Ireland should trust the skills of its people, not luck

Ireland has an important choice. In the face of increasing international opposition, should it stick to its 12.5% ??corporate tax rate?Or it should match G7 protocol And set a tax rate of at least 15%, calling for the development of a tax strategy, the Deputy Prime Minister said on Wednesday that this is an “important part of the tax strategy.” [Ireland’s] Economic model”?

Low interest rates Irish corporate tax The system began in the 1980s with a 10% tax rate on manufacturing in Dublin and a special system for financial services, but it was later expanded nationwide, with a 12.5% ??corporate tax rate on all trade profits since 2003.

There is no doubt that the corporate tax system has had a huge impact. Many American companies allow themselves to be taken over by Irish companies in order to change their location for corporate tax purposes. More people have found intellectual property and other intangible assets and leased aircraft in the country to take advantage of generous tax rules.

Tax avoidance is so common now that Irish national income figures have become ridiculous. Gross domestic product is meaningless as an indicator of living standards, because the profits of foreign companies that flow to people outside of Ireland are huge and included in the statistics. The National Central Bureau of Statistics had to formulate a new measure, “Revision of gross national income“To find a more useful measure of economic performance.

However, if the Irish tax system is important to companies, whether it has always been the source of the country’s own prosperity is an even more unresolved question. For example, the timing of the rise of the Irish economy does not coincide with changes in taxation. In the first 70 years from Britain’s independence to around 1990, the revised value of Ireland’s gross national income was approximately 70% of the EU level.This Rising to the EU average In the 1990s, before the 12.5% ??tax system was implemented.

Although academic research shows that Ireland’s tax rate has always been Quite important It is far from the only reason for the country’s success in the decision-making of corporate location. Arguably more important is the investment and quality of the Irish education system, which has been a priority for the past 50 years. according to According to John FitzGerald of the Dublin Institute of Economics and Society, this “changes the educational level of the working-age population.” Many graduates also have overseas experience before returning to Ireland, which makes them attractive to international companies. Regardless of the tax rate, these are reasons for confidence in the Irish economy.

Paschal Donohoe, the Minister of Finance of Ireland, estimates that if the global agreement were to be carried out at a minimum tax rate of 15%, the country would lose one-fifth of its corporate taxes. The reason for this loss is that artificially transferring intangible assets to the country will no longer have much advantage. This will cause harm, but Ireland will not lose other selling points: an efficient economy, English, access to the EU single market and high-quality workforce.

The risk for Ireland to join efforts to terminate corporate tax avoidance is that it will find that its success since the 1990s boils down to artificially lowering tax rates in order to attract free business from abroad. But if this success is purely artificial, then it is threatened anyway. The United States can unilaterally impose the lowest global corporate tax on its companies, and the Biden administration is ready to take action.

In this case, it is in Dublin’s interest to put money on the lips, raise corporate tax rates, and trust the skills of the Irish rather than luck. Otherwise, it will reinforce the impression that, in terms of taxation, it is a pariah country seeking to steal income from its two largest allies, the United States and the European Union. For Ireland, that would be futile and dangerous.

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