"Would an EU bailout be all that bad?" - the DEFINITIVE thread

hatrickpatrick · 15-11-2010 04:32PM #1

Ok I've seen this question crop up (and asked it myself) in other threads about the current situation but it always gets brushed aside in the larger debate about what's actually happening now, so let's make this the definitive thread for it:

Would an EU bailout be all that bad?

My opinion: We're facing into €15bn cuts over the next 4 years anyway. Several people have already stated that if we were to go to the IMF, they wouldn't ask us to do anything differently to what we're already about to do.

That's the IMF. What would the EU demand in exchange for a bailout? The obvious answer is corporation tax, but several comments I've seen suggest that they wouldn't want to do this as it would further hammer confidence and defeat the entire purpose of the bailout.

So what sort of additional pain which we are not already talking about would be attached to getting a bailout from the EU fund?

Would it really be any worse than what our government is planning to do on their own initiative?

jimmycrackcorm · 15-11-2010 05:22PM

As long as our CT was untouched then I cannot see how it would be a bad thing. We'd still have to get our books in order and it would be a relatively stable and cheap loan source. The bond markets are very predatory and unforgiving - we can well do without the speculators putting us under pressure in an effort to make money.

SkepticOne · 15-11-2010 05:39PM

I agree with jimmycrackcorm. We obviously need to tell them where to go with the corporation tax issue if they insist on that. We also need to ensure that the rate is low enough that we have a hope of extracting ourselves. The main point of the Morgan Kelly article was that if it is 5% such as was extended to Greece, then that is too high and default is inevitable. May as well default than accept a deal that simply puts off default for a couple of years while further damaging the economy.

I think the key thing is that we don't assume that everything the EU does is for our benefit. They have core European economies to look after first and foremost.

later12 · 15-11-2010 05:42PM

I imagine the difference would be tax. By European standards, Ireland is a low tax jurisdiction. I imagine our tax rates would increase substantially to brng us up to par with mainland Europe. Personally, I don't fully buy your view that it wouldn't be in Europe's interest to touch Corporation Tax.

At the moment Ireland is pretty much shot in the leg. all Europe wants is for us to be able to hobble along on our own, they don't expect us to be running sprints and doing backflips. So if corporation and other tax increases are how we suffer, then as long as we hobble along, so be it. If education and health take a further battering, it will be irish politicians who take the hit, not the Germans, so be it.
The difference is that our own government currently consider the repercussions, and therefore are more likely to come up with ways to raise funds which 'spreads the pain' and is arguably fairer on society. This would not be a big concern of the the Europeans.

Slydice · 15-11-2010 05:47PM

The problem with the country at the moment is that no matter the solution, the answer is Yes. It would be all that bad.

It just depends on who it would be bad for.

Some solutions are bad for all of us, where we end up paying a bunch of tax.
Some solutions are bad for people who splurged on big houses in the boom, if they get repossessed.
Some solutions are bad for people who have savings in a bank, if the government were to change to a new currency or include them in a default.
Some solutions are bad for the public sector workers
Some solutions are bad for the private sector workers
etc

My best guess is that most people don't want any of the solutions on offer...

but...

if they have to get stuck with one...

That they'd rather it be fair than be one that effects them only

It sucks that we are in this position at all.

If people aren't angry or upset or very frustrated with this situation, they must be fairly lucky or not very well informed.

RichardAnd · 15-11-2010 05:53PM

The only thing I'm fearful of is the corp tax being raised. The germans and the french (especially the french) will look out for themselves before us. Perhaps they'd use this as an opportunity to "steal" mncs off ireland.

SkepticOne · 15-11-2010 05:56PM

I think we need to divide the solutions into two classes.

The first class would include measures that help us sort out the deficit problem and start paying back debts. This might be raising certain taxes or lowering government spending of one sort or another.

The second class (and this is what we need to be wary of, imo) are measures that don't help us pay back debts but are insisted upon as political the price for getting a bailout. Corporation tax might be one of these. A significant rise in corporation tax might drive out multinationals and Ireland, rather than raise more, would raise less revenue. However other European countries would benefit from greater inward investment due to the removal of Ireland's "unfair" corporation tax.

[Edit. Basically what RichardAnd says]

RichardAnd · 15-11-2010 06:29PM

SkepticOne wrote: »

I think we need to divide the solutions into two classes.

The first class would include measures that help us sort out the deficit problem and start paying back debts. This might be raising certain taxes or lowering government spending of one sort or another.

The second class (and this is what we need to be wary of, imo) are measures that don't help us pay back debts but are insisted upon as political the price for getting a bailout. Corporation tax might be one of these. A significant rise in corporation tax might drive out multinationals and Ireland, rather than raise more, would raise less revenue. However other European countries would benefit from greater inward investment due to the removal of Ireland's "unfair" corporation tax.

[Edit. Basically what RichardAnd says]

Exactly, it's the politics of Europe that will really hurt, more so than the necessary economic adjustments. We have to remember, during the boom we bragged to europe about out economic miracle so if now, we have to go to them for help you can be sure that they will take the opportunity to knock us down a few pegs.

You see, europe isn't a family, if it were the french and germans would punish us in a way that a parent might punish a child. We'll be upset for a bit but after a while, we'll learn from it and be better off. No, the EU is a wild collection of radically different nations/people who have spend most of the last 1000 years at war for various reasons. The only change is that we now do our fighting over a table rather than a battle field but the end result is the same; we're all out for get what's best for ourselves.

This may seem cynical but I do believe that the EU will not last for long as it currently stands. No state in Europe really gives a crap about anyone else so in short, Ireland is the only person watching Ireland's back. Sadly we're busy fighting with each other.

Fentdog84 · 15-11-2010 06:29PM

RichardAnd wrote: »

The only thing I'm fearful of is the corp tax being raised. The germans and the french (especially the french) will look out for themselves before us. Perhaps they'd use this as an opportunity to "steal" mncs off ireland.

Sadly from our point of view the days us wise arse paddys pissing off the rest of Europe with our corporation tax et al will be over should the IMF come in.. they are obviously chomping at the bit to come and put us in our place..The latest actions from the govt are just a final desperate act to prevent this from happening because they also know their own massive salaries will certainly be when the IMF come in. All social and public services & pay will be cut to ribbons. I think overall the IMF coming in will be agood thing in the long term because it will fix our crazy spending habits bring this country back to reality in line with rest of Europe, but for you're average Joe who goes down to the pubs or shops to blow his money every week, its going to be a massive wake up call

dan_d · 15-11-2010 07:31PM

RichardAnd wrote: »

Exactly, it's the politics of Europe that will really hurt, more so than the necessary economic adjustments. We have to remember, during the boom we bragged to europe about out economic miracle so if now, we have to go to them for help you can be sure that they will take the opportunity to knock us down a few pegs.

You see, europe isn't a family, if it were the french and germans would punish us in a way that a parent might punish a child. We'll be upset for a bit but after a while, we'll learn from it and be better off. No, the EU is a wild collection of radically different nations/people who have spend most of the last 1000 years at war for various reasons. The only change is that we now do our fighting over a table rather than a battle field but the end result is the same; we're all out for get what's best for ourselves.

This may seem cynical but I do believe that the EU will not last for long as it currently stands. No state in Europe really gives a crap about anyone else so in short, Ireland is the only person watching Ireland's back. Sadly we're busy fighting with each other.

The politics of Europe are already hurting. Why do you think Angela Merkel is being so incredibly vocal on the subject of bailouts lately?She's answerable to the German people, and therefore, is trying to protect her own political position and future. It's not from any great love towards the EU or it's banks. And the markets are running scared at her remarks, and the interest rates hiked up - and now look where we are. To be honest, this is just a fore-runner of what could happen should we allow ourselves to be "taken over" by the EU. We have no real idea of the issues in France and Germany that led to them voting in their current Governments or where their Governments stand with their electorate, therefore if they chose to protect their political images at home, at our expense, they will - and we will have no control at all over that. And the same goes for future European governments.

15-11-2010 07:51PM

A bailout wont make a difference unless we let some of the banks go and default on some of our debts/banking guarantee

http://www.thepropertypin.com/viewtopic.php?f=19&t=2281&p=374552&hilit=IMF+database#p374552

It took 7 years for non performing loans to start killing banks in Japan.
Deficit aside, arrears alone could bankrupt Ireland around 2013/14 (or earlier) because we are tied to the banks and paradoxically by reducing the deficit we make this problem worse.

Amhran Nua · 15-11-2010 08:55PM

later10 wrote: »

all Europe wants is for us to be able to hobble along on our own, they don't expect us to be running sprints and doing backflips. So if corporation and other tax increases are how we suffer, then as long as we hobble along, so be it.

I think you underestimate how serious any interference in the CT would be for Ireland. It wouldn't be suffering, it would be the equivalent of expecting us to hobble along with a millstone tied to our feet after being nudged into the docks.

Dannyboy83 · 16-11-2010 11:06AM

On a pretty basic level, why the should the Germans/French/EU be expected to pay for our screw ups?

What would all the Moaning Michaels in Ireland be saying if the tables were turned and we were expected for bail out Portugal?
I seem to recall a different attitude when we were supposed to stump up for Greece.

Isn't it only fair that the Irish should get their house in order?
Isn't it only fair that some type of responsible governance is forced upon this nation?, as thusfar we have been unable to do it ourselves - as our current predicament quite clearly proves.

How did Greece end up in the mess they're in? Was it Lehmans? Nope. They cooked their own books.
Do we laugh at the Greeks, scratch our heads in bemusement - what the feck did they expect?
Well, the rest of Europe thinks the exact same thing when they look at us.

I agree that raising the CTR is a death sentence.
On the other hand, it speaks volumes that the only reason a MNC is attracted to the perfect timezone, English speaking, EU gateway that is Ireland is because of the CTR.
What infrastructure do we have to offer them?
Please don't tell me about the fabulous '3' dongle system:rolleyes:.

Other countries can't use the CTR, so quite clearly they have something else to offer.

America went into Japan & Germany at the end of WW2 and helped to rebuild & transform those countries.
Perhaps Germany can now do the same for us?

Perhaps they can help us finally eradicate the Gombeen-ism which is strangling the nation. As Amhran Nua has said plenty of times, first thing we need to change is the STV system, it needs to go.

Most important thing is that this mess was made by the Irish and it's up to the Irish to clean it up.
If other countries are actually prepared to help us - we should be grateful for that.

20Cent · 16-11-2010 11:09AM

Dannyboy83 wrote: »

On a pretty basic level, why the should the Germans/French/EU be expected to pay for our screw ups?

Because they lent money to bad investments, these investments didn't work out so tough. Thought that was what capitalism was supposed to be about.

BluePlanet · 16-11-2010 12:37PM

The EU and specifically Germany have been paying for Ireland for 20 years.

Screw the Corporation Tax, if multinational corporations want access to the EU, they can pay tax like everybody else.
We've been subsidising their bloody ESB bill long enough.

Funny to see pro-EU / pro-Lisbon posters get all tetchy once tax harmonisation edges ever closer.

Fat_Fingers · 16-11-2010 02:44PM

BluePlanet wrote: »

The EU and specifically Germany have been paying for Ireland for 20 years.

Screw the Corporation Tax, if multinational corporations want access to the EU, they can pay tax like everybody else.
We've been subsidising their bloody ESB bill long enough.

Funny to see pro-EU / pro-Lisbon posters get all tetchy once tax harmonisation edges ever closer.

i could not find any more recent data for Foreign-owned MNCs in Ireland ... in 2006, 100,687 people were employed in FDI manufacturing companies, and 51,534 in FDI internationally traded services companies.
This is without considering all the resulting jobs from supporting the above.

Most have stated that low Corporation Tax is the only reason left to keep them in Ireland.
I think if that is removed within 2-3 years all MNC's would be gone.

rumour · 16-11-2010 04:07PM

Dannyboy83 wrote: »

On a pretty basic level, why the should the Germans/French/EU be expected to pay for our screw ups?

What would all the Moaning Michaels in Ireland be saying if the tables were turned and we were expected for bail out Portugal?
I seem to recall a different attitude when we were supposed to stump up for Greece.

Isn't it only fair that the Irish should get their house in order?
Isn't it only fair that some type of responsible governance is forced upon this nation?, as thusfar we have been unable to do it ourselves - as our current predicament quite clearly proves.

How did Greece end up in the mess they're in? Was it Lehmans? Nope. They cooked their own books.
Do we laugh at the Greeks, scratch our heads in bemusement - what the feck did they expect?
Well, the rest of Europe thinks the exact same thing when they look at us.

I agree that raising the CTR is a death sentence.
On the other hand, it speaks volumes that the only reason a MNC is attracted to the perfect timezone, English speaking, EU gateway that is Ireland is because of the CTR.
What infrastructure do we have to offer them?
Please don't tell me about the fabulous '3' dongle system:rolleyes:.

Other countries can't use the CTR, so quite clearly they have something else to offer.

America went into Japan & Germany at the end of WW2 and helped to rebuild & transform those countries.
Perhaps Germany can now do the same for us?

Perhaps they can help us finally eradicate the Gombeen-ism which is strangling the nation. As Amhran Nua has said plenty of times, first thing we need to change is the STV system, it needs to go.

Most important thing is that this mess was made by the Irish and it's up to the Irish to clean it up.
If other countries are actually prepared to help us - we should be grateful for that.

So we want the Marshall Plan not the Treaty of Versailles. Sounds like a good slogan to me.

hinault · 16-11-2010 04:25PM

If a bailout ensured more direct control of Irelands internal economic policy, I would welcome it.

Our policy makers here are guilty of economic treason IMO.
( we really do deserve better than the bunch of crooks/liars that we have representing us).

keithclancy · 16-11-2010 05:28PM

RichardAnd wrote: »

The only thing I'm fearful of is the corp tax being raised. The germans and the french (especially the french) will look out for themselves before us. Perhaps they'd use this as an opportunity to "steal" mncs off ireland.

Steal .. ?

By shuffling money through Ireland its possible to only pay an effective overseas tax rate of 2.4%.

Alot of MNCs use Ireland as a base for tax reasons, nothing more. (Microsoft, Google, Facebook, Dell etc)

http://www.irishtimes.com/newspaper/frontpage/2010/1022/1224281723468.html

Irelands Income tax rate is low, simple as, the income tax rate and corporate tax rate will have to be raised to cover the gap.

Angela Merkel is seeing a lot of pressure in Germany because people believe if a bailout is offered with no consequences then countries that are experiencing issues will run themselves into the ground to get the bailout.

i.e. Get out of the hole by digging their way out.

IMO any bailout should come with strings attached otherwise no lessons will be learnt.

jimmycrackcorm · 16-11-2010 05:48PM

keithclancy wrote: »

Steal .. ?

By shuffling money through Ireland its possible to only pay an effective overseas tax rate of 2.4%.

Interesting given our CT rate is 12.5% - what diference would be made at a higher rate? We're such a small economy ( the size of an average city in Europe ) that it's not the rate itself but the super-profits that piss off our EU partners.

Alot of MNCs use Ireland as a base for tax reasons, nothing more. (Microsoft, Google, Facebook, Dell etc)

http://www.irishtimes.com/newspaper/frontpage/2010/1022/1224281723468.html

Irelands Income tax rate is low, simple as, the income tax rate and corporate tax rate will have to be raised to cover the gap.

Angela Merkel is seeing a lot of pressure in Germany because people believe if a bailout is offered with no consequences then countries that are experiencing issues will run themselves into the ground to get the bailout.

i.e. Get out of the hole by digging their way out.

I wonder how elastic CT is - after all we need to be below our competitors but there might be a case to say that it could be raised perhaps a basis point.

IMO any bailout should come with strings attached otherwise no lessons will be learnt.

Yes in terms of fiscal prudence.

murphy93 · 16-11-2010 05:56PM

Sounds good to me. If we go for a bailout or help it might keep our politicans accountable. At present we are drifting and spending is not in check. The longer we leave it the more painfull it may become. We have all got used to the generous EU rebuilding Ireland and we deserve it.
so what if we have to join the Greeks, Portudgese spainish etc. plenty in common.
The Corrutpion and dodgy dealings might stop. though god only knows what are MEP s get up to.;)

hatrickpatrick · 17-11-2010 02:56AM

keithclancy wrote: »

Steal .. ?

By shuffling money through Ireland its possible to only pay an effective overseas tax rate of 2.4%.

Alot of MNCs use Ireland as a base for tax reasons, nothing more. (Microsoft, Google, Facebook, Dell etc)

http://www.irishtimes.com/newspaper/frontpage/2010/1022/1224281723468.html

So what? The point is, they employ people. To hazard that would be DISASTROUS.

Amhran Nua · 17-11-2010 11:36AM

Fat_Fingers wrote: »

This is without considering all the resulting jobs from supporting the above.

Including, lest we forget, most of the public sector jobs paid for out of income taxes collected.

keithclancy wrote: »

Alot of MNCs use Ireland as a base for tax reasons, nothing more. (Microsoft, Google, Facebook, Dell etc)

Google for example employs 1700 people and contributes I'd say the guts of €100 million euros annually to the exchequer. If we had a hundred more like them we could go a lot easier on the cuts. Unfortunately, if we had a hundred more like them we'd be one of the largest tax haven operations on earth, so it would be a lot harder to hold out against US and EU demands to push the CT upwards. The future lies in domestic industry of some sort.

We have a lot of bright, talented, well educated people in Ireland, but then again so do most European countries. We need something special to make companies set up shop here. So we cut the corporation tax and make it in income taxes, employers contribution, etc instead. What we need, looking towards the future, are homegrown industries to use the same competitive advantage.

keithclancy · 17-11-2010 11:44AM

hatrickpatrick wrote: »

So what? The point is, they employ people. To hazard that would be DISASTROUS.

The point is if your only benefit is a low rate of corporate tax and the country cannot pay its debt, then you can see why the Germans and French would be a little upset when they lose this revenue while still maintaining a good public infrastructure and then end up have to bail out Ireland anyway.

Ireland should have used the low rate of corpo tax to attract business, not to keep it. All the while investing in infrastructure, encouring more knowledge workers into the country. Keep the Companys sweet but Ireland should not just be a gammy EU tax haven.

The Transport Infrastructure in Ireland is seen as a joke.

Ireland is not the only country with a Tax Incentive to get business in, the Netherlands for example has the 30% Ruling to bring in Foreign Knowledge.

http://www.iamsterdam.com/en/living/official-matters/thirty-percent-ruling

Taxation across the board compared to other Eurozone countrys is very low.

Amhran Nua · 17-11-2010 12:33PM

keithclancy wrote: »

The point is if your only benefit is a low rate of corporate tax and the country cannot pay its debt, then you can see why the Germans and French would be a little upset when they lose this revenue while still maintaining a good public infrastructure and then end up have to bail out Ireland anyway.

If they ever want to see a bent cent of what they lend paid back though, they literally can't touch the corporation tax rate.

keithclancy · 17-11-2010 02:27PM

Amhran Nua wrote: »

Google for example employs 1700 people and contributes I'd say the guts of €100 million euros annually to the exchequer. If we had a hundred more like them we could go a lot easier on the cuts. Unfortunately, if we had a hundred more like them we'd be one of the largest tax haven operations on earth, so it would be a lot harder to hold out against US and EU demands to push the CT upwards. The future lies in domestic industry of some sort.

Did you read the Article I posted ?

Google paid taxes of € 18.3 million in Ireland last year

Google’s “income shifting” helped reduce its overseas tax rate to 2.4 per cent, the lowest of the top five US technology companies, according to regulatory filings in six countries.

A Google spokeswoman said that the firm’s practices were “very similar to those at countless other global companies” operating across a wide range of industries.

Bob_Latchford · 17-11-2010 02:40PM

Its all in the details, thats why ireland should be wary of being bumped into an agreement. Labeling Ireland a problem and falling overthemselves to offer "help" should be taken with a pinch of salt.

They are offering debt to pay debt that they themselves own. Its all self interest.

If you owe the bank 500 thats your problem
If you owe the bank 500m thats the banks problem
If the banks owe institutions 100bn then its the inistitutions problem.

Ireland needs a debt facility but it should not be punitive. The bond holders , lenders, ECB & UK need to take some of the burden.

Defaulting is everyones problem not just Irelands as is being portrayed by Europe and media

Amhran Nua · 17-11-2010 02:42PM

keithclancy wrote: »

Did you read the Article I posted ?

Google pays its 1700 employees a decent wage, and every one of them pays income taxes. The employer's PRSI contribution is likewise not counted as part of corporate tax take; between the two of those they probably surpass the CT income, and if you pile on the VAT from employee expenditure on top of that you get a very healthy annual payment into the exchequer.

keithclancy · 17-11-2010 02:54PM

Amhran Nua wrote: »

Google pays its 1700 employees a decent wage, and every one of them pays income taxes. The employer's PRSI contribution is likewise not counted as part of corporate tax take; between the two of those they probably surpass the CT income, and if you pile on the VAT from employee expenditure on top of that you get a very healthy annual payment into the exchequer.

Yes and there isn't enough to meet Government spending, can't you see that other European countries would see this as unfair ? Not only are they subsidising Irelands growth but their money into their tax purse also.

Maybe we should just tell Germany "Arra lads .. can't pay back that pile of cash, how about we just get a load of Irish to go on Holidays there and then you'll get it back in VAT and Jobs serving Beer and Schnitzel"

galway2007 · 17-11-2010 02:55PM

Amhran Nua wrote: »

Google pays its 1700 employees a decent wage, and every one of them pays income taxes. The employer's PRSI contribution is likewise not counted as part of corporate tax take; between the two of those they probably surpass the CT income, and if you pile on the VAT from employee expenditure on top of that you get a very healthy annual payment into the exchequer.

Just heard a Uk guy on radio
He said that if the UK was to go along with any bailout for Ireland there would have to be big changes to the Irish corporation Tax.

He said as it stands the Irish are robbing the tax base in the uk and other countries by allowing companies to set up there head quarters here and we could not expect countries to bail us out while we are robbing there tax base.
You have to be honest what he said is true and we can kiss our 12.5 rate goodbye.
What the result will be, I would think more unemployed

Theboinkmaster · 17-11-2010 03:14PM

galway2007 wrote: »

Just heard a Uk guy on radio
He said that if the UK was to go along with any bailout for Ireland there would have to be big changes to the Irish corporation Tax.

He said as it stands the Irish are robbing the tax base in the uk and other countries by allowing companies to set up there head quarters here and we could not expect countries to bail us out while we are robbing there tax base.
You have to be honest what he said is true and we can kiss our 12.5 rate goodbye.
What the result will be, I would think more unemployed

Surely if the CT rate is highered it only damages us economically - then how would we ever pay back our bailout debt?!

"Would an EU bailout be all that bad?" - the DEFINITIVE thread

Comments