European Common Corporate Tax Base

johnnyq

So what are your opinions on this issue?

The European Commission outline its proposals on this controversial topic here.

Personally I don't think it's a good idea and will undermine Irish Industry and will lead to job loses.

However, apparently it's on the way whether we like it or not.

"The key is that we have to be aware that the CCCTB can come
into existence regardless of Irish objections, and we have to prepare for it.”

How does voting in the Lisbon Treaty affect this proposal? Will enhanced cooperation proposed under the treaty bring it in or is it already here?

Any thoughts?

Scofflaw

johnnyq wrote: »

So what are your opinions on this issue?

The European Commission outline its proposals on this controversial topic here.

Personally I don't think it's a good idea and will undermine Irish Industry and will lead to job loses.

However, apparently it's on the way whether we like it or not.



How does voting in the Lisbon Treaty affect this proposal? Will enhanced cooperation proposed under the treaty bring it in or is it already here?

Any thoughts?

Quite a few, starting with some unkind ones about your rather snide raising of this red herring.

First, Lisbon does not impact CCCTB. It makes no changes to the competence of the EU in respect of direct taxation, which is zero. It makes no changes in the enhanced cooperation provisions that could lead to CCCTB. The Referendum Commission has stated as much, as have tax authorities. ECJ rulings have all determined that the EU has no rights or powers over fiscal measures.

Second, CCCTB is not "coming whether we like it or not". The French have been pushing tax harmonisation for 30 years, and it's still nowhere, because it is opposed by Ireland and several other countries.

Third, the very fact that Ireland has full sovereignty over its direct taxation rates, policies, and mechanisms means that all the other member states do too. Nobody can stop a group of EU countries from putting together whatever joint arrangement they like, because direct taxes such as corporation tax are a fully internal matter, and have nothing to do with the Lisbon Treaty.

But please, don't let the truth stop you. Spin on.

regards,
Scofflaw

johnnyq

Scofflaw wrote: »

Second, CCCTB is not "coming whether we like it or not".

Why does a tax expert in this article say the exact opposite?

Scofflaw wrote:

Third, the very fact that Ireland has full sovereignty over its direct taxation rates, policies, and mechanisms

But this isn't true. How otherwise could the ECJ intervene in Finnish direct taxation law concerning pensions and other member states. See here. To say the the EU/ECJ can and will not intervene in this area is wrong.

PHB

I don't believe in harmonisation of any tax rates, and I can't see France getting this through at all. Even if it went through, the national parliament has a veto over it.

Scofflaw

johnnyq wrote: »

Why does a tax expert in this article say the exact opposite?

Because she doesn't, unfortunately for your argument. What she says is:

This would clearly be bad news for Ireland if it were to come about. But we still have our veto.

However, there is also the concept of advanced cooperation. This means that a group of member states can decide to get together and implement this in their own countries and the rest of the 27 member states have to go along with it and co-operate.

And

“This is something Ireland will have to scrutinise very closely to make sure we are not adversely affected.”

So what can we do about it?

According to O’Connor, there is a number of things that need to be done as a matter of urgency.

Not at any point does she say that Lisbon makes this more likely, or that CCCTB is inevitable. CCCTB is not inevitable - the Irish government has been fighting it for several years, as have others.

johnnyq wrote: »

But this isn't true. How otherwise could the ECJ intervene in Finnish direct taxation law concerning pensions and other member states. See here. To say the the EU/ECJ can and will not intervene in this area is wrong.

Cough..."the European Court of Justice decision in Cadbury-Schweppes (C-196/04) has forced Finland, like many European countries, to re-think legislation concerning the taxation of shareholders in controlled foreign companies."

Now, I hope you don't mind if I quote from this Sunday Business Post article, since it's clear your rely on people not reading the links:

Governments are understandably loath to surrender any further the fiscal controls they apply domestically. For many EU member states, monetary policy has already passed to the European Central Bank. Tax policy remains the key tool available for domestic economic regulation. This understandable reluctance may remain the most durable source of opposition to EU interventions in the tax arena.

So the Lisbon Treaty doesn’t even try. It leaves direct taxes within the control of individual member states.

Against this backdrop, where does the notion of a common EU tax system for companies fit in? The European Commission has been working for several years on a framework tax system called the Common Consolidated Corporate Tax Base (CCCTB).This project predates the Lisbon Treaty - in fact, it even predates the Nice Treaty - and exists independently of the Lisbon Treaty.

The European Commission is seriously up against it as it seeks to change corporation taxes under its CCCTB framework. Its motivation - the need to promote the concept of a single market with a single tax approach - has been largely hijacked by the activities of the European Court of Justice (ECJ).

In recent times, the ECJ has been particularly active in ensuring that member state tax rules comply with the broader precepts of EU agreements, such as the freedom to set up business in whichever member state a company wishes. The ECJ has also ensured that the tax rules of one member state do not interfere with those of another member state.

Nevertheless, the commission marches on. It is only at this point that a discussion on the Lisbon Treaty becomes in any way relevant to a discussion on the CCCTB, which concerns structures and administration. So does the Lisbon Treaty. Ireland has always dealt best with European initiatives when we do what we have traditionally done: play within the EU team.

The fact is that Ireland cannot be forced into the CCCTB. It is too easy to ascribe a direct relationship between the Lisbon Treaty and the CCCTB. The claim that to vote for one entails the introduction of the other is lazy thinking: the relationship between the two is far more complex.

However, our capacity to contain and manage the consequences of the CCCTB initiative could be significantly hindered if we reject Lisbon.

regards,
Scofflaw

leninbenjamin

if one believes the assumptions that are behind the entire common market ideal harmonisation of taxes are necessary to the full functioning of the market. I personally think in the long run we will see some movement towards this, most likely in the form of a tax floor to prevent the 'race to the bottom' scenario. At the moment something like this would completely screw with our economy, but with the right institutional changes i believe it could be for the better. even the burden somewhat between the individuals and the corporations.

johnnyq

PHB wrote: »

I don't believe in harmonisation of any tax rates, and I can't see France getting this through at all. Even if it went through, the national parliament has a veto over it.

This is the tax base we're talking about not the rate. Sure what does the rate matter if less money can be taxed under it.

Scofflaw wrote:

Not at any point does she say that Lisbon makes this more likely, or that CCCTB is inevitable.

I never said that the article says that lisbon makes this more likely. So thanks for stating the obvious

Scofflaw wrote:

CCCTB is not inevitable - the Irish government has been fighting it for several years, as have others

And yet why does the tax expert conclude:

link wrote:

"The key is that we have to be aware that the CCCTB can come
into existence regardless of Irish objections, and we have to prepare for it.”

Scofflaw wrote:

Cough..."the European Court of Justice decision ... the taxation of shareholders in controlled foreign companies

Hello Scofflaw!!! This is direct taxation we are talking about here!!!
You said that the EU has no competence in this area. That decision says otherwise.

Your article also states that the ECJ can interfere with direct taxation policy:

SBP Article wrote:

In recent times, the ECJ has been particularly active in ensuring that member state tax rules comply with the broader precepts of EU agreements, such as the freedom to set up business in whichever member state a company wishes. The ECJ has also ensured that the tax rules of one member state do not interfere with those of another member state.

This quote is interesting:

SBP Article wrote:

However, our capacity to contain and manage the consequences of the CCCTB initiative could be significantly hindered if we reject Lisbon.

Scenario 1: Reject Lisbon
Ireland keeps existing veto which has prevented CCCTB for the 30 yrs up to now.

Scenario 2: Accept Lisbon
Supposedly, Ireland keeps existing veto which has prevented CCCTB. No change.

How can rejecting the treaty significently hinder Ireland's resistence to the CCCTB on the one hand and the treaty have nothing to do with it on the other hand?
Could this just be scaremongering I wonder?
Otherwise, are you suggesting that a reduced veto will be outweighed by positive 'pats on the back' from Europe?
We either have a veto or we don't.

Scofflaw wrote:

it's clear your rely on people not reading the links

I think you rely on people not reading your posts tbh!! :pac:

To repeat, slowly, my two cents:
1) The EU/ECJ does readily interfere with direct taxation
2) CCCTB can be brought in regardless of Ireland
The consequences of this are left to your imagination.

Scofflaw

I never said that the article says that lisbon makes this more likely. So thanks for stating the obvious

Scenario 1: Reject Lisbon
Ireland keeps existing veto which has prevented CCCTB for the 30 yrs up to now.

Scenario 2: Accept Lisbon
Supposedly, Ireland keeps existing veto which has prevented CCCTB. No change.

So, in brief, you accept that the Lisbon Treaty has no impact on this? Even though you choose to phrase it as if this was somehow doubtful?

The consequences of this are left to your imagination.

If the Lisbon Treaty makes no changes that impact CCCTB, why make out as if it does? Surely you're not simply engaging in scaremongering?

regards,
Scofflaw

johnnyq

Scofflaw wrote: »

So, in brief, you accept that the Lisbon Treaty has no impact on this? Even though you choose to phrase it as if this was somehow doubtful? Are you, perchance, simply scaremongering?

regards,
Scofflaw

I don't know, Scofflaw. If the treaty gets passed i'll jump forward a few decades and come back to tell you the answer.

What I do know however, is that up to now, what cards Ireland does have, has prevented this proposal from coming into being.

I guess my big question is whether the treaty brings in Enhanced co-operation procedures which allow this proposal to be brought in via the back door? The consequences of which were potentially outlined in the article I linked to.

Now, perhaps these procedures already exist? Can you potentially enlighten me?

Feel free to address the actual content of this thread when ready.

Scofflaw

johnnyq wrote: »

I don't know, Scofflaw. If the treaty gets passed i'll jump forward a few decades and come back to tell you the answer.

What I do know however, is that up to now, what cards Ireland does have, has prevented this proposal from coming into being.

I guess my big question is whether the treaty brings in Enhanced co-operation procedures which allow this proposal to be brought in via the back door? The consequences of which were potentially outlined in the article I linked to.

You're aware, presumably, that enhanced cooperation already exists? That it's not brought in by Lisbon?

johnnyq wrote: »

Now, perhaps these procedures already exist? Can you potentially enlighten me?

Feel free to address the actual content of this thread when ready.

There is no content, though, as far as I can see. You appear to be simply speculating that unspecified "enhanced cooperation procedures" brought in by Lisbon might allow CCCTB to be "brought in by the back door".

What procedures? We can discuss what Lisbon "might" bring in until we're both dying of RSI, but in the absence of you pointing out what new procedures in Lisbon you think "might allow CCCTB", there's no actual content - just you speculating. You could equally well claim that the Lisbon Treaty might be an addendum to the Bible, or a secret map to the lizard-people's lair, if you're not going to provide anything but a couple of sort-of articles that sound like they might have something vaguely to do with it.

regards,
Scofflaw

johnnyq

Scofflaw wrote: »

I never said that the article says that lisbon makes this more likely. So thanks for stating the obvious

Scenario 1: Reject Lisbon
Ireland keeps existing veto which has prevented CCCTB for the 30 yrs up to now.

Scenario 2: Accept Lisbon
Supposedly, Ireland keeps existing veto which has prevented CCCTB. No change.

So, in brief, you accept that the Lisbon Treaty has no impact on this? Even though you choose to phrase it as if this was somehow doubtful?

The consequences of this are left to your imagination.

If the Lisbon Treaty makes no changes that impact CCCTB, why make out as if it does? Surely you're not simply engaging in scaremongering?

regards,
Scofflaw

Grrr. I replied before you substantially edited your post.

Firstly, to address your misleading quote at the top of the edit. I said that the article never mentioned what impact the lisbon treaty would have on the CCCTB. So the question as to the writers opinion on this has not been disclosed. Maybe it does, maybe it doesn't, the article never stated. Nor was it my intention to link the article for that purpose as you make out, it was to highlight the consequence of the proposal and Ireland's inability to do anything about it.

Next, the second set of quotes referred to the article which you Scofflaw linked to (and which you highlighted I may add :pac:) which linked the Lisbon Treaty to the CCCTB proposal. You brought this up, not me!!!

I responded to highlight how the YES side can't have it both ways. It's up to you to defend why the treaty has no effect on the CCCTB. But I cannot ignore that you additionally claim that a NO vote can have a negative impact at the same time. I await your clarrification.

Finally, about the consequences of the CCCTB proposal. Those consequences still stand - independently of the whether the treaty affects the proposal - and need to be explored.

johnnyq

Scofflaw wrote: »

You're aware, presumably, that enhanced cooperation already exists? That it's not brought in by Lisbon?

Excellent! I did not know this. Pity it took this long to clarify.

scofflaw wrote:

There is no content, though, as far as I can see.

Well, that whole Lisbon tangent you went on must have clouded your vision

To repeat, slowly, the questions for discussion are:
1) The EU/ECJ does readily interfere with direct taxation
2) CCCTB can be brought in regardless of Ireland
3) The consequences of this

I am pie

Your point 2 - "can be brought in regardless of Ireland"

Do you mean imposed on Ireland, or can be established like the Eurozone with the option to participate or not, as per the UK ? If anything it is the latter, a coaltion led by the French will form an over regulated uncompetitive tax base and those outside that particular pale may benefit, they may not.

Scofflaw

johnnyq wrote: »

Excellent! I did not know this. Pity it took this long to clarify.

Really? Sure. Glad to have helped you in your quest for clarity.

johnnyq wrote: »

Well, that whole Lisbon tangent you went on must have clouded your vision

To repeat, slowly, the questions for discussion are:
1) The EU/ECJ does readily interfere with direct taxation
2) CCCTB can be brought in regardless of Ireland
3) The consequences of this

Dear me. Your first post must have confused me:

johnnyq wrote:

How does voting in the Lisbon Treaty affect this proposal? Will enhanced cooperation proposed under the treaty bring it in or is it already here?

The one at the top of the page. It looked awfully like you were linking the proposal with Lisbon. But perhaps English isn't your first language?

amused,
Scofflaw

johnnyq

Scofflaw wrote: »

How does voting in the Lisbon Treaty affect this proposal? Will enhanced cooperation proposed under the treaty bring it in or is it already here?

amused,
Scofflaw

It was a question, you gave your answer and i am eternally grateful for your everlasting patience.

So, back on topic, How best is it for Ireland to respond to the CCCTB when it is brought in? *not by the Lisbon treaty;) - but by enhanced cooperation*

I am still waiting your reply as to why voting no in Lisbon damages Ireland's ability to reject CCCTB and still the Lisbon treaty you say does not affect Ireland's veto?

Your point 2 - "can be brought in regardless of Ireland"

Do you mean imposed on Ireland, or can be established like the Eurozone with the option to participate or not, as per the UK ? If anything it is the latter, a coaltion led by the French will form an over regulated uncompetitive tax base and those outside that particular pale may benefit, they may not.

Well the tax expert said that enhanced cooperation will bring in CCCTB to those countries (and as we have now established thanks to Scofflaw, echanced cooperation is already here, not due to Lisbon) and that Ireland must cooperate with it.

So whether this is imposing or not depends on your point of view.

Scofflaw

johnnyq wrote: »

It was a question, you gave your answer and i am eternally grateful for your everlasting patience.

So, back on topic, How best is it for Ireland to respond to the CCCTB when it is brought in? *not by the Lisbon treaty;) - but by enhanced cooperation*

As we are currently doing - by creating a level of political resistance within the EU that means any group proposing to go ahead with CCCTB by enhanced cooperation will have few friends, and many opponents. Those opponents will be less willing to cooperate with the CCCTB group on other issues. At the moment, there is insufficient goodwill for a CCCTB group to simply plough ahead, since they will thereby lose political capital, prestige, and goodwill.

This is analogous to the situation where, in a largish group who are choosing to go on holiday together, a smaller group is thinking about, say, getting a different class of room (thus reducing the overall bargaining power of the larger group). If this would generate sufficient tension and upset in the larger group, they will not do so.

johnnyq wrote: »

I am still waiting your reply as to why voting no in Lisbon damages Ireland's ability to reject CCCTB and still the Lisbon treaty you say does not affect Ireland's veto?

Well, see above. CCCTB is being combated politically, because the legal mechanisms to make it possible are already there. Currently, Ireland has the upper hand, just about - we have sufficient allies, and no-one can claim that we are simply against CCCTB because we are euro-sceptic, as would be the case for the Brits.

A No vote, particularly in the context of the Nice I vote, sends the message that Ireland is against the CCCTB because we're euro-sceptic. In the analogy I'm using, that's like being against the whole idea of a group holiday - people are much less likely to listen to what you say.

Subtle, but that's politics.

johnnyq wrote: »

Well the tax expert said that enhanced cooperation will bring in CCCTB to those countries (and as we have now established thanks to Scofflaw, echanced cooperation is already here, not due to Lisbon) and that Ireland must cooperate with it.

So whether this is imposing or not depends on your point of view.

Unfortunately, you keep using "will bring in", when all that is said is that it makes it possible. CCCTB is not inevitable, as long as we don't cut the ground out from underneath our negotiating position.

cordially,
Scofflaw

Peter Fitz

Scofflaw wrote:

the very fact that Ireland has full sovereignty over its direct taxation rates, policies, and mechanisms means that all the other member states do too. Nobody can stop a group of EU countries from putting together whatever joint arrangement they like, because direct taxes such as corporation tax are a fully internal matter, and have nothing to do with the Lisbon Treaty.

Question to Scofflaw & anyone else that has a view or wants to answer -

Can Ireland reduce its existing corporation tax rate of 12.5% ?

I was under the impression that the 12.5% rate was pretty much the lowest the EU would tolerate & the rate itself came about as a result of lengthy negotiations with same ?

In my view, reducing the rate to 10% is the kind of action Ireland needs to take to remain competitive / attractive to multi - nationals. I would suggest that Ireland cannot 'freely' reduce the rate as things stand, open to correction on that.

Interested to hear your views, Peter Fitz.

ixtlan

Peter Fitz wrote: »

Can Ireland reduce its existing corporation tax rate of 12.5% ?

I was under the impression that the 12.5% rate was pretty much the lowest the EU would tolerate & the rate itself came about as a result of lengthy negotiations with same ?

I'm not an expert but I'm pretty sure the answer is yes... we can make our rate zero if we want. I think other countries have similar or lower rates. Some countries may be unhappy with this, and may apply political pressure, but they can't make us do anything. I don't think there were any negotiations, lengthy or otherwise. Of course if we made it zero we might have to drastically cut social services which might not be allowable if future EU rulings for example mandated certain A&E respond times.

Peter Fitz wrote: »

In my view, reducing the rate to 10% is the kind of action Ireland needs to take to remain competitive / attractive to multi - nationals. I would suggest that Ireland cannot 'freely' reduce the rate as things stand, open to correction on that.
Interested to hear your views, Peter Fitz.

Again not an expert but my amateur interpretation is yes, we can freely do what we want.

Actually I find the obsession with the corporate tax rate to be pretty puzzling, for several reasons.

1/ Lisbon does not change policy in this area.

2/ The "no" side seems to be pushing the idea that whatever the policy is is irrelevant, because our friends/neighbours are so devious/evil/manipulative they will twist whatever form of words are in all the treaties to achieve the goal of destroying us competitively. Now this is a valid point of view, but if they really believe that then we better get the hell out of the EU quick. Yet they at the same time says Europe has been good for us and they are pro-European.

3/ Nobody is giving any thought to the question of whether a common corp tax might eventually be good for Ireland. It will be very very ironic if in 5, or 10 or 15 years we are pushing hard for a common rate to slow down the growth of Eastern Europe countries.

4/ Nobody, even Sinn Fein is even pausing for a moment to consider the irony of low corp tax rate. It's good for 2 things in this case. For Ireland to get investment that might have gone elsewhere, but also for corporations to make more profit. I would have expected the socialists to just pause for a moment on that, or even to acknowledge it as a necessary evil.

Ix.

Scofflaw

Peter Fitz wrote: »

Question to Scofflaw & anyone else that has a view or wants to answer -

Can Ireland reduce its existing corporation tax rate of 12.5% ?

I was under the impression that the 12.5% rate was pretty much the lowest the EU would tolerate & the rate itself came about as a result of lengthy negotiations with same ?

In my view, reducing the rate to 10% is the kind of action Ireland needs to take to remain competitive / attractive to multi - nationals. I would suggest that Ireland cannot 'freely' reduce the rate as things stand, open to correction on that.

Interested to hear your views, Peter Fitz.

We're free to set whatever rate we like - zero if we like, as ixtlan says. Direct taxation is a purely national competence.

What you're thinking of in respect of the EU setting a certain minimum is VAT. The EU does set minimum rates there (15% for the main VAT rate, as far as I recall), and is also funded out of VAT to some extent. VAT is an 'indirect tax', not a direct one.

cordially,
Scofflaw

Peter Fitz

Ix wrote:

Again not an expert but my amateur interpretation is yes, we can freely do what we want.

Actually I find the obsession with the corporate tax rate to be pretty puzzling, for several reasons.

1/ Lisbon does not change policy in this area.

Cheers for reply Ix.

First off; agreed that Lisbon does not change policy in this area, any stipulations & restrictions are buried in its predecessors or in the obscure terms of same that may relate to unfair competitive advantage etc.

Most references to the corp tax rate from the IDA & KPMG, PWC etc. is followed by the line that the 12.5% rate is 'approved by the EU' as if to assure multi nationals, which is puzzling; add to the fact that there is scarcely a mention of reducing the rate, all the rhetoric is about protecting what we have, as if to say don't even dare.

Had a quick look around & the confusion my end seems to stem from the required phasing out of the 10% rate for the manufacturing sector on the grounds that it essentially constituted a form of state aid to that sector, Irish Gov has agreed with the EU that it will go by 2010, thats fair enough

Ix wrote:

3/ Nobody is giving any thought to the question of whether a common corp tax might eventually be good for Ireland. It will be very very ironic if in 5, or 10 or 15 years we are pushing hard for a common rate to slow down the growth of Eastern Europe countries.

I see your point, but the bottom line is that any harmonised rate would have to sit somewhere up around 20 - 25 %, the 12.5% is so far below the bulk of europe, leaving us much closer to the eastern bloc. I'd contend that we are in a position to compete with our eastern friends, no shocks to the system, but a gradual & guaranteed reduction by the Irish Gov to 9% over a number of years would solidify our position as one of the best bases for multi-nationals in europe.

Scofflaw wrote:

We're free to set whatever rate we like - zero if we like, as ixtlan says. Direct taxation is a purely national competence.

What you're thinking of in respect of the EU setting a certain minimum is VAT. The EU does set minimum rates there (15% for the main VAT rate, as far as I recall), and is also funded out of VAT to some extent. VAT is in 'indirect tax', not a direct one.

Appreciate the reply & that is how it should be, but not sure if i'm entirely convinced on this one. 12.5 was an odd rate to begin with, i'd have to ask why any reduction in the rate is not on the agenda of any political party, even the PD's, God love them. Perhaps the thinking is lets not be seen to be having our cake & eating it too, i don't know.

Scofflaw

Peter Fitz wrote: »

Appreciate the reply & that is how it should be, but not sure if i'm entirely convinced on this one. 12.5 was an odd rate to begin with, i'd have to ask why any reduction in the rate is not on the agenda of any political party, even the PD's, God love them. Perhaps the thinking is lets not be seen to be having our cake & eating it too, i don't know.

Or to make at least some money out of it? After all, the government needs to balance attracting companies with actually making money out of them. A zero rate would presumably see multinationals queuing to get in, but what would it provide in the way of revenue?

cordially,
Scofflaw

Peter Fitz

Scofflaw wrote:

Or to make at least some money out of it? After all, the government needs to balance attracting companies with actually making money out of them. A zero rate would presumably see multinationals queuing to get in, but what would it provide in the way of revenue?

cordially,
Scofflaw

Sure scofflaw, obviously i'm not advocating a move to 0%, not feasible, a reduction to 10% however is. The system has long been weighted so that the employed & indirect taxes, not the employer provide the bulk of tax revenue, doesn't sit well with me, but it has worked.

Corp tax only accouted for 7bn last year, approx 14% of the total tax take -given the often forgotten substantial surplus on the current account, further reductions are possible & in current climate, would send out the right message imo, assuming thats ok with our european friends

Cheers, Peter Fitz.

sink

Peter Fitz wrote: »

I'd contend that we are in a position to compete with our eastern friends, no shocks to the system, but a gradual & guaranteed reduction by the Irish Gov to 9% over a number of years would solidify our position as one of the best bases for multi-nationals in europe.

Appreciate the reply & that is how it should be, but not sure if i'm entirely convinced on this one. 12.5 was an odd rate to begin with, i'd have to ask why any reduction in the rate is not on the agenda of any political party, even the PD's, God love them. Perhaps the thinking is lets not be seen to be having our cake & eating it too, i don't know.

The reason it's not on the agenda is because it's not an issue. The World Economic Forum published their Global Competitiveness Report last year and highlighted a lack of infrastructure, inflation, bureaucracy and restrictive regulations as the main issues. The tax rate came well down near the bottom of the list. So lowering the corporate tax rate is not going to help us solve these problems and will probably have more of a negative effect as funding for infrastructure projects will be effected.

Here you can find all the information.
http://www.gcr.weforum.org/

guinnessdrinker

Lithuania have a 0% corporation tax for five years as long as a company ivestests more than 1 million euro in certain areas of the country and of that 1 million, 75% of the company's activity has to be conduced in that region.

While not brining in much revenue it will lead to job creation and income tax revenue from the people that gain employment there, so I would not rule out a 0% corporation tax rate here. For example, in attracting FDI to areas of the country with high levels of unemployment.

I don't think Ireland can over rely on the 12.5% rate forever and it may have to be revised as more eastern European countries lower their rates to attract multinationals also. But I do think it is vitaly important that Ireland keeps its control of setting the rate. So EU wide tax harmonisation would not be a good thing, besides I don't think new EU members and applicant members would like to give up control of their ability to set their own corporation tax rate either.

Peter Fitz

sink wrote:

The reason it's not on the agenda is because it's not an issue. The World Economic Forum published their Global Competitiveness Report last year and highlighted a lack of infrastructure, inflation, bureaucracy and restrictive regulations as the main issues.

I still contend its not an issue because europe would have a fit. Why 12.5%?

A modest reduction would at least serve as a positive signal to companies while the other issues mentioned are tackled.

We look as if we are sitting on our hands, we can't afford to.

sink

Peter Fitz wrote: »

I still contend its not an issue because europe would have a fit. Why 12.5%?

There may be some grumbling but I think you're overstating things. Anyway it's none of their business, if they don't like it they can sod off they have no legal right to do anything. I'm not concerned what they think, I just don't believe it would be good tax policy. Why is VAT at 21%, why not 20%? Tax policy is not about rounding off figures.

Peter Fitz

sink wrote:

Tax policy is not about rounding off figures.

Obviously. Having said that, it is the only tax rate to have a ridiculous half point thrown in, it smacks of negotiation.

oscarBravo

It's precisely 1/8. It's not that strange a number.

Scofflaw

Peter Fitz wrote: »

Obviously. Having said that, it is the only tax rate to have a ridiculous half point thrown in, it smacks of negotiation.

In 1972 we had a VAT rate of 16.37% - who were we negotiating with then? Canada has a corporation tax rate of 19.5%, Hong Kong of 17.5% - who are they negotiating with? Brazil has an income tax rate of 27.5%, Morocco of 41.5% - who are they negotiating with?

If the half-decimal is all you have to go on as evidence of negotiation, I don't think you have a case, I'm afraid.

cordially,
Scofflaw

The Rooster

The 12.5% rate was the result of negotiation - but nothing to do with Europe. Revenue wanted a 15% rate, the IDA wanted a 10% rate, and after many long negotiations the 12.5% rate was agreed!

There will never be a harmonised direct corporation tax rate. Each country can pick whatever rate they want - so long as they don't discriminate between different types of business.

The CCTB will be bad for Irish business and bad for Ireland. Ireland cannot be forced to bring it in, but there is a questionmark over what happens if a number of EU countries do bring it in and we stay outside. Can it still erode our tax base even if we stay outside? How will the CCTB interact with existing treaties?

The CCTB has nothing to do with Lisbon.

Peter Fitz

Scofflaw wrote:

In 1972 we had a VAT rate of 16.37% - who were we negotiating with then? Canada has a corporation tax rate of 19.5%, Hong Kong of 17.5% - who are they negotiating with? Brazil has an income tax rate of 27.5%, Morocco of 41.5% - who are they negotiating with?

If the half-decimal is all you have to go on as evidence of negotiation, I don't think you have a case, I'm afraid.

Fair enough. I was making the point with specific reference to existing rates in Ireland, without trawling the annals of history to find a former odd ball VAT rate.

Thanks for clarification Rooster.

Yes I don't have a huge amount to go on, save the peculiar silence of the political establishment on the issue in the midst of numerous assurances that they will protect 'what we have' . With Portugal & Holland moving to our magic 12.5% level, we need to move on ourselves. The cost is not an issue, we can well afford to knock up to 2bn off the 7bn received in Corp Tax last year. We've been building infrastructure with excess current change up to now, borrow if necessary and be done with it.

American Chamber of Commerce says Irish Government needs to restate it's commitment to the lowest possible corporate tax rate rather than suggesting 12.5% is ‘as good as it gets'

Last week, Microsoft Ireland Managing Director Joe Macri said that the Republic of Ireland's corporation tax rate is the prime reason why multinational companies choose to remain in Ireland. While access to the EU and the availability of cheap labour were key factors in attracting foreign investment here 20 years ago, these have largely been eroded by rising costs, falling productivity and the enlargement of the EU to central and eastern European countries, he said, adding: "That leaves us with tax."

Today, the American Chamber of Commerce Ireland President said that the Government needs to restate it's commitment to the lowest possible tax rate rather than suggesting 12.5% is ‘as good as it gets' particularly in light of the global trend towards lower levels of income tax especially on corporate profits.

There are currently over 600 US companies employing close to 100,000 people directly in Ireland with a further 225,000 indirect jobs supported by US companies. In 2006 US firms paid over €2.4 bn to the Irish exchequer in corporate tax and contributed a further €13 bn in expenditure to the Irish economy in terms of payrolls, goods and services employed in their operation.

Additional comments made by O'Hara on key competitive issues are outlined below.

Ireland's 12.5% corporation tax rate has been of enormous benefit but Ireland cannot afford to become complacent about fair tax competition when other countries are now offering similar, if not better, tax incentives for foreign direct investment.

The Government needs to restate it's commitment to the lowest possible tax rate rather than suggesting 12.5% is ‘as good as it gets' particularly in light of the global trend towards lower levels of income tax especially on corporate profits.

The Government must not accept any rolling back of its opposition to EU Tax Harmonisation. The argument that tax harmonisation is necessary for closer European unity, does not stand up to scrutiny. In the United States of America, one of the most successful global economies, there is wide divergence between States in both corporate and individual tax rates. Low taxes are used by States to encourage inward investment and a better spread of economic development.

In truth, there is little we can do about inflation & must live with an interest rate that bears no relation to economic activity in Ireland.

Direct taxation is one of the few tools government has left to steer economic activity & ensure Ireland can compete, we need to use it.

I think we'll be left waiting.

ixtlan

The Rooster wrote: »

The CCTB will be bad for Irish business and bad for Ireland. Ireland cannot be forced to bring it in, but there is a questionmark over what happens if a number of EU countries do bring it in and we stay outside. Can it still erode our tax base even if we stay outside? How will the CCTB interact with existing treaties?

The CCTB has nothing to do with Lisbon.

I assume a number of countries could agree a common rate, but as you say Lisbon does not affect this. They could have done this by joint agreement outside the EU anyhow. The only minor advantage doing it inside the EU would bring would be that some of the admin and organisation could be handled by the EU itself, plus some businesses might find it helped them with cross-border dealings.

However if some countries want to do this so be it. If it's a higher rate than us, why would we care? If it's a lower rate maybe we would want to join?

Again I must make the point that it is not necessarily a good thing that all we EU countries vy with each other to offer the lowest possible tax to multi-nationals. The countries with the highest rates are those with the public services that everyone seems to aspire to. Admittedly it's not a simple balance to strike, but everyone including Sinn Fein are striking very much towards letting the corporations make as much profit as possible. 7bn is not a trifling amount of tax. Even 2bn (if the rate was reduced) is not small. Taken to it's logical conclusion according to everyone involved in this debate, corporations should pay no tax. After all if it's the right thing for Ireland to do it must be right be everyone else, and we would end up in a downward spiral of lower tax and bigger profits.

Lisbon does not change tax policy but let's at least acknowledge that this is a double edged sword.

Ix.

sink

That is why i'm all for leaving the tax rate as is. I don't see any threat of a cctb anytime soon. Lowering tax will have minimal effect on our competitiveness atm. Multinations don't just compare one single tax rate to judge where it is best to invest, they look at everything. That is why we need to improve infrastructure, cut red tape, and improve services. The tax rate is only been focused on at the moment because the media and the no campaign are using it to cause hysteria.

Peter Fitz

sink wrote:

Lowering tax will have minimal effect on our competitiveness atm. Multinations don't just compare one single tax rate to judge where it is best to invest, they look at everything. That is why we need to improve infrastructure, cut red tape, and improve services.

That is to discount the view of the American Chamber of Commerce & the CEO of Microsoft in Ireland as posted above. It is of course just one of a number of issues on the radar of multi nationals, but when the CEO of Microsoft says that the low corporation tax rate is the 'prime reason why companies choose to remain in Ireland', it cannot be dismissed as a minor element of economic policy.

Ix, 2bn is of course not an insignificant sum, but it can be managed, to focus solely on 7bn direct revenue from multi national corporations is to ignore the massive ancillary contribution through investment, expenditure, payroll etc.

I take the wider points on the virtue or otherwise of the low tax model & possible strain on funding for services, depending of course on how the gov of the day distributes available revenue.

As stated before, a rate of 0% is not an option, i doubt anything lower than 8% is feasible, but there is scope for further reduction. All other issues mentioned either take time or are difficult to resolve, this is something government can move quickly on if they have the bottle.

sink wrote:

The tax rate is only been focused on at the moment because the media and the no campaign are using it to cause hysteria.

I have not heard mention of reducing the rate in any media outlet, which is why i posed the original question, why not?

All media comment seems to be focused solely on harmonisation & whether we can retain the rate in the midst of spurious arguments thown in by the 'No' side to damage Lisbon.

sink

Look, we basically agree that low taxes are the way to go. What I read from the American chamber of commerces comments is that low tax is the 'only' reason they are still in Ireland. We have lost our competitive advantage in almost every other area. We can't just keep lowering the tax rate to compensate for everything else falling to pieces. 12.5% is as low as I would go at present if I was finance minister, I would use the revenue from that to plough back into areas we have fallen behind. I believe this will give a far greater long term gain than any short term benefit from lowering the tax rate a few percent. 12.5% percent is still a very competitive rate when compared to the bulk of our competition in Europe. The fact that UK based companise are relocating their HQ's here stating low tax as the reason attests to that. So long as that continues I don't see any reason to lower it further, if the situation changes then a lower tax rate may be required.

sink

I forgot to add that I do not believe that multi-nationals are going to pull out of Ireland, they are still making very decent profits in a downward economy. I see there comments a polical move to see if they can force the government to lower taxes when they don't have. Of course companies are always going to want lower taxes and the statement you quoted won't hurt them in any way. It's kind of like bargaining at the market you have see behind the words, and look at their real agenda, it's a basic negotiating skill.

guinnessdrinker

Peter Fitz wrote: »

As stated before, a rate of 0% is not an option, i doubt anything lower than 8% is feasible, but there is scope for further reduction.

I still would not rule out a 0% rate. Not at present but in the near future. The 12.5% rate certainly needs to be reviewed. Since that rate was bought in and attracted foreign investment there have been many other factors that have changed that may adversly affect multinationals setting up here. High wage rates being one of the main factors.

We should not over rely on the 12.5% rate indefinetly.

sink

There is a very interesting article in the Irish Times today from a British ecnonomist.

http://www.ireland.com/newspaper/finance/2008/0516/1210883228945.html

His take is basically it's an international race to the bottom and while small low tax economies like Irelands will benefit. The UK and other large economies are seriously loosing out. He also points out that there is very little anyone can do about it as the UK themselves would likely veto any cctb as the public would see it as a loss of soverignty and it would be polical suicide.