EU looking at Corporation Tax

Mick Regan · 09-09-2010 12:04am #1

I remember a lot of discussion here during Lisbon 2 that EU tax harmonisation would not be forced on Ireland. Is this still the case....?

Scofflaw · 09-09-2010 1:11am

Mick Regan wrote: »

I remember a lot of discussion here during Lisbon 2 that EU tax harmonisation would not be forced on Ireland. Is this still the case....?

Just as it was during Lisbon, the answer is "depends...". It depends on whether you mean harmonising the rate of tax, or the basis of calculation of tax - specifically, in both cases, corporation tax.

The rate of tax is not within the competence of the EU to set. The Commission is, however, continuing to move forward with the idea of harmonising the basis of calculation of corporation tax.

Is this in response to the IT article about CCCTB? It's not really accurate, though:

Irish Times wrote:

The plan was first aired in 2001. Agreement proved elusive and it was withdrawn in mid-2008 in the wake of Ireland’s rejection of the Lisbon Treaty. Now, however, the commission believes the conditions are ripe for its reintroduction.

The plan was not at any point "withdrawn" - it has continued all along to be an aim of the Commission, because it evens things up within the common market, which is the job of the Commission. As to whether it will garner the necessary support this time - that's an open question. We're not the only low corporate tax EU member (we're not even the lowest), and we're certainly not the only beneficiary of the current rather lumpy playing field, so we're not likely to be alone in wishing to oppose it - which means that it's unlikely to go forward, because it only takes one country to veto it:

Irish Times wrote:

Changes to European tax policy must be unanimously endorsed by member states before they take effect so the Government could veto the plan.

Nor is it really a terribly good candidate for "enhanced cooperation", given that it's quite a fundamental change, and contentious. However, there is no way of preventing any number of other states from agreeing a common basis for calculation of corporation tax among themselves - we could agree a common basis with the UK, or the US, or Yemen, if we wanted to.

What does remain definitively the case is that Lisbon did not change the picture with respect to such a proposal, apart from raising the number of members needed for enhanced cooperation to nine rather than eight.

cordially,
Scofflaw

liammur · 09-09-2010 11:23am

http://www.rte.ie/aertel/131-01.html

Low corporation tax has advantages and disadvantages, but MNC's aren't paying enough tax imo and therefore there is a greater burden on the taxpayer. A standardised rate of maybe 20% to 25% is to be welcomed.

ei.sdraob · 09-09-2010 11:35am

liammur wrote: »

Low corporation tax has advantages and disadvantages, but MNC's aren't paying enough tax imo and therefore there is a greater burden on the taxpayer. A standardised rate of maybe 20% to 25% is to be welcomed.

You welcome the only sector in the country actually generating real wealth and employing hundreds of thousands of people packing its bags and leaving?

heres some maths for you
12.5% of something is better than 25% of nothing

low (not the lowest in EU mind you) corpo tax is the only thing going for this country

SkepticOne · 09-09-2010 11:42am

"A commission spokesman said this did not necessarily mean that corporation tax rates would change. "

This means that corporation tax rates will change.

liammur · 09-09-2010 11:42am

ei.sdraob wrote: »

You welcome the only sector in the country actually generating real wealth and employing hundreds of thousands of people packing its bags and leaving?

heres some maths for you
12.5% of something is better than 25% of nothing

low (not the lowest in EU mind you) corpo tax is the only thing going for this country

Your argument simply smacks of panic.

Banned Account · 09-09-2010 11:46am

Another one of these threads in AH.

This relates to the calculation of a common tax base - not the rate of corporation tax which cannot be legislated for by the EU without the express consent of every country.

Please can we try and understand the issues before jumping to conclusions, it makes discussion difficult otherwise.

ei.sdraob · 09-09-2010 11:47am

liammur wrote: »

Your argument simply smacks of panic.

Erm of all the bad decisions that this country has made lately
raising the corporation rate could be the dumbest one!

Its the only good thing left about doing business in this country

anyways corporation rax is charged on profits, not many companies are making much of that lately...

So in short term it would not raise much

in the medium term it would lead to companies leaving and/or closing down

in the long term it will mean even more unemployment as no one bothers to setup shop here

Welease · 09-09-2010 11:48am

liammur wrote: »

Your argument simply smacks of panic.

http://www.choosetocompete.org/pdf/Barrett_Testimony_060622.pdf

Count Dooku · 09-09-2010 11:49am

http://yestoeurope.ie/

Nino Brown · 09-09-2010 11:53am

liammur wrote: »

Your argument simply smacks of panic.

Far from it actually, Craig Barrett, former CEO of Intel recently said that when Intel originally moved to Ireland they had 9 reasons, now there is only 1 reason left, our tax rate. We used to have low construction costs, low labour costs and low power costs etc, now all we have going for us is our low tax rate.

If we give that up we're in huge trouble. I wouldn't worry about it though, there's no way our government would agree to a corporate tax rate change.

johnnyjb · 09-09-2010 11:57am

Fitzcaraldo wrote: »

Another one of these threads in AH.

This relates to the calculation of a common tax base - not the rate of corporation tax which cannot be legislated for by the EU without the express consent of every country.

Please can we try and understand the issues before jumping to conclusions, it makes discussion difficult otherwise.

Another "Another one of these threads in AH" in AH

liammur · 09-09-2010 12:22pm

ei.sdraob wrote: »

Erm of all the bad decisions that this country has made lately
raising the corporation rate could be the dumbest one!

Its the only good thing left about doing business in this country

anyways corporation rax is charged on profits, not many companies are making much of that lately...

So in short term it would not raise much

Plenty are, likes of Ryanair, Tullow oil.
We focus far too much on foreign MNC's. Why on earth would Intel leave Ireland for another EU country if the same corporation tax applied?

ei.sdraob · 09-09-2010 12:26pm

liammur wrote: »

Plenty are, likes of Ryanair, Tullow oil.
We focus far too much on foreign MNC's. Why on earth would Intel leave Ireland for another EU country if the same corporation tax applied?

if we had same tax rate as other EU countries

then we wouldn't have an advantage now would we?

so companies will start considering other factors such as competitiveness, cheap energy etc etc at which we suck

liammur · 09-09-2010 12:28pm

ei.sdraob wrote: »

if we had same tax rate as other EU countries

then we wouldn't have an advantage now would we?

so companies will start considering other factors such as competitiveness, cheap energy etc etc at which we suck

Yes, we have to up our gameplan in these areas, simple as that.

High costs + low tax rates = end in tears.

mickoneill30 · 09-09-2010 12:31pm

liammur wrote: »

Plenty are, likes of Ryanair, Tullow oil.
We focus far too much on foreign MNC's. Why on earth would Intel leave Ireland for another EU country if the same corporation tax applied?

Why on earth would they stay if the same coporate tax applied across all of Europe? Can they get cheaper labour & services anywhere else?

Nino Brown · 09-09-2010 12:33pm

liammur wrote: »

Plenty are, likes of Ryanair, Tullow oil.
We focus far too much on foreign MNC's. Why on earth would Intel leave Ireland for another EU country if the same corporation tax applied?

Cheaper labour, cheaper energy, lower construction costs, cheaper shipping, it's easier to source raw materials when you're not on an island.....etc etc, Why did Dell leave?

Count Dooku · 09-09-2010 12:35pm

liammur wrote: »

We focus far too much on foreign MNC's. Why on earth would Intel leave Ireland for another EU country if the same corporation tax applied?

To get access to cheap workforce
Why Intel shareholders must pay for greed of PS unions and FF populism?

mickoneill30 · 09-09-2010 12:35pm

liammur wrote: »

Yes, we have to up our gameplan in these areas, simple as that.

High costs + low tax rates = end in tears.

So rather than attempt to lower costs we should increase taxes?

liammur · 09-09-2010 12:35pm

mickoneill30 wrote: »

Why on earth would they stay if the same coporate tax applied across all of Europe? Can they get cheaper labour & services anywhere else?

If they can, we need pay cuts and reduce these energy costs etc.

Our tax base needs to be broadened, and by that I mean companies have to play their part. Taxpayers are being bled dry.

ei.sdraob · 09-09-2010 12:36pm

liammur wrote: »

Yes, we have to up our gameplan in these areas, simple as that.

High costs + low tax rates = end in tears.

Ah so your solution is

High costs + high taxes :rolleyes:

excellent lets ignore the elephant in the room of high costs and now ask why are they high and try do something about that

mickoneill30 · 09-09-2010 12:36pm

Count Dooku wrote: »

To get access to cheap workforce
Why Intel shareholders must pay for greed of PS unions and FF populism?

I don't understand that? Are you saying Intel employees are exploited?

Nino Brown · 09-09-2010 12:38pm

liammur wrote: »

If they can, we need pay cuts and reduce these energy costs etc.

Our tax base needs to be broadened, and by that I mean companies have to play their part. Taxpayers are being bled dry.

Are we really? I know it's popular these days to complain about taxes and governments, but I don't really have any problem with our tax burden, there's a lot of people much worse off than us in europe, taxwise.

Tora Bora · 09-09-2010 12:40pm

liammur wrote: »

Plenty are, likes of Ryanair, Tullow oil.
We focus far too much on foreign MNC's. Why on earth would Intel leave Ireland for another EU country if the same corporation tax applied?

It's really, really difficult how any sane, rational, semi-intelligent person could argue for a corporation tax increase in this country right now, or possibly for ever for that matter.
Economically speaking we have had our two legs, one arm, and a couple of fingers of the second hand severely damaged in the collapse. The few fully functioning fingers which we are using to feed ourselves, are foreign multinationals, farming / food exports, some tourism, .............. there aint a whole lot left in this place.
And you want to increase TAX on the MNC finger ............ get real here!

Cut the corp tax on the MNC's. Get more of them in here. Get the ones here to expand. Get the min wage down. Large blue chip companies, never, ever had so much cash on their balance sheets. They are looking out for opportunities to invest in better plants, facilities, means and methods to better future ROI. That is the card the government needs to play right now.
Good place to do business. Low tax. Falling labour costs. People available to man the factory floors.

liammur · 09-09-2010 12:41pm

Nino Brown wrote: »

Are we really? I know it's popular these days to complain about taxes and governments, but I don't really have any problem with our tax burden, there's a lot of people much worse off than us in europe, taxwise.

Right now, we are not. But look down the line, in a few years time when water charges, property taxes come in, income tax goes up we will be bled dry.

SkepticOne · 09-09-2010 12:42pm

Tora Bora wrote: »

Cut the corp tax on the MNC's. Get more of them in here. Get the ones here to expand. Get the min wage down. Large blue chip companies, never, ever had so much cash on their balance sheets. They are looking out for opportunities to invest in better plants, facilities, means and methods to better future ROI. That is the card the government needs to play right now.
Good place to do business. Low tax. Falling labour costs. People available to man the factory floors.

That may put us into conflict with the core EU from whom we may be looking for bailouts later.

ei.sdraob · 09-09-2010 12:45pm

SkepticOne wrote: »

That may put us into conflict with the core EU from whom we may be looking for bailouts later.

True, but our politicians could maybe try to bluff em

"Either allow us to gain competitiveness via only method we have or prepare to handover your valets"
yes i know is cheeky but what options do we have left

liammur · 09-09-2010 12:48pm

Tora Bora wrote: »

It's really, really difficult how any sane, rational, semi-intelligent person could argue for a corporation tax increase in this country right now, or possibly for ever for that matter.
Economically speaking we have had our two legs, one arm, and a couple of fingers of the second hand severely damaged in the collapse. The few fully functioning fingers which we are using to feed ourselves, are foreign multinationals, farming / food exports, some tourism, .............. there aint a whole lot left in this place.
And you want to increase TAX on the MNC finger ............ get real here!

Cut the corp tax on the MNC's. Get more of them in here. Get the ones here to expand. Get the min wage down. Large blue chip companies, never, ever had so much cash on their balance sheets. They are looking out for opportunities to invest in better plants, facilities, means and methods to better future ROI. That is the card the government needs to play right now.
Good place to do business. Low tax. Falling labour costs. People available to man the factory floors.

People need to think it through. What if every country decides to cut the corp tax to 1% ?

Nino Brown · 09-09-2010 12:56pm

liammur wrote: »

People need to think it through. What if every country decides to cut the corp tax to 1% ?

That wont happen, some countries are actually fighting this because they want to keep their corp taxes high, some countries are dependant on that revenue.

Welease · 09-09-2010 1:00pm

liammur wrote: »

Plenty are, likes of Ryanair, Tullow oil.
We focus far too much on foreign MNC's. Why on earth would Intel leave Ireland for another EU country if the same corporation tax applied?

Because, they have cheaper labour, rates, electricity, closer to markets etc etc etc etc...

The only cost we are lower on is Corp tax..

Tora Bora · 09-09-2010 1:01pm

liammur wrote: »

People need to think it through. What if every country decides to cut the corp tax to 1% ?

For example France:D Imagine the street protests, as they increase the pension age at the same time.

It's a hell of a lot longer way from 35% corp tax in some of the big european economies, than it is from ours to 1%.
It's simply impossible for many / most /all of the big economies to do this. Their whole social system is funded by corp tax.
Remember as well, that wheat the mobile MNC's need as well as low tax, is English speaking and available workers. We have both, as well as corp tax advantage.

Mick Regan · 09-09-2010 1:10pm

Hi Scofflaw,

Yes, i was referring to the IT article, and corporation tax in particular.
I find the timing of this interesting. As I understand it Ireland was the main objector to harmonisation last time round and we were in a stronger negotiating position to defend our stance (Brussels wanted the Lisbon 2 referendum, financially we were perceived as being relatively healthy etc).

Now it seems the EU has greater influence over national economic decisions, and whilst our government will obviously present themselves domestically as the decision-makers I wonder how much control they still have within the EU framework.

Is there the potential to find ourselves backed into a corner needing further EU support, in exchange for compromises in the taxation arena?

Count Dooku · 09-09-2010 1:25pm

Tora Bora wrote: »

Remember as well, that wheat the mobile MNC's need as well as low tax, is English speaking and available workers.

you forgot word affordable
Very few will take job below 25K, because majority of unemployed will be be better on dole, rather then on 18-22K

Scofflaw · 09-09-2010 1:56pm

Mick Regan wrote: »

Hi Scofflaw,

Yes, i was referring to the IT article, and corporation tax in particular.
I find the timing of this interesting. As I understand it Ireland was the main objector to harmonisation last time round and we were in a stronger negotiating position to defend our stance (Brussels wanted the Lisbon 2 referendum, financially we were perceived as being relatively healthy etc).

Now it seems the EU has greater influence over national economic decisions, and whilst our government will obviously present themselves domestically as the decision-makers I wonder how much control they still have within the EU framework.

Is there the potential to find ourselves backed into a corner needing further EU support, in exchange for compromises in the taxation arena?

It's not really a case of Ireland versus the EU on this, though. It's Ireland and a number of other countries against those countries which favour the idea, with a middle ground of those who are lukewarm. Last time I looked there were 12 in favour, 8 lukewarm, and 7 against, with the UK and Ireland the ones who reject the plan entirely.

So the question would be whether those who support the idea support it strongly enough to require Ireland's support in exchange for continued financial support, and whether that's something they can really do anyway.

To answer the second question first, it isn't really something they can do anyway, at least in any direct sense. The ECB is propping up Ireland's debts in order to prevent our failure ripping a hole in the euro, and indeed to demonstrate the solidarity of the eurozone generally, so there's no question of abandoning that support.

The first question I'd have to also answer in the negative. CCCTB has been on the table for a decade now, and at no point has there been any apparent willingness to force Ireland to abandon its opposition. I don't see that anything has changed there either.

If I were to see the leader of one of the major member states (apart from France) adopt CCCTB as the solution to all the EU's ills, then the picture would change, and one might well see strong-arm tactics - but as it is, there is no such champion, and no such risk. The raising of enhanced cooperation as the go-ahead mechanism is itself a signal that there will be no strong-arm tactics, since part of the requirement for enhanced cooperation is that the issue is one that cannot be advanced any other way.

cordially,
Scofflaw

Scofflaw · 09-09-2010 2:06pm

Two threads merged, slightly uncomfortably - one thread appears to be about CCCTB, which is on the agenda, the other appears to be discussing corporation tax rate, which is not, as far as I'm aware. I've presumed the latter is a misinterpretation of the former, perhaps incorrectly - if someone can point me to a source that says the EU has suggested harmonising corporation tax rates as opposed to CCCTB, I'll separate them again.

moderately,
Scofflaw

Theboinkmaster · 09-09-2010 2:12pm

Count Dooku wrote: »

you forgot word affordable
Very few will take job below 25K, because majority of unemployed will be be better on dole, rather then on 18-22K

The dole needs to be lowered obviously

liammur · 09-09-2010 3:32pm

Tora Bora wrote: »

Remember as well, that wheat the mobile MNC's need as well as low tax, is English speaking and available workers. We have both, as well as corp tax advantage.

That's why I believe most MNC's wouldn't leave en masse. They get enough in subsidies and IDA grants besides ridiculously low tax rates.

danbohan · 09-09-2010 3:39pm

liammur wrote: »

Your argument simply smacks of panic.

your argument simply smacks of public servant !

Tora Bora · 09-09-2010 3:43pm

liammur wrote: »

That's why I believe most MNC's wouldn't leave en masse. They get enough in subsidies and IDA grants besides ridiculously low tax rates.

The subsidies and grants are all but a thing of the past, and in any case make up a largely one time benefit.
The big carrot is corp tax. The key here, is smart use of transfer pricing!

This can create an ongoing benefit into the future. = Stability. = Just what corps want.
I know a bit about this, as I work in this area for one such MNC:)
Believe you me ................... it's why they are here first and foremost.
Secondly and not far behind, is the fact that Irish manufacturing plants, tend to be very high in terms of quality and productivity.
The tiger binge damaged the cost base, but now it is getting better again.

MNC manufacturing jobs, are real jobs, generating many more real jobs in spin off activities. Sub contractors, services, freight, etc, etc.
Plus the graduates of today needing jobs, joining these MNC's become the entrepeneurs of the future.

liammur · 09-09-2010 3:47pm

danbohan wrote: »

your argument simply smacks of public servant !

Indeed not. I feel the vast majority of our PS workers are grossly overpaid. But having a very low Corp tax can distort the wage system in an economy, and it's no coincidence that the worlds great economies don't apply it. It's the irelands, and albanias.

Tora Bora · 09-09-2010 3:54pm

liammur wrote: »

Indeed not. I feel the vast majority of our PS workers are grossly overpaid. But having a very low Corp tax can distort the wage system in an economy, and it's no coincidence that the worlds great economies don't apply it. It's the irelands, and albanias.

Explain how low corp tax, distorts wages in an economy? I do not get this.

Wages in our economy became distorted by one single fundamantal thing, loose credit! Nothing else. Loose credit, fuelling demand for property, fuelling demand for more and more workers in this sector, fuelling wage inflation. That is what wrecked our economy. Nothing else.

If we had stayed with our policy of containing costs, developing manufacturing and international traded services, we would be in fine fettle today.

liammur · 09-09-2010 4:02pm

Tora Bora wrote: »

Explain how low corp tax, distorts wages in an economy? I do not get this.

Because you have a very low tax on profits, you have more profits. The likes of Intel can easily afford to pay it's workers what they want.
More profits = higher wages. Higher wages in the private sector will inevitably drive up the wages in the public sector. Distortion in the market.

mickoneill30 · 09-09-2010 4:21pm

liammur wrote: »

Because you have a very low tax on profits, you have more profits. The likes of Intel can easily afford to pay it's workers what they want.

Just because Intel can make more profits doesn't mean they're going to pay above the market rate for their employees does it?

Intel can pay their employees what they "want" and I'm sure they "want" to pay as little as possible.

Tora Bora · 09-09-2010 4:32pm

liammur wrote: »

Because you have a very low tax on profits, you have more profits. The likes of Intel can easily afford to pay it's workers what they want.
More profits = higher wages. Higher wages in the private sector will inevitably drive up the wages in the public sector. Distortion in the market.

Sorry, but Intel or any other sucessful MNC, do not pay their employess, any more becuause of extra profit generated because of bottom line gains from the transfer price / corp tax benefit.

They pay according to market conditions (supply and demand of suitably qualified employees) and other considerations regarding plant profitability / ROI, having disregarded the transfer price / corp tax benefit.

Believe you me, the employees in Intel, and the now defunct Dell, would not be on the saleries they are / were, if the credit fuelled property boom distorted 100% of the sanity of the labour market here.

In the MNC world, you have to earn your crust, you have to be productive, you have to show up for work, sick days are recorded, followed up, managed and stopped. If not job gone. Simple.

You say you are not a PS. What are you? Did you ever work in a MNC?
I'm curious to understand your "tax the productive sector more" philosophy.

liammur · 09-09-2010 4:37pm

Tora Bora wrote: »

Sorry, but Intel or any other sucessful MNC, do not pay their employess, any more becuause of extra profit generated because of bottom line gains from the transfer price / corp tax benefit.

They pay according to market conditions (supply and demand of suitably qualified employees) and other considerations regarding plant profitability / ROI, having disregarded the transfer price / corp tax benefit.

Believe you me, the employees in Intel, and the now defunct Dell, would not be on the saleries they are / were, if the credit fuelled property boom distorted 100% of the sanity of the labour market here.

In the MNC world, you have to earn your crust, you have to be productive, you have to show up for work, sick days are recorded, followed up, managed and stopped. If not job gone. Simple.

You say you are not a PS. What are you? Did you ever work in a MNC?
I'm curious to understand your "tax the productive sector more" philosophy.

Profitable companies pay more. If you are unsure about that ask onyone in the lkes of the ESB, where they don't know what to do with their profits.
As for productivity/sick days, that's a seperate issue entirely.

mickoneill30 · 09-09-2010 4:40pm

liammur wrote: »

Profitable companies pay more. If you are unsure about that ask onyone in the lkes of the ESB, where they don't know what to do with their profits.
As for productivity/sick days, that's a seperate issue entirely.

So they pay at the upper end of the market rate to attract talent

or

They pay so much more that they can

liammur wrote: »

distort the wage system in an economy

BluePlanet · 09-09-2010 4:45pm

It's not about what Ireland wants.
It's what the EU wants.
They look at Ireland and see a tax haven, where large multinationals are not contributing.
They should be.

They want to access to the EU market, they must be prepared to pay the taxman.

Some posters here will argue against raising the Corp tax in Ireland, yet at the same time expect the EU to bail us out and continue funding projects here.

Ireland is a very player "at the heart of Europe" :rolleyes:

The EU sez jump, you have the right to say "how high?"

liammur · 09-09-2010 4:46pm

mickoneill30 wrote: »

So they pay at the upper end of the market rate to attract talent

or

They pay so much more that they can

Correct, they are operating on what would be termed 'an unfair competitive advantage'. It's a shame we don't try and concentrate on our own industries and R&D for the future.

Very, very few countries would tolerate such a flawed system.

mickoneill30 · 09-09-2010 4:47pm

BluePlanet wrote: »

Some posters here will argue against raising the Corp tax in Ireland, yet at the same time expect the EU to bail us out and continue funding projects here.

Can you quote any?

liammur · 09-09-2010 4:50pm

mickoneill30 wrote: »

Can you quote any?

The EU have given us over €40bn over the years for infrastructure, CAP , etc

Tora Bora · 09-09-2010 4:51pm

liammur wrote: »

Profitable companies pay more. If you are unsure about that ask onyone in the lkes of the ESB, where they don't know what to do with their profits.
As for productivity/sick days, that's a seperate issue entirely.

You are most confused my dear man.
The ESB is not a MNC!!!!!!!!!!!! That particular organisation is a bye product of the rotten semi state structure of the past. Do what ever you bloody like with the tax on their profits, they have no where to go!! They cannot relocated to Poland:P

Go back to your original position.
Explain your logic in upping the tax on the true MNC's in this country.

EU looking at Corporation Tax

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