Gosh, this is amazing!

Second, there’s much debate on Ireland’s 12.5% tax rate, and rightly so, but the bigger issue concerning this rate was highlighted by me based in my report on the Irish Congress of Trade Unions and for the TUC entitled “Pot of Gold or Fool’s Gold?” . The reality is that due to lax rules on transfer pricing, the taxing of dividends and controlled foreign companies it does not really matter what the tax rate is in the Republic – the tax base is or will always be close to zero and as such the rate becomes almost irrelevant.

The tax base is close to zero? So they can\’t be raising any money from it then, right?

By EU standards, Ireland is a low tax jurisdiction overall, and because of the Exchequer deficit and the cost of the bank bail-out, that will have to change.  But we are not a low Corporation Tax jurisdiction.  Ireland’s Corporation Tax take as a percentage of GDP was 2.9% in 2008.  By comparison, Germany’s Corporation Tax take for the same year was only 1.1% of GDP.

So what\’s Germany\’s excuse then? What with them having a higher rate of corporation tax and all that?

5 comments on “Gosh, this is amazing!

  1. A very nicely found quotation Tim.

    This appears to be as strong proof as one could wish for that the Laffer Curve works & with a vengeance. Particulalry since the Irish economy has slightly more than doubled, compared to ours & even moreso Germany’s, since they brought in the lower CT in 1989. So that means they are getting in 6 times as much as they would had they not lowered CT.

    George Osborne take note.

  2. It’s very simple. Ireland poaches corporation tax revenues off other countries. Countries like, er, Germany.

  3. And Neil Craig, you might like to do some research on the meaning of the word “proof.” The Laffer Curve is a laughing stock among economists. Sometimes tax cuts are followed by revenue rises, sometimes (more often) they are followed by revenue falls; and the idea that tax revenues are higher overall if you steal those revenues from another country’s citizens doesn’t really work, does it. You just have to look at the right frame of reference.

  4. Perhaps then you might wish to provide some “proof” of some large number of economists “laughing” at the Lafer curve?

    The curve does not insist that at all positions on the curve a cut in the rate will lead to a rise in takings though even in the worst cases such a cut will lead to a proportionately much smaller cut in that tax – as well as to an increase in national wealth usually leading even then to an increase in takings of other taxes. Ireland has indeed been a proof of the best case.

    Your term “poaching” implies that Germany has an inherent right to insist people set up factories there. It hasn’t.

  5. No such eco0nomists? Thought not Nick.

    Assuming you are, at least to some extent honest Nick I will accept your apology.

    Or not as the case may be.

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