Japan is still bubbling public debt to stimulate a declining economy. Ireland has more growth potential than Japan. DG.

Enough of this beardism. You’re just jealous.

bjg

Greek vs Ireland spreads:
Best to look at the moves since June. Ireland 10yr was trading at 70bps approx over Greece. Large ECB LTRO (plenty of liquidity), better risk appetite – Ireland trades 30bps through Greece. Most rational traders would take profit here (looking ahead toward year end liquidty etc). Trades back towards flat. Volatility recently in spreads probably reflects lack of interest from traders in these markets given the time of year coupled with rumours that china will buy 30-90bio of greek debt, dubai jitters, concerns about stock market valuations etc. Wouldn’t try pin it on fundamentals – difficult to fit a story to the moves. Similar moves in Irish – bund spreads – 100bps tighter. Risk reward given reasons outlined above would favour taking this off – hence it trades wider. I am not aware of any stark revelation that the market didn’t know of already that would fundamentally drive this move wider (equally hard to explain the move from june based on the fundamental view that - has Ireland’s position improved so much relative to Germany in the last few months).
Corporate Tax
I think we should have 0% Corporate Tax. Europe don’t want it because they know what the likely effect is on a multinational’s (who is looking at Europe) decision process. The Gov forecast it will raise 3.5bio to 4bio over the next 3yrs. Given their record – probably going to come in lower. From Minsky’s Stabilizing an Unstable Economy – 0% reduces the incentive to load up a balance sheet with debt because interest payments are deducted before arriving at taxable profit – definitely an incentive worth thinking about in Ireland. It reduces the incentive for executives to lose the plot on advertising and marketing (everything that falls under this umbrella) which also reduces taxable profit. Ensure that the company pays out majority of profits ala reits (who cares if its abroad or not) so as to avoid people using the corporate status as means of avoiding paying income tax. I am sure there are more. Can anyone tell me negatives? Can anyone tell me that it definitely won’t create employment almost immediately (it can be implanted immediately – unlike trying to reduce min. wage, power costs, strength of the euro etc) – it certainly might save some jobs as it puts less of a burden on business? Putting people on training courses doesn’t help them pay mortgages. Yes protected banks will pay levys in the future for the state’s protection and can abolish tax incentives – let the cash flow to the most productive resources/investments – we have enough hotels. I would certainly wager the 4bio that it will attract investment. We have taken far greater risk recently. And finally, yes it is beggar thy neighbor but as the last few months and years have shown it’s a dog eat dog world. No one giving out to the boe, fed snb etc. Can’t think of another way to try tip the scales back slightly in our favour. Would definitely favour a carbon tax. But the key is removing as much as possible any impediments to doing business here. Would love to hear your views.

I’m of the view that we should not treat foreign enterprises (mobile or not) any differently from any other enterprise. The Government and EU agrees. Hence we have a 12.5% corporate tax rate.

Now you seem to think that we can raise more money from them by taxing them more. Why does the Irish government need to raise more money?

Perhaps it needs to raise less. The working classes, consumers and general populus vulgus agree with me on this. Hence they shop in Newry.

Now you have posited a higher tax rate on these MNCs to raise more money. And it’s been objected that this might cause them to move away.

I kind of agree that we could raise their tax to 15% but only if we reduce all other tax to 15%.

The government doesn’t need much of the money it raises. This is clear when you consider the simple and obvious fact that, 1. given the most efficient business processes, 2. use of technology, 3. integration of activity across sectors, 4. privatisation opportunities and 5. removal of privileges granted to public sector workers in a way that is driven by union coercion / extortion and not markets, - public sector employment could be cut by about 75% and spending by about 80%.

I’m talking MNC top-level, productivity stuff here.

Otherwise it’s a feudal swamp awaiting the Enlightenment of market forces and Consumer sovereignty.

would that be an as open a mind as Sepp Blatter has on Ireland being the 33rd nation in the world cup. These instruments were meant to be core tier 1 i.e. loss bearing in certain circumstance. Here is such a circumstance.

Ernie, this is a non sequitur.

Object lesson in what?
What question are you answering?
What is it I’m not keeping up with?

You said Capitalism is a pyramid scheme.

What does this mean?

Paul

already dealt with here

http://www.irisheconomy.ie/index.php/2009/11/30/new-bank-guarantee-scheme/#comments

They’re almost certain to actually pay the govt dividend, as the EU has confirmed it has an “open mind” on the matter.

Is that now official. Was a statement made this afternoon?

A consequence of the move is that that AIB can not pay interest on the Government’s €3.5 billion.

???????????????

sorry, the tangible benefit of c.5% would be vs the lower tier of corporation tax rates existing in the main EU countries.

what im saying is that its not cost-free for them to remain in Bermuda, much like its not cost free for them to set up shop here (they’re still irritating the Feds somewhat). The point is its less costly reputation-wise to set up here vs Bermuda, and they still get a tangible benefit (c.5% or so) when compared to setting up in the US or UK. As such, its worth it for them overall. If the benefit was 1-2%, it probably wouldn’t be. Its a pretty basic concept of pro’s vs con’s.

So, let me see if I have this straight:

We have to have a beggar-thy-neighbour corporate tax rate because, if we didn’t, the American multinationals would all go to cheaper jurisdictions except that they can’t go to cheaper jurisdictions because the American government takes a dim view of those jurisdictions and all the ones they don’t take a dim view have higher corporate tax rates than we do.

So why is it again that we can’t increase our corporate tax rate?

no im getting your point, i just think you’re over emphasising a one day movement that leaves nominal Greek bond yields still higher than nominal Irish ones, and Ireland is quite clearly benefitting fromt he news, just not as much, but then again it didnt lose out as much either.

Im saying its profit taking, you’re implying its a big shift in sentiment against Ireland, despite the fact that Irish yields are lower as well. Its either really really good news for Greece, profit taking after a huge 1 month move up for Greece, or perhaps profit taking on any Ireland vs Greece trades that were put on in recent weeks. Maybe its just short covering and general illiquidity. Hard to paint it as a “bad news for Ireland” day when our bond yields are much lower as well. In the Eurozone, Greece are the outperformers today, but who are the second best performers? Ireland.

because Obama has already said they view certain jurisdictions as borderline tax evaders (Bermuda) and others as simply tax convenient/friendly (Ireland). Not sure how the US feel about the Isle of Man, but a few Bermuda based corporations have relocated to Ireland in recent months (Covenian/Accenture). Because we’re in the EU, it seems to keep the US authorities happy enough.

Greece is benefitting from two dynamics - itself (ie the EU aint gonna let it go bust) and Dubai (general risk appetite).

The story last week was - Greece and Dubai, are they gonna default/need to be bailed out?

The story this week - Greece and Dubai, actually its not as bad as it looks, just need to be careful.

Its a reminder that the financial crisis is still present is certain assets/locations, but you’d go mad if you made medium terms judgement calls on a day-to-day basis. The focus next week, for instance, is obviously gonna turn to the Irish budget. It’ll be far more important in terms of how the sentiment for Ireland looks as we head into 2010.

If Bermuda and the Isle of Man have tax rates which are virtually nil and if we’re just talking about companies free to shift their profits to any country they like, why would any corporation choose Ireland?

“as of now on reuters Greek ten year over bund 167, irish at 165….
five year over bund 103 and 140″

Just to clarify, thats five year over bund 103 (Irish) and 140 (greek), and not the other way around (though the Greek one is slightly longer maturity which explains some of the difference).

I think the 8.30am to 10.30 am is more due to when liquidity is in the markets.

In the days after the Dubai crisis the Irish and Greek spreads widened significantly but the Greek spread went out much further.

Since the panic has abated risk spreads has started to tighten on all assets.

But Ireland hasn’t benefited from that tightening as much as other risks and I think we are pushing out to our previous outlier status again.

if you look at the graph of the move in Greek debt today, the move is almost completely between 8.30am and 10.30am, and its flatlined since. Its the same withh the Irish bonds. Basically a load of buyers came in first thing this morning on the back of the Dubai news. With most other bonds fairly flat on the day, and Irish stuff slightly better, whats your alternative explanation?