should be kicking up a major fuss about any raising of Corporation Tax, as if that happens, a greater focus will be put on achieving greater competitiveness in other areas - like slashing pay.

Just my 2 cents - any opposing views would be gratefully received.
 

HanleyS

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I don't believe the corporation tax rate is a major driver of employment generating FDI. A couple of per cent in tax surely pales in significance to the costs of doing business here. I think the effect of the corporation tax is more likely just a little boost to exchequer figures.
 

Guangzhoutom

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I don't believe the corporation tax rate is a major driver of employment generating FDI. A couple of per cent in tax surely pales in significance to the costs of doing business here. I think the effect of the corporation tax is more likely just a little boost to exchequer figures.
Well, I think your right that low CT won't drive FDI - i.e. we won't attract anyone new here because of the low CT alone. However, if we raise the CT rate, we stand to lose those companies already established here.

Plus, a small percentage when you are talking about billions in profits is a lot of money. And all companies seek to maximise profits. Raising the CT might just push some over the edge, and they will leave.
 

HarshBuzz

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I don't believe the corporation tax rate is a major driver of employment generating FDI. A couple of per cent in tax surely pales in significance to the costs of doing business here. I think the effect of the corporation tax is more likely just a little boost to exchequer figures.
HanleyS, in reutation of this viewpoint, I'll offer my own personal experience

I have worked in the IFSC for 14 years in various international banks. The overwhelming reason that most banks\funds etc choose to locate here is our CT rate. Our tax people undertake an annual exercise to determine the marginal effect of any increase in this tax rate - any increase in the rate would see us gone, almost literally, tomorrow. There would be no advantage to remaining in a small, overpriced country with significant infrastructural deficits otherwise.

The American Chamber of Commerce is not spoofing when they say the same thing on the FDI side.

For me, the sole and only benefit to staying out of the clutches of the EFSF is the fact that we get to hold onto our CT rate. Lose that and we are toast. Albania II, just with more debt.
 

Guangzhoutom

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HanleyS, in reutation of this viewpoint, I'll offer my own personal experience

I have worked in the IFSC for 14 years in various international banks. The overwhelming reason that most banks\funds etc choose to locate here is our CT rate. Our tax people undertake an annual exercise to determine the marginal effect of any increase in this tax rate - any increase in the rate would see us gone, almost literally, tomorrow. There would be no advantage to remaining in a small, overpriced country with significant infrastructural deficits otherwise.

The American Chamber of Commerce is not spoofing when they say the same thing on the FDI side.

For me, the sole and only benefit to staying out of the clutches of the EFSF is the fact that we get to hold onto our CT rate. Lose that and we are toast. Albania II, just with more debt.
+ 1

And before anyone starts going on about how "most of the banks in the IFSC are just empty offices for tax-dodging" my experience is predominantly with MNCs with factories/facilities here, each one employing a few hundred people.

My clients tell me, if CT goes, so do the jobs. I see no reason why they would bluff to me.
 

Kevin Doyle

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+ 1

And before anyone starts going on about how "most of the banks in the IFSC are just empty offices for tax-dodging" my experience is predominantly with MNCs with factories/facilities here, each one employing a few hundred people.

My clients tell me, if CT goes, so do the jobs. I see no reason why they would bluff to me.
`
What else would you expect them to say?

Turkeys dont vote for Christmas as they say.
 

Guangzhoutom

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`
What else would you expect them to say?

Turkeys dont vote for Christmas as they say.
True, but my point is there seems to be a debate about whether a rise in CT would hurt industry, and threaten employment.

My point is that it would (i.e. that there is a "Christmas" that the turkeys need to worry about! Some here seem to think the "Christmas" in this situation is a myth).
 

slumdog1971

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The main problem with our low CT is the revenue it is swipping from the Germans and the French.

They really don't care that much about the FDI's that have set up legitimate business here and are employing people.

They have a serious and legitimate gripe about the amount of brass plate companies that are set up here with the sole purpose of paying low CT.

Unfortunately for us, he who pays the piper calls the tune. IMO it will definately be a focus for any ESF/IMF.
 

Guangzhoutom

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The main problem with our low CT is the revenue it is swipping from the Germans and the French.

They really don't care that much about the FDI's that have set up legitimate business here and are employing people.

They have a serious and legitimate gripe about the amount of brass plate companies that are set up here with the sole purpose of paying low CT.

Unfortunately for us, he who pays the piper calls the tune. IMO it will definately be a focus for any ESF/IMF.
I suspect you are right.
 

HanleyS

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I fail to see how corporation tax is such a competitive advantage in attracting FDI when weighed against our other high costs. Unless these businesses have astronomical profit margins that is. I'm talking about real value creating activities here rather than tax avoidance.
 

bormotello

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Plus, a small percentage when you are talking about billions in profits is a lot of money. And all companies seek to maximise profits. Raising the CT might just push some over the edge, and they will leave.
What wrong with that?
The biggest problem for Ireland that it can borrow too much, because bondholders are always looking on GDP/debt ratio, not on GNP/Debt.
CT increase will have relatively small effect on GNP ( possibly 20-30%), but huge impact on GDP, which can fall by 50%.
If we want to save country from excessive spending on PS payroll bill, we need to stop borrow now and there is no better way to do then increasing CT, because then Ireland never will able to borrow for decades
 

Kevin Doyle

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True, but my point is there seems to be a debate about whether a rise in CT would hurt industry, and threaten employment.

My point is that it would (i.e. that there is a "Christmas" that the turkeys need to worry about! Some here seem to think the "Christmas" in this situation is a myth).
Nah, I think they where just doing the usual pre-decision shooting across the bow. CT is going to go up, they are just warning that it better not go too high or there will be consequences, naturally.
 

HarshBuzz

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Unfortunately for us, he who pays the piper calls the tune. IMO it will definately be a focus for any ESF/IMF.
there's definitely some truth in this

and that's why it's imperative to stay out of the hands of the EFSF
 

Old Mr Grouser

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THE DOUBLE IRISH HYBRID; IRELAND & elsewhere

The main problem with our low CT is the revenue it is swipping from the Germans and the French. .....
The Germans and the French, and everyone else as well - particularly the Yanks.

As I mentioned this on another thread a few days ago there’s a very relevant piece about this on the web at http://www.wtexecutive.com/cms/documentstorage/com.tms.cms.document.Document_secur_051507/SR051507.pdf

It’s an article in the International Securitization & Finance Report, May 15, 2007 -
Double Irish More than Doubles The Tax Savings - Hybrid Structure Reduces Irish, U.S. and Worldwide Taxation”
by Joseph B. Darby III and Kelsey Lemaster.

It explains that “Some well-known U.S. software companies have made headlines in recent years by opening “operations centers” in Ireland, i.e., Irish affiliates that offer software and related services to customers in Europe and the Middle East.

Ireland is an attractive venue for performing these functions because of the favorable interaction between the Irish corporate tax regime (with a maximum corporate tax rate of 12.5 percent on active business income) and the tax rules of the United States.”


It praises the Irish tax-regime, “Ireland has recognized that a low-tax regime on corporations will generate far more prosperity (and even more tax revenues, when you take into account well-employed Irish citizens paying personal taxes) than a high-tax regime would be likely to generate.”

However it does explain that the tax benefits are only because of:-
(1) arrangements that transfer some of the Irish profits to some off-shore tax-haven, for example Bermuda;
(2) Ireland’s relaxed attitude to that; and
(3) the tolerance of all this by the US, which could at any time stop these schemes just by changing its own tax regulations.
 
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HarshBuzz

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Nah, I think they where just doing the usual pre-decision shooting across the bow. CT is going to go up, they are just warning that it better not go too high or there will be consequences, naturally.
this is a bit different to CORI or ASTI or any other vested interest group that will be shooting their mouth of ahead of the Budget

If we had our own vibrant domestic-owned manufacturing and services sector, then maybe we could afford to gamble with CT rates. We don't. We can't.

Especially now that all the fake 'wealth' of the bubble has evaporated. FDI is all that is keeping us from being Albania. Without it, what have we got?
 


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