Libertas tries to wriggle off the corporate tax hook.

Gadjodilo

After three attempts to get a reply from Libertas on this issue, I’ve received a communication (in what looks like a press release) from a high-ranking member of the group in question.

The issue has been discussed here before and basically revolves around the claim by Libertas that article 93 (new article 113) would allow a bypassing of our tax veto on corporate tax. People have been puzzled by this since even the most cursory reading of this article shows that it relates to indirect taxes only and hence could not relate to corporate tax since corporate tax is not an indirect tax,

The distinction between a direct tax and an indirect tax is not complex or arcane. Direct taxes are paid directly to the government and would include the likes of income tax and corporate tax. Indirect taxes are levied onto the price of the goods in question and are paid to the retailer who passes it on to the tax authorities. Hence, the government receives the amount indirectly.

The crucial quotation from the email I’ve received states the following:
“At present, this [Article 93 which is new article 113] applies to so-called “indirect taxes” such as VAT and turnover taxes, but who is to say when and how the ECJ might rule on what differentiates a “direct” tax from an “indirect” one?”

So, Libertas fears that at some point in the future, the European Court of Justice might decide that corporate tax – which is paid directly to the exchequer – is in fact an indirect tax......!

I’ll say no more.

sink

Before I even read the treaty I was extremely sceptical of Libertas's claims. Not only beacause every major politican in Europe seems to refute it completely but also because it makes no sence. Ireland is not the only country which looks to benefit from low taxation policies and any Country would be mad to allow the EU to set a single tax rate.

leninbenjamin

sink wrote: »

any Country would be mad to allow the EU to set a single tax rate.

to deviate slightly from the original topic; not necessarily. in a nutshell most of the economic theory that forms the rationale behind the EU and the entire single market claim that differing tax rates result in inefficiencies and increase changes of asymmetric shocks. thus it's fair to say that anyone who believes the single market is a good ideal should by default also advocate harmonised direct taxes. in theory it should encourage govts to offer real competitive advantages over nominal advantages.

to go back to the original topic; libertas seem to have some hidden agenda behind this campaign. they seem more focused on manipulating the ignorant than offering any logical debate. i would so dearly love to know what motivates organisations like theirs...

sink

I would repectfully disagree that differing tax rates result in inefficiencies. While that may be the case in a vacum where all other factors where equal.

I would advocate that in real world situations where different governments follow different policies such as social welfare versus free marketering and different countries have different natural resources and populations with varying skills/competencies. One single direct tax would not be the most efficient and certainly wouldn't be the most effective at promoting growth.

leninbenjamin

sink wrote: »

I would repectfully disagree that differing tax rates result in inefficiencies. While that may be the case in a vacum where all other factors where equal.

I would advocate that in real world situations where different governments follow different policies such as social welfare versus free marketering and different countries have different natural resources and populations with varying skills/competencies. One single direct tax would not be the most efficient and certainly wouldn't be the most effective at promoting growth.

but that's what the entire EU single market project is based on. that effectively our markets structures across the nations will become homogeneous, and that harmonizing will eliminate the differences you mention, which there is some empirical evidence of to an extent. i'm skeptical too, but that's how the information was presented to me.

sink

I've seen the arguments for free trade/trade blocs, and I agree with them to for the most part. However the win-win situation touted by economists even they will admit is not entirely practicle when you take into account sociological/culural and technological factors.

People in general are not willing to uprout and move to another county due to cultural/language barriers and are attached to their homes for emotional/sentimental reasons. Regions with different demographics are not suddenly going to homogonise and never will. Technologically it takes time and money to build infrasture to support a competitive and developed economy. So a rural area that consist of mainly agricultural industry with a mainly working class population cannot and will not be able to compete with a highly developed urban area with a large base of highly skilled workers if taxes were equal (low-wages would have some effect but not enough).

The only reason Ireland was able to atract hi-tech industry in the first place was because of its low tax base, anybody with an education had emigrate to find suitable work. If taxes were homoginsed back then Ireland would still be a backwater of the EU as there would be no reason for a hi-tech company to set up here.

Now many eastern European countries are in the same position we were in 20-30 years ago. If the EU was to take away their right to set lower taxes to attract industry it would take them alot longer to develope their economies and would lead to inefficiencies in the overall European economy as part of it would be underdeveloped.

A single tax system may be possible in future but alot has to happen before it really becomes practical. The French have some of the highest taxes in Europe and the reason they want a single tax rate is so they don't have to lower theirs in order to compete. It's really self defeating in a way because Europe would still have to compete with other economies and for a short term boost in the Fench ecnomy you would have a long term downturn in European economy. The French are not able to support their bloated civil service under their current taxes let alone at any tax rate that would keep the rest of Europe competitive.