A two tier corporation tax system?

Sleepy

Just a random thought that occured to me last night, forgive me if something similar is already in place... would it make sense to differentiate betwen profits made from export versus profits made from domestic sales?

Say allow a reduced corporate tax payment on whatever percentage of a company's profits were generated from exports.

I'd see this as a mechanism for encouraging investment in the real economy and since all the economists seem to agree that our best means of getting out of this slump is to sell our services abroad, surely that would be a good thing?

Just as interested to hear why this wouldn't work as to why it might but please leave any "tax the rich, free services for all!" arguments out of this thread please.

ei.sdraob

Sleepy wrote: »

Just a random thought that occured to me last night, forgive me if something similar is already in place... would it make sense to differentiate betwen profits made from export versus profits made from domestic sales?

Say allow a reduced corporate tax payment on whatever percentage of a company's profits were generated from exports.

I'd see this as a mechanism for encouraging investment in the real economy and since all the economists seem to agree that our best means of getting out of this slump is to sell our services abroad, surely that would be a good thing?

Just as interested to hear why this wouldn't work as to why it might but please leave any "tax the rich, free services for all!" arguments out of this thread please.

Can you expand on what you mean by "real economy"

are you talking about giving a lower rate to export companies

Sleepy

Pretty much. Selling things to each other, while it may inflate the economy and provide jobs is unsustainable in such a small country (and we're currently suffering the results of doing just that).

So, imho, we should be looking to incentivise export activity.

Since there's very few companies that derive their entire income from export, the suggestion would be that whatever the percentage of turnover is generated from exports is, that percentage of gross profit should be taxed at a different rate than the percentage generated domestically...

ardmacha

Say allow a reduced corporate tax payment on whatever percentage of a company's profits were generated from exports.

The EU don't allow this, which is why we have the 12.5% tax rather than the previous 10% on export companies.

I'd propose a two tier tax structured to put a higher rate on excessive profits, and aim it at monopolistic sectors in the domestic economy, mobile phone companies, supermarkets etc. This might affect multinationals if they artificially structured pricing to ensure a large profit in Ireland, but if this happened it would be a powerful defence against the removal of the 12.5% rate.

Sleepy

I thought the EU might have something against the idea alright. Would it be allowed for revenues generated outside the EU?

Cookie_Monster

we already have a 10% rate for manufacturing companies as opposed to 12.5% don't we? Also certain type of income such as Case V rent is 25%, not 12.5% too

The 10% rate is still knocking around but it is rare.

http://www.finfacts.ie/taxfacts.htm#corptax

Standard Rate on Trading Income* 12.5% from 1 January 2003
Investment/Rental Income 25%
Manufacturing Rate 10% (only for established qualifying companies)
*Special rates apply to dealings in land

Edit: With a common consolidated tax base companies might well end up paying different rates of tax but to various different countries in the EU rather than to the Irish government.

Amhran Nua

Corporations like Google are effectively getting a 2.5% tax rate, according to Business Week.

whatawaster

What about a scheme whereby companies can claim a credit against CT for each additional employee they hire in a given year?
- say they can claim a percentage of the total PAYE tax paid by that employee as a credit against CT – maybe 25% in year one, 10% in year two and 5% in year three.
- credit is clawed back if additional employee is not maintained for 3 years

Jobs, jobs, jobs . . .

oppenheimer1

ardmacha wrote: »

The EU don't allow this, which is why we have the 12.5% tax rather than the previous 10% on export companies.

I'd propose a two tier tax structured to put a higher rate on excessive profits, and aim it at monopolistic sectors in the domestic economy, mobile phone companies, supermarkets etc. This might affect multinationals if they artificially structured pricing to ensure a large profit in Ireland, but if this happened it would be a powerful defence against the removal of the 12.5% rate.

Mobile phone and supermarkets are tow of the sectors with strong competition. Not monopolistic at all.

ardmacha

Mobile phone and supermarkets are tow of the sectors with strong competition. Not monopolistic at all.

Perhaps. But there was a suggestion that their Irish branches had much larger margins than in other countries.