France's Corporate Tax Rate - Today's Irish Independent

shamrock2004

Hi there. I was reading the following article in today's irish independent: entitled "Our fight to survive: EU in Noonan's line of fire".

It states that France's corporate tax rate is just 8.1%. What I don't understand however, is why we are being pushed to lower our corporate tax rate? I was under the impression that a lower corporate tax rate would entice foreign investment?! A higher tax rate would act as a deterrent for foreign corporate interest.

Hopefully somebody can clear this up for me.

Regards
Ned

Aard

France's standard rate is something like 34%. But there are a ton of deductions and exemptions, which leads to an effective rate of 8.1%.

In Ireland, our standard rate is far lower at 12.5%, but we don't allow as many exemptions so our effective rate is somewhere around 11.5%.

That's basically it.

RichardAnd

I think alot of it is populism from the germans and the french. Both the French and the Germans can not be happy with pumping a fortune into a bonkers state like Ireland. Thus, when they read that our corp tax is low, they understandably might wonder why we don't pay more tax to reduce the money we need from them.

Merkel and her diminutive and very vocal counterpart in france aren't idiots, they know well what corporation tax means to Ireland and they know well that raising it would only hinder our ability to pay. In my opinion, it won't be raised but the threat of it being raised could be used to entice us to do something else the EU would like it to do.

Sad thing in all of this is that if tax is so crucial to keeping businesses here. it doesn't speak much good about us.

shamrock2004

Thanks for the replies. But what I don't understand is why the article states that europe is pressing for it to be lowered, not increased... What benefit would it have for the suits in europe if it is lowered? And how would it adversely affect us.

Thanks
Ned

manic mailman

RichardAnd wrote: »

Sad thing in all of this is that if tax is so crucial to keeping businesses here. it doesn't speak much good about us.

I think it's fair to say that when multinationals first came to Ireland in earnest it was because of numerous factors (english speaking workforce, relatively competitive wage rates, adequate infrastructure and of course the grants and incentives from the IDA & government).

However now...I feel it's pretty much only the corp tax that is keeping the big companies from pulling out. That and the fact that some of them have invested a lot in sites over here, for example Intel. We'd be scuppered if the likes of them decide to go as I feel it'd discourage others from setting up here.

Maybe i'm being overly pessimistic though. :P

RichardAnd

manic mailman wrote: »

I think it's fair to say that when multinationals first came to Ireland in earnest it was because of numerous factors (english speaking workforce, relatively competitive wage rates, adequate infrastructure and of course the grants and incentives from the IDA & government).

However now...I feel it's pretty much only the corp tax that is keeping the big companies from pulling out. That and the fact that some of them have invested a lot in sites over here, for example Intel. We'd be scuppered if the likes of them decide to go as I feel it'd discourage others from setting up here.

Maybe i'm being overly pessimistic though. :P

I don't think it's overly pessimistic at all. The whole thing seems just like a house of card waiting to fall over.

dan_d

shamrock2004 wrote: »

Thanks for the replies. But what I don't understand is why the article states that europe is pressing for it to be lowered, not increased... What benefit would it have for the suits in europe if it is lowered? And how would it adversely affect us.

Thanks
Ned

Hard to say why Europe keeps pushing this. Possibly it's because they feel that they are missing out on possible investment from MNC's themselves, although I don't think that's realistic on their part either. I can't help thinking most of this is politically motivated on their part, although why they have fixated on the corporation tax I don't know. But they have to be seen by their own public to be doing something, having pledged their tax money to bail our banks out. I think (but I've no proof) that it wouldn't benefit Europe in any way if had to raise our corporation tax.

Scofflaw

shamrock2004 wrote: »

Hi there. I was reading the following article in today's irish independent: entitled "Our fight to survive: EU in Noonan's line of fire".

It states that France's corporate tax rate is just 8.1%. What I don't understand however, is why we are being pushed to lower our corporate tax rate? I was under the impression that a lower corporate tax rate would entice foreign investment?! A higher tax rate would act as a deterrent for foreign corporate interest.

Hopefully somebody can clear this up for me.

Regards
Ned

The most likely answer is that Irish people and journalists are in a state of such hysteria about corporation tax that no editor spotted the use of "lower" when it should rather obviously be 'raise' here:

Once in Brussels, Mr Noonan will also be stressing to ministers from the smaller European economies, including a number of the newer EU states in Eastern Europe, that they will be next if France and Germany succeed in their demands that Ireland lower the corporate tax rate of 12.5 per cent.

The idea that France has an effective CT rate of 8.1% remains risible, though - that figure is from a study that didn't compare effective CT rates, and if it were actually the case, would mean that our CT rate was entirely irrelevant, because if a journalist can find that out, so can a multinational's accountants.

I hope people here don't mind that I find it equally entertaining that no poster has been able to answer your question because they apparently can't see the word "lower" either.

amused,
Scofflaw

shamrock2004

Scofflaw wrote: »

The most likely answer is that Irish people and journalists are in a state of such hysteria about corporation tax that no editor spotted the use of "lower" when it should rather obviously be 'raise' here:


I hope people here don't mind that I find it equally entertaining that no poster has been able to answer your question because they apparently can't see the word "lower" either.

amused,
Scofflaw

That's it! I was assuming it was a typo and that the word "raise" was instead intended. I was confused however as I didn't think it was possible to make such an error and not have it rectified.

Thanks for clearing that up.

Ned

Victor

shamrock2004 wrote: »

Thanks for the replies. But what I don't understand is why the article states that europe is pressing for it to be lowered, not increased...

Its the Sindo, what do you expect, but errors?

Scofflaw wrote: »

I hope people here don't mind that I find it equally entertaining that no poster has been able to answer your question because they apparently can't see the word "lower" either.

But they have to read the article to find it.

Rubik.

PricewaterhouseCoopers and the World Bank issued a report recently comparing statutory and effective corporates tax rates of the G-8 and BRIC countries. While France was found to have the second lowest effective rate, it was at 19% not 8.1%.

http://www.dailymarkets.com/stock/2010/04/15/tax-friendly-country-etfs-for-an-april-15th-deadline/

femur61

Aard wrote: »

France's standard rate is something like 34%. But there are a ton of deductions and exemptions, which leads to an effective rate of 8.1%.

In Ireland, our standard rate is far lower at 12.5%, but we don't allow as many exemptions so our effective rate is somewhere around 11.5%.

That's basically it.

Therefore our mantra of "our low corporation tax is an a huge incentive in attracting MNC" is wrong. If MNC can get a lower CT in France why do we have so many

RichardAnd

femur61 wrote: »

Therefore our mantra of "our low corporation tax is an a huge incentive in attracting MNC" is wrong. If MNC can get a lower CT in France why do we have so many

I think it has something to do with good old accounts fiddling, something Ireland excells at. There is a tax trick that makes it posible to transfer earning from other countries to Ireland and, if my understanding is correct, pay the Irish rate of tax on those profits.


http://en.wikipedia.org/wiki/Double_Irish_Arrangement


Someone more astute with how this works could probably explain it in more detail than me of course.

CDfm

Have I read elsewhere that France has an extensive system of grant aid to domestic industries.

So while Ireland does not have a domestic capital base for industrial investment France does and subsidises it. Ireland on the other hand depends on MNC's to compensate for the lack of a capital base.

Is that true ?

munchkin_utd

RichardAnd wrote: »

I think it has something to do with good old accounts fiddling, something Ireland excells at. There is a tax trick that makes it posible to transfer earning from other countries to Ireland and, if my understanding is correct, pay the Irish rate of tax on those profits.

http://en.wikipedia.org/wiki/Double_Irish_Arrangement

Someone more astute with how this works could probably explain it in more detail than me of course.

a translation into normal mans speak is that they pay shag all Irish corporation tax, irrelivant of whatever level its set at.

Ireland value to multinationals is a backdoor to the Caymans etc, not its 12% corporation rate.

Scofflaw

RichardAnd wrote: »

I think it has something to do with good old accounts fiddling, something Ireland excells at. There is a tax trick that makes it posible to transfer earning from other countries to Ireland and, if my understanding is correct, pay the Irish rate of tax on those profits.


http://en.wikipedia.org/wiki/Double_Irish_Arrangement


Someone more astute with how this works could probably explain it in more detail than me of course.

As munchkin_utd says, the value in that trick isn't actually Ireland's low CT rate, but Bermuda's low CT rate and the Irish exemption on withholding tax if you're transferring profits to another EU country - that's the "Dutch Sandwich".

Basically, Google books 86% of its advertising sales here (because the sales are made by people here). That ought to produce a huge taxable profit here, but in fact what happens is that Google then says that those sales depend on intellectual property held by an Irish Google subsidiary based in Bermuda, so most of the immediate sales profit is transferred to that company via royalty payments. In order to avoid an exit tax on profits leaving the country, the royalty payments are handled on behalf of the Bermuda company by a Dutch Google subsidiary, because Ireland doesn't charge an exit tax if the profits are headed for certain other EU countries.

It's worth pointing out, perhaps, that CCCTB would make no difference to such a set of arrangements, because Google presumably won't opt for CCCTB unless CCCTB offers an equivalent tax saving (which seems unlikely).

cordially,
Scofflaw

Dannyboy83

It's really weird that the Irish independent made that mistake, because I saw a very similarly phrased post last week on the forum, making the exact same mistake.

How exceedingly odd.

exceedingly,
Dan

Victor

The Irish Times made the same mistake yesterday. :eek: Sorry, I didn't keep the link.

[EDIT] "But if France’s effective rate is much lower than the headline rate, why is lowering the Irish rate such an issue for Sarkozy?"

http://www.irishtimes.com/newspaper/finance/2011/0321/1224292707369.html

K-9

Dannyboy83 wrote: »

It's really weird that the Irish independent made that mistake, because I saw a very similarly phrased post last week on the forum, making the exact same mistake.

How exceedingly odd.

exceedingly,
Dan

A few posters got that particular bone between their teeth on here. It was picked up on a few times and nobody could answer.

I think they seen another bone in the water.

Atilathehun

I work for MNC, with global operations. The corporation tax benefit of Ireland is important, BUT, the really important tax benefit in Ireland vs France or Germany, is in the area of employer social charges.
Effectively 35% in France compared to 10% here.
Irish government badly needs to PROMOTE this aspect as much as or more than the CT benefit.

ei.sdraob

Scofflaw wrote: »

As munchkin_utd says, the value in that trick isn't actually Ireland's low CT rate, but Bermuda's low CT rate and the Irish exemption on withholding tax if you're transferring profits to another EU country - that's the "Dutch Sandwich".

Basically, Google books 86% of its advertising sales here (because the sales are made by people here). That ought to produce a huge taxable profit here, but in fact what happens is that Google then says that those sales depend on intellectual property held by an Irish Google subsidiary based in Bermuda, so most of the immediate sales profit is transferred to that company via royalty payments. In order to avoid an exit tax on profits leaving the country, the royalty payments are handled on behalf of the Bermuda company by a Dutch Google subsidiary, because Ireland doesn't charge an exit tax if the profits are headed for certain other EU countries.

It's worth pointing out, perhaps, that CCCTB would make no difference to such a set of arrangements, because Google presumably won't opt for CCCTB unless CCCTB offers an equivalent tax saving (which seems unlikely).

cordially,
Scofflaw

Why single out Google?

Anglo Irish have been doing this for a very long time before Google came about...

Aard

Atilathehun wrote: »

I work for MNC, with global operations. The corporation tax benefit of Ireland is important, BUT, the really important tax benefit in Ireland vs France or Germany, is in the area of employer social charges.
Effectively 35% in France compared to 10% here.
Irish government badly needs to PROMOTE this aspect as much as or more than the CT benefit.

Absolutely spot-on. The EU average seems so be around 30%.

Scofflaw

ei.sdraob wrote: »

Why single out Google?

Anglo Irish have been doing this for a very long time before Google came about...

Google is well documented (!), rather than any other reason.

cordially,
Scofflaw

beeftotheheels

..that the "double Irish" is fundamentally a US tax play and as such is of benefit to US MNCs. Anglo being an Irish MNC, could not have operated a "Double Irish", they could just have had an Irish incorporated Cayman resident subsidiary.

Google, MS (Round Island One) etc have all had press coverage - SEC asked Google to clarify this week.

ei.sdraob

Anglo Irish Capital Funding Limited was registered in Netherlands ...

why?


----

address: Locatellikade 1 Parnassustoren, 1076 AZ Amsterdam, The Netherland
activity: Investment holding

sollar

I watched a program about Sarkozy on BBC recently he is just a little windbag trying to act the big man.

ei.sdraob

lol

Googling the address for Anglo's Dutch arm brings this

http://www.google.ie/search?sourceid=chrome&ie=UTF-8&q=Locatellikade+1+Parnassustoren%2C+1076+AZ+Amsterdam%2C+The+Netherland

Seems like many companies are registered to this very same address :P must be a very big building PO Box

Anyone in the vicinity take a stroll to see whats going on here?

beeftotheheels

...never having worked for Anglo I have no idea. However, in ye olden days before Ireland brought in an exemption for any gain on the disposal of shares in subsidiaries it was common for Irish groups to have a Dutch holding company as the Netherlands exempted such disposals (as Ireland does now).

This is why Lotus Green (the entity in the DCC group which disposed of the Fyffes shares subject to all that litigation) was Dutch.

Or it could have held IP (again prior to the introduction of the intangibles relief rules in Ireland) Irish groups set up Dutch IP holding companies to avail of the Dutch rules on IP.

In both these instances Ireland cannot complain as Irish companies can avail of better tax treatment in another EC Member State just as German companies can avail of our 12.5% rate. Nothing wrong with establishing in a beneficial regime once you establish there properly under EC law.

Of course it could be as innocent as that entity was engaged in Dutch business, but my guess is it was set up to dispose of shares prior to a similar exemption being introduced into Ireland, or held IP. Both legal (and moral under EC law since Ireland supports tax competition and thus has copied both Dutch regimes) if done right.

But you can rest assured it was not a "double Irish" structure.

ei.sdraob

It Quacks like a duck, it walks like a duck, it is ... ... a giraffe

Seems like there is literary thousands of companies registered to same address, time for MR Sarcozy to push on the Dutch for their "offshore activities"

View

ei.sdraob wrote: »

It Quacks like a duck, it walks like a duck, it is ... ... a giraffe

Seems like there is literary thousands of companies registered to same address, time for MR Sarcozy to push on the Dutch for their "offshore activities"

The Dutch aren't refusing point blank to even discuss the idea of CCCTB. Given that we previously discussed it in working groups on it at EU level, our politicians are just playing to the gallery on this.

SUMMARY RECORD OF THE MEETING OF THE COMMON CONSOLIDATED CORPORATE TAX BASE WORKING GROUP

held in Brussels on 23 November 2004

I. OPENING OF THE MEETING
1. The meeting of the Commission Working Group on the Common Consolidated Corporate Tax Base (hereafter the "Group") was attended by representatives of all 25 Member States and was chaired by Commission Services.

Link to it is here.