Ethics of our Corporation Tax

Rologyro · 04-03-2019 12:15pm #1

I’m starting this thread cause I’d like to know other people’s opinions on whether our government is right to try and keep our low corporation tax, as my own opinion has changed.

As someone who works in IT, I initially believed that our government should do everything in its power to keep our corporation tax low, so Irish people could have good jobs with companies that base themselves here to take advantage of it.

I now think that really it’s morally wrong to facilitate this tax avoidance. We are helping to global gap between the rich and the poor get bigger.

I understand the argument that we are a small country who needs to use whatever means available to keep our economy healthy, but imagine if our economy was based on something that everyone agrees is unsavory, like manufacturing arms, just because we do well out of it doesn’t mean we should continue.

So what’s other people thoughts on this?

LuckyLloyd · 04-03-2019 12:23pm

I think we should recover the actual amount of tax owed to the exchequer as per the applicable rate. That's the starting point.

mayordenis · 04-03-2019 12:28pm

I think the first 2 posts in this thread are not mutually exclusive and agree with both.

It would probably be doing my own job prospective harm, as in many of the companies that I may work in my career could reduce their employment here but it is in essence an immoral race to the bottom.

The starting point however is absolutely that corporations do pay the amount that they should pay. We should actively combat unreasonable transfers, at least attempt to remove egregious acts of tax fraud.

That said, without some manner of global corporation tax parity (which will never and can never happen), then some country is going to have the absolute lowest rate of tax, so where do we draw the line in the sand?

jm08 · 04-03-2019 12:34pm

Rologyro wrote: »

I’m starting this thread cause I’d like to know other people’s opinions on whether our government is right to try and keep our low corporation tax, as my own opinion has changed.

As someone who works in IT, I initially believed that our government should do everything in its power to keep our corporation tax low, so Irish people could have good jobs with companies that base themselves here to take advantage of it.

I now think that really it’s morally wrong to facilitate this tax avoidance. We are helping to global gap between the rich and the poor get bigger.

I understand the argument that we are a small country who needs to use whatever means available to keep our economy healthy, but imagine if our economy was based on something that everyone agrees is unsavory, like manufacturing arms, just because we do well out of it doesn’t mean we should continue.

So what’s other people thoughts on this?

Its not tax avoidance. Countries have different rates and if the tax rate is low, its the country (the Irish State in this instance) is the one that is losing out. Low corporate tax rate is only harming the Irish State, unlike selling arms to for example, Saudi Arabia which are then used to make war with Yemen.

Geuze · 04-03-2019 12:43pm

CT revenue has surged in recent years.

How is the State losing out?

jm08 · 04-03-2019 12:51pm

Geuze wrote: »

CT revenue has surged in recent years.

How is the State losing out?

The CT take would be even more if the rate was higher (for the record, I don't have an issue with the present tax rate).

My point is that I wouldn't put our low CT rate in the same ethical category as selling arms that end up killing people.

Rologyro · 04-03-2019 12:56pm

jm08 wrote: »

My point is that I wouldn't put our low CT rate in the same ethical category as selling arms that end up killing people.

My point was: just because something helps our economy doesn’t mean we should do it.

Obviously killing people is worse than tax avoidance...

lalababa · 04-03-2019 1:10pm

It's a basically unfair system that paye, small and some big businesses and sole traders are paying a higher rate of tax than the big boys. It's a bit like if the top 3 premiership teams got to play all their games at home and picking their own referee.
It's one rule for the big boys and another for the rest.
To add insult to injury the 12% is ridiculously diluted further by loopholes and special agreements.
Hopefully the eu as a whole will continue to tighten up homogenity in the area.
I saw a TV program about a small town in the North of UK where local shops and businesses were struggling big time . I think it was a butcher that was explaining to a friend that he was going to go out of business. The friend happened to be a corporate tax accountant. The friend turned the butchers into a corporate indity to survive. The UK revenue auditors nearly had a baby.

prawnsambo · 04-03-2019 1:14pm

Rologyro wrote: »

My point was: just because something helps our economy doesn’t mean we should do it.

Obviously killing people is worse than tax avoidance...

Yes, but it isn't tax avoidance. Putting aside issues like transfer pricing of course. There are actually lower CT rates elsewhere in the world. And elsewhere in the EU as well. Hungary and Montenegro have 9%, Macedonia, Bosnia Herzegovnia, Andorra and Bulgaria have 10% and Cyprus, Liechtenstein and ourselves have 12.5%. The Isle of Man and Monaco have 0%.

We're not by any means the lowest.

Franz Von Peppercorn · 04-03-2019 1:21pm

lalababa wrote: »

It's a basically unfair system that paye, small and some big businesses and sole traders are paying a higher rate of tax than the big boys. It's a bit like if the top 3 premiership teams got to play all their games at home and picking their own referee.
It's one rule for the big boys and another for the rest.
To add insult to injury the 12% is ridiculously diluted further by loopholes and special agreements.
Hopefully the eu as a whole will continue to tighten up homogenity in the area.
I saw a TV program about a small town in the North of UK where local shops and businesses were struggling big time . I think it was a butcher that was explaining to a friend that he was going to go out of business. The friend happened to be a corporate tax accountant. The friend turned the butchers into a corporate indity to survive. The UK revenue auditors nearly had a baby.

Why wouldn’t the butchers be a corporate entity to begin with. The corporate tax rate is the same for all businesses in Ireland. However small businesses whose owners live entirely off the earnings would be stupid to pay too much corporate tax as they would be doubled taxed.

Rologyro · 04-03-2019 1:43pm

prawnsambo wrote: »

Yes, but it isn't tax avoidance. Putting aside issues like transfer pricing of course. There are actually lower CT rates elsewhere in the world. And elsewhere in the EU as well. Hungary and Montenegro have 9%, Macedonia, Bosnia Herzegovnia, Andorra and Bulgaria have 10% and Cyprus, Liechtenstein and ourselves have 12.5%. The Isle of Man and Monaco have 0%.

We're not by any means the lowest.

The average global corporation tax rate is 23% (or 26% when you take GDP into account).

Agree that some countries are worse than us, but by having a rate that is so much lower, we are part of the problem. Companies are paying tax here rather than where their sales are.

As another poster said, using your argument just leads to a race to the bottom.

Amirani · 04-03-2019 1:51pm

Ireland's ethics (and by extension the ethics of its Government) are to its citizenry. Raising the corporation tax by any notable amount would cause increased hardship to its citizenry. There would be a lower corporate taxation take, and there would be a reduction in jobs. This is not an ethical change to make.

Ireland pushes up its corporation tax rate to 20% and the US multinationals just pay their corporation tax in the US (or an alternative low-tax country) instead. And the fruits of that just flow to the large US shareholders to pay feck all in wealth taxes and capital gains taxes anyway. How is that a more ethical outcome?

jm08 · 04-03-2019 2:17pm

lalababa wrote: »

I saw a TV program about a small town in the North of UK where local shops and businesses were struggling big time . I think it was a butcher that was explaining to a friend that he was going to go out of business. The friend happened to be a corporate tax accountant. The friend turned the butchers into a corporate indity to survive. The UK revenue auditors nearly had a baby.

Would the small towns in the north of England struggle as much if they had multinational employers like Intel or Boston Scientific in the area employing 1000s of local people paying very good wages so that ordinary workers could afford to go to the butchers to buy their meat?

prawnsambo · 04-03-2019 2:36pm

Rologyro wrote: »

The average global corporation tax rate is 23% (or 26% when you take GDP into account).

Agree that some countries are worse than us, but by having a rate that is so much lower, we are part of the problem. Companies are paying tax here rather than where their sales are.

As another poster said, using your argument just leads to a race to the bottom.

You're conflating two differnt things. Transfer pricing (which I excluded from my comparison because it's not confined to low CT territories) is a seperate issue. There is a broad case for it, where there is an IP content that originated somewhere other than where the sale is made or the product manufactured, is an acceptable method of allocating profit to where it's made. On a simplistic example where I invent a product here, manufacture it in (say) Bulgaria and sell it all over the world, there would be tax liability in Bulgaria on the added value from the manufacturing process, a tax liability on the sale markup here and the royalty that the Bulgarian manufacturing plant pays to me, would be tax free here and a deduction against tax in Bulgaria.

The use of the word 'worse' is unnecessarily emotive. The issue for smaller economies is that they have very little competitive advantage over much larger economies and so have to rely on other incentives to attract jobs and business to their shores.

Manic Moran · 04-03-2019 5:37pm

I would presume that an decision to locate anywhere is a multitude of factors, of which corporate tax is only one. Being in the EU with an English language workforce is probably worth paying a few percent extra on tax than setting up in Bulgaria. On the other hand, raising corporate tax to the extent that it becomes a decisive decision criterion will result not in an extra +10% or whatever revenue, but could result in an loss of everything if they up and leave. Not to mention the unemployment costs... Ireland has a bird in the hand right now, and seems to be doing well enough out of it. Is it ready to risk it for greed?

greenfield21 · 04-03-2019 6:21pm

But does corporate tax not directly effect that deicision. I thought I read somewhere that these companies need to bring employees here to meet a certain percentage of the value of total profits filtered through Ireland? So as to avoid shell company's setting up.

blanch152 · 04-03-2019 6:25pm

lalababa wrote: »

It's a basically unfair system that paye, small and some big businesses and sole traders are paying a higher rate of tax than the big boys. It's a bit like if the top 3 premiership teams got to play all their games at home and picking their own referee.
It's one rule for the big boys and another for the rest.
To add insult to injury the 12% is ridiculously diluted further by loopholes and special agreements.
Hopefully the eu as a whole will continue to tighten up homogenity in the area.
I saw a TV program about a small town in the North of UK where local shops and businesses were struggling big time . I think it was a butcher that was explaining to a friend that he was going to go out of business. The friend happened to be a corporate tax accountant. The friend turned the butchers into a corporate indity to survive. The UK revenue auditors nearly had a baby.

PAYE is paid on a different basis than corporation tax.

Small businesses get huge tax exemptions and many pay little tax.

Sole traders are much better off than PAYE.

It is not just a question of the rate of tax.

PeadarCo · 04-03-2019 6:48pm

blanch152 wrote:

Small businesses get huge tax exemptions and many pay little tax.

What's your evidence of this? Sole traders are taxed on taxable income. They are allowed claim expenses(which are regulated by revenue and general tax law) like any normal business. However they face largely the same taxes as everyone else. Nothing that could be described as a huge tax exemption. If you run a small business you also face the close company surcharge.

PeadarCo · 04-03-2019 6:55pm

blanch152 wrote:

Sole traders are much better off than PAYE.

Sole traders are better not incorporating in general at least from a taxation point of view because it makes cash extraction from a business far far expensive as they end up getting double taxed. They pay tax at their standard tax rate and the legal entity also has to pay tax. Obviously a person making the decision should consider more than just the tax impact.

lalababa · 04-03-2019 7:02pm

Franz Von Peppercorn wrote: »

Why wouldn’t the butchers be a corporate entity to begin with. The corporate tax rate is the same for all businesses in Ireland. However small businesses whose owners live entirely off the earnings would be stupid to pay too much corporate tax as they would be doubled taxed.

What in God's name are you on about?

ted1 · 04-03-2019 7:05pm

Rologyro wrote: »

I’m starting this thread cause I’d like to know other people’s opinions on whether our government is right to try and keep our low corporation tax, as my own opinion has changed.

As someone who works in IT, I initially believed that our government should do everything in its power to keep our corporation tax low, so Irish people could have good jobs with companies that base themselves here to take advantage of it.

I now think that really it’s morally wrong to facilitate this tax avoidance. We are helping to global gap between the rich and the poor get bigger.

I understand the argument that we are a small country who needs to use whatever means available to keep our economy healthy, but imagine if our economy was based on something that everyone agrees is unsavory, like manufacturing arms, just because we do well out of it doesn’t mean we should continue.

So what’s other people thoughts on this?

Tax avoidance and low corporation tax are different things

firemansam4 · 04-03-2019 7:23pm

Raising corporation tax significantly may bring in a temporary rise In Revenue but it would do irreparable damage to our economy in the long term.
It is not just the tax but the employment it brings to this country.
Yes there may be an ethical question as to whether it is right or not, but in the global scheme of things us raising our corporation tax is not going to make any real difference other than damaging our own economy.

Rologyro · 04-03-2019 8:06pm

ted1 wrote: »

Tax avoidance and low corporation tax are different things

One of the primary methods [of corporate tax avoidance] is corporate profit-shifting. This is where a multinational company registers its headquarters in a low-corporation tax jurisdiction and then books its profits there, rather than in the country in which it actually makes its sales.source

Wheeliebin30 · 04-03-2019 8:11pm

Corporation tax is 12.5% on profits only.

If they want to take money from the profits after that they still pay tax.

People think this is all the tax big companies pay.

Another myth pushed by the left.

They pay huge tax on behalf of the employees and any money they want to take out is subject to the same tax as anyone else.

Cookie_Monster · 04-03-2019 8:56pm

PeadarCo wrote: »

Sole traders are better not incorporating in general at least from a taxation point of view because it makes cash extraction from a business far far expensive as they end up getting double taxed. They pay tax at their standard tax rate and the legal entity also has to pay tax. Obviously a person making the decision should consider more than just the tax impact.

I've been out of Ireland too long to be current on this but surely it's still more tax efficient to setup a company and rail as many expenses through it as possible and pay yourself a lower salary as a result, thus saving a lot overall?
Can also claim VAT on any expense.

My wife is a H&S consultant here in NZ and I setup a company for her as it's so much more tax efficient, can claim part of mortgage interest, rates, company pays broadband, pays for phones, will shortly own the car, can claim depreciation on any asset (phone, laptop etc), can write off all day to day expenses. You get the GST benefit (local VAT) as a deductible on everything too so thats another 15% saved.
You save a ton paying all these out of pretax income and salary can be lower as a result, paying less tax here again, all for a little bit of corporate tax at the end... why would you not setup a company? and thats with NZ's 28% rate, 12.5% would be even better.

Eric Cartman · 04-03-2019 9:05pm

Rologyro wrote: »

I’m starting this thread cause I’d like to know other people’s opinions on whether our government is right to try and keep our low corporation tax, as my own opinion has changed.

As someone who works in IT, I initially believed that our government should do everything in its power to keep our corporation tax low, so Irish people could have good jobs with companies that base themselves here to take advantage of it.

I now think that really it’s morally wrong to facilitate this tax avoidance. We are helping to global gap between the rich and the poor get bigger.

I understand the argument that we are a small country who needs to use whatever means available to keep our economy healthy, but imagine if our economy was based on something that everyone agrees is unsavory, like manufacturing arms, just because we do well out of it doesn’t mean we should continue.

So what’s other people thoughts on this?

I really haven't heard anything so wrong in my life. Our corporation tax should only ever be debated to go lower. This low rate has transformed Ireland from an agriculture centric poor country into the 5th richest country in the world (per capita) . It is responsible for so much FDI and putting food on so many peoples tables.

James Brown · 04-03-2019 9:29pm

The system encourages a race to the bottom. There's nothing wrong in business making money where it can and availing of more lenient taxation where it can. That said, thankfully we have some forms of social legislation protecting workers or we might be having a 'If we improve standards for workers, Nike might go back to China and we'd lose those jobs' conversation.

Franz Von Peppercorn · 04-03-2019 9:30pm

lalababa wrote: »

What in God's name are you on about?

I’m explaining corporate tax to you.

Franz Von Peppercorn · 04-03-2019 9:35pm

Cookie_Monster wrote: »

I've been out of Ireland too long to be current on this but surely it's still more tax efficient to setup a company and rail as many expenses through it as possible and pay yourself a lower salary as a result, thus saving a lot overall?
Can also claim VAT on any expense.

My wife is a H&S consultant here in NZ and I setup a company for her as it's so much more tax efficient, can claim part of mortgage interest, rates, company pays broadband, pays for phones, will shortly own the car, can claim depreciation on any asset (phone, laptop etc), can write off all day to day expenses. You get the GST benefit (local VAT) as a deductible on everything too so thats another 15% saved.
You save a ton paying all these out of pretax income and salary can be lower as a result, paying less tax here again, all for a little bit of corporate tax at the end... why would you not setup a company? and thats with NZ's 28% rate, 12.5% would be even better.

Other countries tend to be different but in Ireland wages and dividends are taxed as normal income. It makes no sense to pay yourself dividends after you pay corporation tax, unlike the U.K. where dividends are not taxed for the first 30k or so. In the U.K. you can (or at least could a few years ago) get away with no personal tax on approx 40K (dividends and wages) but you will pay corporation tax on the profits. Wages are of course excluded from profits.

In Ireland dividends are taxed as normal income and as a sole trader you can expense what you could have with the company. There’s little or no tax advantage to a company for many.

I think the company is the safer route though, insurance wise, but it doesn’t have the same advantages as other countries with regards tax.

Rologyro · 04-03-2019 11:11pm

Eric Cartman wrote: »

I really haven't heard anything so wrong in my life. Our corporation tax should only ever be debated to go lower. This low rate has transformed Ireland from an agriculture centric poor country into the 5th richest country in the world (per capita) . It is responsible for so much FDI and putting food on so many peoples tables.

I think you’re saying the same thing as I am, but your conclusion is that it is a good thing because our economy benefits.

My argument is that it is not a good thing, because we are helping large corporations avoid paying a fair amount of tax.

You haven’t anything so wrong in your life?

Rologyro · 04-03-2019 11:23pm

Manic Moran wrote: »

I would presume that an decision to locate anywhere is a multitude of factors, of which corporate tax is only one. Being in the EU with an English language workforce is probably worth paying a few percent extra on tax than setting up in Bulgaria. On the other hand, raising corporate tax to the extent that it becomes a decisive decision criterion will result not in an extra +10% or whatever revenue, but could result in an loss of everything if they up and leave. Not to mention the unemployment costs... Ireland has a bird in the hand right now, and seems to be doing well enough out of it. Is it ready to risk it for greed?

Agree that the best thing to do for Ireland is to leave our corporation tax the way it is.

If these companies were taxed based on where they made their sales it would solve this without Ireland having to touch its tax rate. There would be huge resistance to that though.

Ethics of our Corporation Tax

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