Britain to cut corporation tax rate

Bullseye1

http://news.eircom.net/breakingnews/19381547/?view=Standard

More important that ever to protect our CTR. Interesting that they are considering lowering theirs just as the EU (France and Germany) are putting pressure on us to raise ours.

SBWife

Yes it's being slashed :eek: to 23% by 2014.

Must say I like the tax credit for R&D at small enterprises 200% in April and 225% in 2012. Does anyone know how this compares to the Irish system for R&D tax credits?

Scofflaw

Bullseye1 wrote: »

http://news.eircom.net/breakingnews/19381547/?view=Standard

More important that ever to protect our CTR. Interesting that they are considering lowering theirs just as the EU (France and Germany) are putting pressure on us to raise ours.

Possibly because they are bailing out rather than being bailed out, and are therefore under no external pressure to increase their tax take.

cordially,
Scofflaw

RichardAnd

Britain has every right to lower her CT is she feels the need to do it. What a state, and a fairly stable one at that, does with it's own finances are no concern of anyone else.

SBWife

RichardAnd wrote: »

Britain has every right to lower her CT is she feels the need to do it. What a state, and a fairly stable one at that, does with it's own finances are no concern of anyone else.

Except those who trade with it or compete with it.

And it's "its" for possessive case.

ART6

SBWife wrote: »

Except those who trade with it or compete with it.

And it's "its" for possessive case.

So the business of those who compete with it is to be more competitive is it not? More reason to defend our CTR.

Why did you bother with the punctuation correction? Is it relevant to this thread?

SBWife

I'm not arguing the importance of the Irish corporate tax regime I think moving it higher would be a disaster. Firstly, being at 12.5% is attractive to foreign corporations on an absolute bases. Secondly, any movement even if it remained a low tax regime would send the message that the corporate tax rate was not secure. My post was just pointing out that saying it wasn't relevant for others was an extremely naive comment.

I pointed out the grammar because the misuse of it's and its is a personal bug bear. Sorry.

ei.sdraob

I would like to see Sarcozy stick his nose into British affairs now. They know where to send those nosy europeans :P.

Bullseye1

Scofflaw wrote: »

Possibly because they are bailing out rather than being bailed out, and are therefore under no external pressure to increase their tax take.

cordially,
Scofflaw

I would have thought it was more that they are not part of the Euro.

SBWife

Bullseye1 wrote: »

I would have thought it was more that they are not part of the Euro.

I don't think so Lithuania and Poland get pressure on their corporate tax regimes as well and they're neither bailout contenders or Euro zone members. IMO the UK won't be attacked for lowering the corporate tax rate because they're not bringing it down low enough to be seen as a real threat by the continental powers.

beeftotheheels

The other issue of course is that Britain, like France and Germany, view themselves as being more outbound than inbound in terms of investment.

We know we are dependent on inbound investment, and engaging in transparent tax competition helps us in this regard. But; you only have to look at comments on this site with posters expressing anguish at the thought Anglo established Dutch subsidiaries to avail of Dutch tax reliefs to realize most people think their country has a right to tax all the profits of domestically headed groups.

Therefore, the Brits (like many of us) assume that they have an inherent right to tax all of the profits of British headed companies as well as the British profits of all other companies. They don't like to think of these "British" profits of the FTSE 100 being "diverted" to low tax regimes like Ireland. In this regard they would have the agreement of France and Germany. Britain is responding to our tax competition by cutting their rate.

France and Germany, as our paymasters at the moment, are trying to force us to increase our headline rate.

As I said, their view of themselves is as outbound investors whose profits we are diverting but they also view each other in the same light (as outbound investors) and as such the thought of of the UK dropping their CT rate does not strike fear into the hearts of Germans at the notion that Siemans may relocate there, Germans will look at the rate change and think of it as applying to BP, Vodafone, GSK etc, not Siemans or DB.

The reality is that the UK has significant outbound and inbound investors, and their rate drop may well encourage German businesses to invest more there, but as we are entirely inbound dependent it is very easy to paint us as the town tart luring innocent French and German companies to invest here with our seductive tax rate.

It plays well to the masses who don't understand the intricacies and complexities of tax law. The UK, is the respectable married woman whose top may be a little low cut (think Nigella Lawson). We, on the other hand are letting it all hang out and acting recklessly (in their eyes) so I'm thinking more Dorien Green.

Fratton Fred

The CEO of advertising company WPP announced this morning that this will probably result in them moving their head office back to London.

I think this is more about reducing the flight of companies for tax reasons than it is to pinch companies off the French or Germans.

Scofflaw

Fratton Fred wrote: »

The CEO of advertising company WPP announced this morning that this will probably result in them moving their head office back to London.

I think this is more about reducing the flight of companies for tax reasons than it is to pinch companies off the French or Germans.

And it's interesting that all that's required for the move back is a very small fall in their CT rate.

cordially,
Scofflaw

ei.sdraob

Scofflaw wrote: »

And it's interesting that all that's required for the move back is a very small fall in their CT rate.

cordially,
Scofflaw

So therefore you concede that the inverse of that (us raising being forced to raise rates) would be detrimental to this country?

Scofflaw

ei.sdraob wrote: »

So therefore you concede that the inverse of that (us raising being forced rates) would be detrimental to this country?

I had a discussion with another poster a while ago now, who asked what my views were on raising Ireland's CT rate. My view has been all along that raising Ireland's CT rate would be detrimental to our economy, because we basically don't have an economic strategy other than attracting FDI.

Had you asked at any point, that's something you could have found out for yourself, rather than making incorrect assumptions about my position and then asking silly "do you concede" questions like the above about a view I've never held.

slight regards,
Scofflaw

ei.sdraob

I suspected that you understand the position we are in, wanted a clarification.

Now onto the next question,
at what stage did EU stopped being a union of equals with common shared goals and became an extension of France/Germany?

The current shenanigans by Sarcozy go against the very core ideals that made EU. These are of competition and equality of each member state.

SBWife

ei.sdraob wrote: »

Now onto the next question,
at what stage did EU stopped being a union of equals with common shared goals and became an extension of France/Germany?

25 March 1957

later12

Even more interesting that Britain intend to cut Northern Ireland's corporate tax rate to 12.5%
http://www.bloomberg.com/news/2011-03-24/northern-ireland-consultation-on-corporation-tax-cut-begins.html

And also this

http://www.dailymail.co.uk/news/article-1369339/BUDGET-2011-Worlds-biggest-advertising-agency-plans-UK-corporation-tax-cut.html

Chancellor George Osborne's cut to corporation tax has paid off as it emerged advertising giant WPP is likely to move back to the UK.
'There has to be legislation enacted... (but) I think it looks as though we will make that recommendation,' WPP's Martin Sorrell told BBC radio.

WPP had moved its tax base to Ireland over what it said was uncertainty over the future of UK taxation policy.

ei.sdraob wrote: »

at what stage did EU stopped being a union of equals with common shared goals and became an extension of France/Germany?

The EU cannot logically nor sustaibably claim to be a union of equal states and at the same time claim to be representative of equal citizens. This is going to have to change and it may well be an economic impetus which will be driving it.

ixtlan

I think pretty much everyone on this forum agrees that we must not increase our rate now although some of us may argue that it's unhealthy that we rely on the rate so much for investment and we may argue that in the long term we should not be completely dismissive of an increase of some sort.

What I really wanted to add though was that while some people will point to the UK's small decrease and cheer it as an example of a country doing what it wants for it's own benefit, it's also a little bit of a wakeup call to the dangers of excessive competitive between EU states as regards corporation tax.

A 1% (and more in later years) drop we won't worry about too much, even though it will mean losing some investment. However if they get sufficient benefits from the decrease and reduce further to divert even more investment from us and Germany/France, we may be more concerned. Taken to an extreme (which many posters here seem to believe is the way things should be) many EU states could find themselves forced to continue cutting corp tax to whatever the allowed minimum is, so that we end up with the corporations making more profit and the burden of tax falling more heavily on individuals. This is the classic "beggar thy neighbour" scenario.

Then we would have to compete solely on non-tax advantages, and we had better have improved from our current state.

Ix.

beeftotheheels

Non-Tax folk talk about headline rates including CEOs. Decisions are made on effective tax rates and not headline rates. WPP did not invert to avail of our 12.5% rate as they did not put a new trading company atop the group. They inverted because Ireland does not have specific rules called "controlled foreign company" rules which subject the non UK, Low tax subsidiaries of a group like WPP to UK tax. By putting Irishco on top of the group and transferring all the low tax subs up under Ireland the UK ceased to be able to tax those subs. This was the very significant tax savings which caused WPP and others to invert.

As a result of the inversions the UK has changed its CFC rules and this is what is causing WPP to consider moving back (combined, one assumes, with the threat of constant tax audits seeking to catch them out ever making a significant decision in the UK on behalf of the Irish Plc which would cause it to be UK resident). It has nothing to do with the rate reduction.

Since the ordinary folk assume WPP moved to avail of our rate it is politically expedient for MS to say he'll move back now the UK rate is down. But as he never availed of our 12.5% rate it is nothing to do with headline rate, and everything to do with the impact of the CFC rules on his effective rate.

WPP style inversions made our rep as a tax haven worse while actually contributing nothing to our coffers. I would like to see them all redomicile home or to a real tax haven. It got our 12.5% rate bad press when it was all about us not having CFC rules (which we don't need because our rate is competitive enough that there is not a huge benefit to a real Irish Plc trying to set up low tax subs offshore when they can operate lower risk, and economically more sensible 12.5% subs onshore).

One of the ancillary benefits to having a competitive tax rate is that you then don't need a host of rules dealing with companies trying to get profits out of your tax net since the assumption is that companies will be happy enough to leave profits at home at 12.5%. Companies like WPP trying to avail of this "nice" feature of our tax system i.e. the lack of nasty rules, without seeking to establish real activities here to create jobs and avail of the 12.5% rate lead to additional pressure as the general populace in France/ Germany and the UK think it was our rate and not our lack of avoidance rules (which we can justify as unnecessary in our system with that low rate) which caused us to "entice" UK profits here.

I take drugs for an illness I don't have because a side effect of the drugs helps with an illness I do have. My doctor, like many others is happy that there is no downside to me taking the drugs for the tangible benefit of the side effect.

WPP and co did the same in tax terms and sullied our rep into the bargain.

View

ei.sdraob wrote: »

Now onto the next question,
at what stage did EU stopped being a union of equals with common shared goals and became an extension of France/Germany?

The EU never started being a union of equal (states). If would have been a nonsense to suggest, when the ECSC was founded, that Luxembourg's C&S Industries were as important as those of Belgium never mind Germany. And the voting system put in place at the time largely reflected this. It is only in a few "sensitive areas" that the principle of 1 state, 1 vote holds sway and arguably those are as absurd as the C&S industry example above would have been were it adopted at the time.

As for the common shared goals, they remain the same as they have been - indeed the current proposals being considered seek to provide solutions for these.

We have lost sight of that - perhaps understandably - but ask yourself this, what proposals have we advanced that would provide a common EU solution to the possibility that some other member state in the future could find themselves in a comparable mess to us today? After all, if in 20 years time, should we need to borrow money to loan it to, let's say, Hungary, how happy are we going to be if the system in place allows them to borrow, b*t&h about us for having loaned them the money, demand a lower interest rate on the money we loaned them and then, maybe, ten years later get more emergency aid because having solved their problems, they immediately repeated them because they know we are going to loan them more money again?

ei.sdraob

Internal taxation is not a "sensitive issue" @View

Why is corporation taxation part of a "solution" when it was never the cause of the problems??

View

ei.sdraob wrote: »

Internal taxation is not a "sensitive issue" @View

If, by "internal taxation", you mean corporate taxation, it does not operate on the basis of "one state, one vote" or any other variation thereof. It is up to each member state to set individually.

That said, politicians in other member states are free to articulate their views on this - there is no way to gag them short of violating their human rights.

ei.sdraob wrote: »

Why is corporation taxation part of a "solution" when it was never the cause of the problems??

Largely, I suspect because the other politicians see it as being part of the problem - specifically the large hole in our budget. They are asking themselves obvious questions like "Why don't they raise their CT rate?" and "Why don't they fix the loopholes?" - After all, it is an open secret that companies like Google aren't even paying at our 12.5% CT rate due to loopholes in our CT system.

Why therefore aren't we addressing this? We sooner have Google pay at 2.5% and close our hospitals as a result?

The other politicians want a solution to the problems. Right now, we don't have a solution other than "Can we borrow some more from you, guys?".

beeftotheheels

ei.sdraob wrote: »

Why is corporation taxation part of a "solution" when it was never the cause of the problems??

I'm not sure it is entirely fair to say that it was never part of the problem. We decided that as a peripheral Member State we should engage in tax competition in order to encourage investment and create jobs. In terms of manufacturing etc the tax is fair enough but as explained on many threads we left a number of loopholes and took a "light touch" approach towards the MNCs and their tax, being happy to collect the VAT and payroll taxes they generated.

But we didn't just go after manufacturing, we also went after financial services. A 12.5% tax rate and "friendly" tax authority would not have encouraged the industry to flourish here to the extent it did had we been heavy handed in regulating it. I suspect the same rationale for the softly softly approach to tax was also mirrored in regulation, we listened too much to what the industry wanted of us rather than what we thought was right for the industry.

I guess in conclusion I'm not agreeing with Angela that our tax rate caused this, but I am saying our tax rate, and approach to mitigating it may be symptomatic of our general approach to industries creating jobs in the short term...

Count Dooku

beeftotheheels wrote: »

I'm not sure it is entirely fair to say that it was never part of the problem. We decided that as a peripheral Member State we should engage in tax competition in order to encourage investment and create jobs. In terms of manufacturing etc the tax is fair enough but as explained on many threads we left a number of loopholes and took a "light touch" approach towards the MNCs and their tax, being happy to collect the VAT and payroll taxes they generated.

But we didn't just go after manufacturing, we also went after financial services. A 12.5% tax rate and "friendly" tax authority would not have encouraged the industry to flourish here to the extent it did had we been heavy handed in regulating it. I suspect the same rationale for the softly softly approach to tax was also mirrored in regulation, we listened too much to what the industry wanted of us rather than what we thought was right for the industry.

I guess in conclusion I'm not agreeing with Angela that our tax rate caused this, but I am saying our tax rate, and approach to mitigating it may be symptomatic of our general approach to industries creating jobs in the short term...

with minimum investments in order to use taxpayers money for buying votes by populists in Dail
BTW
WPP may quit Dublin after UK Budget

Advertising giant WPP has said it is likely to switch its headquarters from Dublin back to the UK after UK chancellor George Osborne slashed corporation tax.

WPP boss Sir Martin Sorrell revealed that the announcement of a greater than expected reduction and reforms to levies on profits collected overseas had tempted the firm to reverse its move to Ireland.

Sir Martin told BBC Radio 4's Today programme: "There has to be legislation enacted ... but I think it looks as though we will make that recommendation (to return to the UK)."

The news comes a day after business publisher and events organiser United Business Media said it was "actively considering" a return to the UK three years after moving its tax base to Ireland.

ei.sdraob

beeftotheheels wrote: »

I'm not sure it is entirely fair to say that it was never part of the problem. We decided that as a peripheral Member State we should engage in tax competition in order to encourage investment and create jobs.

How else is an agrarian backwater with no natural resources on the side of europe to compete with industrial core

Competition and movement of people and capital are core EU blocks.

Corporation tax had absolutely no part in our crisis and the only thing helping drive exports which are needed to repay all that debt.

beeftotheheels

I'm in favor of transparent tax competition, I see nothing wrong with it for a small agrarian backwater once done openly and to support jobs etc. I don't favor increasing our tax rate on trading profits in a recession, I think that could hinder growth.

But, the approach we took to tax was similar to the approach we took to regulation of "growth industries" i.e. business told us what laws they wanted to see...

Had we taxed the property bubble more heavily we could have cooled it. The property bubble was driven by domestic and not inbound players for the most part and something should have been done to cool it, a removal of reliefs, higher rates on property development profits, a closing of stamp duty loopholes.

Had we regulated the banks more heavily we may have prevented this Armageddon we're now in.

Our approach to tax, including those applicable only to domestic industries could be seen as is symptomatic of our general approach to business....

Denerick

Britains corporate rate was 52% back in the 70s for a brief time. COmpanies take a long view. If we even raised ours to 15% they would see the start of a trend; and thus would get out when possible. And hey, if Britain came down to around 20% we'd better start worrying.

ei.sdraob

It is not rocket science, for us to payback existing debts and the "bailout" we need to grow the economy, our government is praying for certain % growth year on year, so are EU.

Playing with corporation taxation, hell even talking about it and breeding uncertainty will shrink our economy, even the EU sanctioned report says we would be the worst hit.

If you look at the stats released today the economy has shrank with exports being the only silver lining on 45 months long recession cloud that is hanging over Ireland.

How do we repay all this debt without exports and ever shrinking economy? Maybe default is inevitable now with such a negative outlook, what is it with this self flagellating attitude lately?

View

ei.sdraob wrote: »

How else is an agrarian backwater with no natural resources on the side of europe to compete with industrial core

In a nutshell, innovation - think Sweden and Finland both of whom seem to be able to manage it. Sweden once had - possibly still has - the slogan that their goal was to invent the future.

A soundbite? No, they had the highest patents per head of population in the entire EU at the time. They were double that of the US as well and - from memory - something like ten times what we were (We were bottom of the EU at the time). That admittedly is a few years back so it may have changed.

We have a "cargo cult" mentality to business. We want large firms to come in, the Minister to "gift" the associated jobs to the people and coast on the MNCs coat-tails.

Most job creation comes in SME firms though - not in large firms - as they "go viral" (for want of a better phase). Where are the Hi-tech firms here that went from start-up to 1 Billion Euro in revenue (or even anywhere close to it)?

ei.sdraob

Time to innovate genetically modified potatoes me thinks :rolleyes: we be going back to the old pastime soon

oh wait can't do that either since our "Smart Green economy" is opposed to science and technology ...

Denerick

View wrote: »

In a nutshell, innovation - think Sweden and Finland both of whom seem to be able to manage it. Sweden once had - possibly still has - the slogan that their goal was to invent the future.

A soundbite? No, they had the highest patents per head of population in the entire EU at the time. They were double that of the US as well and - from memory - something like ten times what we were (We were bottom of the EU at the time). That admittedly is a few years back so it may have changed.

We have a "cargo cult" mentality to business. We want large firms to come in, the Minister to "gift" the associated jobs to the people and coast on the MNCs coat-tails.

Most job creation comes in SME firms though - not in large firms - as they "go viral" (for want of a better phase). Where are the Hi-tech firms here that went from start-up to 1 Billion Euro in revenue (or even anywhere close to it)?

Sweden had the benefit of having great natural industry; ample forests for paper and timber, iron for... iron, vast tracts of land, plenty of rivers to sustain a hydro power system... Finland just got lucky with a electronics industry.

ei.sdraob

Denerick wrote: »

Sweden had the benefit of having great natural industry; ample forests for paper and timber, iron for... iron, vast tracts of land, plenty of rivers to sustain a hydro power system... Finland just got lucky with a electronics industry.

Just checked both countries have cheaper industrial electricity rates and nuclear plants (yet another technology we shun) producing a portion of electricity.
How can we setup a "smart" industries in such areas such as "cloud computing" when electricity is expensive and network infrastructure does not come close to either Sweden or Finland?

@View corporation tax is the only thing we have left, as the Intel boss reminded us not too long ago, we pissed away all the other pluses, and wont be getting them back any time time soon.

sarumite

Fratton Fred wrote: »

The CEO of advertising company WPP announced this morning that this will probably result in them moving their head office back to London.

I think this is more about reducing the flight of companies for tax reasons than it is to pinch companies off the French or Germans.

Does the reasons for doing something matter if the net effect is the same?

beeftotheheels

Count Dooku wrote: »

BTW
WPP may quit Dublin after UK Budget

See comment above re: WPP and other inversions

View

Denerick wrote: »

Sweden had the benefit of having great natural industry; ample forests for paper and timber, iron for... iron, vast tracts of land, plenty of rivers to sustain a hydro power system... Finland just got lucky with a electronics industry.

All countries get dealt different hands due to geography, climate etc. and have to play them accordingly. At the start of the last century, both Sweden and Finland were poor and had suffered mass-emigration just like Ireland had. Neither of them were obvious candidates for Hi-tech success, yet both managed it.

I have not suggested that we could "Copy-Paste" their methods anymore than I would suggest we could do the same with Silicon Valley. However, if our competitive advantage is apparently our low CT rate, it makes little sense that we make a very poor showing in the Hi-tech area. If anything, our domestic economy and associated government policy revolves/revolved around the distinctly low-tech areas of land and property over the last few decades.

Remember, a success story in Hi-tech doesn't create a 100 or 200 jobs - which we would regard as a good success in FDI terms. It can create 10s of thousands of jobs and at least as many again in support industries that go with those. Offhand, I don't recall there being a lot of effort to funnel money towards start-ups here over the last decade, whereas there certainly was for property.

Euroland

We should go further and reduce ours to 9-10%

Amhran Nua

View wrote: »

Where are the Hi-tech firms here that went from start-up to 1 Billion Euro in revenue (or even anywhere close to it)?

View wrote: »

Remember, a success story in Hi-tech doesn't create a 100 or 200 jobs - which we would regard as a good success in FDI terms. It can create 10s of thousands of jobs and at least as many again in support industries that go with those.

This is a bit of a mysterious view of high tech industry. Most of those rags to billions stories are investors pumping something like twitter to make it look big before an IPO, then they cash out. There's no particular reason for high tech to follow a different growth gradient than almost any other business, unless you come up with something completely innovative and extremely useful, and even then it will probably take decades.

I don't think NI will ever see 12.5% corporation tax rates, the UK would then be competing with itself, and we can't have the provinces doing better than the home counties what what?

If you want to cut general costs in Ireland, start with the amount we import, from the UK I might add, and extortionate rents being charged by commercial property owners. Only those with no understanding of the economy, or any economy, advocate cutting private sector wages.

londonbus

beeftotheheels wrote: »

It plays well to the masses who don't understand the intricacies and complexities of tax law. The UK, is the respectable married woman whose top may be a little low cut (think Nigella Lawson). We, on the other hand are letting it all hang out and acting recklessly (in their eyes) so I'm thinking more Dorien Green.

I'd rather think of Dervala Kirwan.

"This is not just foreign investment, this is Irish investment..."

[Jackass]

Although it would be going back on pre-election promises, would it really be that bad for the Government if they made some concessions to the E.U. by raising our CT to 15% for a better interest rate deal?

In the long term it could work out a much better deal for us than maintaining the current rate and not getting a better interest rate.

The current deal will cripple us.

SBWife wrote: »

And it's "its" for possessive case.

:rolleyes:

beeftotheheels

[Jackass] wrote: »

Although it would be going back on pre-election promises, would it really be that bad for the Government if they made some concessions to the E.U. by raising our CT to 15% for a better interest rate deal?

In the long term it could work out a much better deal for us than maintaining the current rate and not getting a better interest rate.

The current deal will cripple us.

It's the signal it sends out to our inbound investors on which we are dependent.

We have had a competitive tax rate for job creating activities since the 50's, and long term rate stability is itself as big a benefit as the low rate in terms of attracting inbound investment. If a US MNC is weighing up setting up their European HQ in Ireland or Switzerland and we seem to be prepared to change our rate, even if slightly, it could tip them in favor of Switzerland where they may pay a slightly higher rate yet have more certainty going forward.

Lets educate our European colleagues that we also have a 25% rate applicable to passive income and brass plate companies, that we recently introduced transfer pricing legislation in accordance with international norms, and that the 12.5% rate is applicable to genuine value adding companies, providing employment here and utilizing our educated workforce.

Could Sanofi, or Shire or Bayer set up subs here to make drugs and avail of the 12.5% rate if they couldn't employ chemists to make those drugs? Drug manufacturing is not a brass plate activity and relies on our low tax rate, our rate stability, and our skilled workforce to be here.