Categories Banking Crisis EMU European economy European politics Citoyen Sarkozy et ses amis irlandais Post author By Brendan Walsh Post date January 18, 2011 111 Comments on Citoyen Sarkozy et ses amis irlandais Colm McCarthy has some trenchant remarks on Mr Sarkozy’s recent populist speech: Related ← Cowen and Advice Relating to the Guarantee → For How Long Does EU-IMF Financing Fund the State? 111 replies on “Citoyen Sarkozy et ses amis irlandais” Ireland’s problem is that we lay down for Sarkozy et al too quickly. We could have a learn a few lessons from CB. Maybe the French will offer us the same deal they gave the Tunisian dictator… give us a loan of their riot police to put down domestic protests (at our austerity measures). Did he make the speech while in India? Or was that just a photo? Because here’s a simple circle. India buys some French military hardware or some such. But give out that they would like to be able to compete better with Ireland for jobs. Would he ever do something about their tax rate. Once again all supposition based on the premise that Mr Sarkozy is corruptible! Democratic deficit again – let the French elect Sarkozy to run France, but let European citizens elect the politicians to run Europe. Sarko has a rejuvenated Front National and a younger Le Pen to contend with. Why should one expect any favours ? We are where we are thanks to FF. Cheapest bailout ever. India buys some French military hardware or some such. But give out that they would like to be able to compete better with Ireland for jobs. Would he ever do something about their tax rate. Once again all supposition based on the premise that Mr Sarkozy is corruptible! Next, you’ll be saying that he’s a NuLab or Tory politician (or even Prince Andrew). c.f. Saudi arms deals colm mccarthy Says: December 2nd, 2010 at 5:33 pm The only papers sensible people believe routinely on factual matters are the Racing Post and the FT. C est quoi, cette Irish Independent ? Come on.. this is hardly worth discussing. Sarkozy is saying what suits him, but I doubt he actually believes the things Colm Mc says he believes. It’s just a career politician speaking out of the side of his face. What’s new? as i posted on the bini smaghi thread… Firstly, I would add to my last post by saying that whereas one might get fair play where there is a shortfall between the aggregate of what taxpayers in various jurisdictions will pay and what is required, one has ery little chance of fair play where there is an overlap as each group of taxpayers will seek to require the other group to pay as much as possible. Secondly, Colm McCarthy socks it to Sarkozy and the Bini-Smaghi band of dissemblers in today’s indo: http://www.independent.ie/opinion/analysis/sarkozys-grandstanding-on-our-corporation-tax-misses-the-point-2497971.html Colm McCarthy points out the inconsistency of saying we must guard against moral hazard vis-a-vis countries but not vis-a-vis reckless lenders. He also points out the problems with countries abandoning law and established practices on the basis of false narratives. In the post yesterday “Cowen and Advice Relating to the Guarantee” http://www.irisheconomy.ie/index.php/2011/01/17/cowen-and-advice-relating-to-the-guarantee/#comment-118453 I argued, ‘Unfortunately the discussion above has turned from fact finding over the actions of the Irish government, to “blame the foreigners”. That [some] would want Ireland’s woes to be portrayed as the fault of the foreigners is understandable. However I’d hope to see a little fact finding first. That should be easy for those of us that have a professional training, work in the business, with access to information sources like Bloomberg’. As for the holders of bonds, we have very imperfect information, as probably does the issuers and the authorities too. But Bloomberg and Reuters have tools that allow you trace some of the institutions. On the basis of that information, I’d suggest that French and German holders of the likes of Anglo are quite in a minority. . . “One of the assumptions of EU membership … is under attack”. Quite right Colm. And those first and foremost are the stipulations of the Stability and Growth Pact. Now let’s remember that Ireland is planning again to run a deficit to GDP ratio in the double digits in 2011. So no real improvement (ex banks) over 2010, and no improvement over 2009. Europe and the IMF kindly agreed to the 2011 budget on the basis of proposals from the incumbent Irish government. It is not because the plan was agreed to that Ireland’s partners are in any happy about it. Take out all the costs of Irish banks crisis from the budget. The ratio of total government revenues to the budget deficit would still be extraordinarily large relative to any Western or even emerging economy. Unparalleled indeed, in cash terms per capita. This state, now for several years in a row, was not imposed from abroad. And of course, Colm’s article is quite right. To correct that deficit, either taxes go up or spending goes down (or growth surprises). I think the EU and the IMF have made it patently clear that they don’t mind which path is chosen, as long as progress starts, finally. If still not happy, then think about fully reclaiming national autonomy in tax policy by giving up the euro and its constraints. As an aside, I was speaking today with some, let’s call them, non-Irish people, who were asking me about the levels of wages, pensions, taxes and benefits in Ireland. “Let’s all emigrate to Ireland” was their unanimous response. I didn’t tell them about the weather of course. Nor the price of drink (although the incumbent government did find the wherewithal to reduce excises recently). Nor the absence of some key infrastructure, despite the large deficits these past few years. Now soon we will be entering the fifth year of the current crisis (Colm sees third). That’s taking the Bear Stearns troubles in June 2007 as the start date (so we are nearing the end of the fourth year). It might seem like three years in Ireland. But hey, the incumbent government’s policy responses are now water under the bridge. “From an Irish standpoint, the sooner matters come to a head the better.” Agreed. But the ball is in the Irish court. If the incumbent Irish government were ever to stay its term, expect no change. I fear there will not even be a substantial change in policies should a fresh Irish government take the reins of power. The strategy from the European authorities has been quite clear and consistent. In the post yesterday that I referred to, “Cowen and Advice Relating to the Guarantee”, I showed that the ECB, like the EC and most other governments, were pleading for a coordinated policy in relation to banks back in Sep/Oct 2008. Ireland went its own way, and stunned the rest of Europe. [Again, those non-Irish people today that I was speaking too today, asked the question that I invariably get asked, why, why, why did the Irish government choose to go the route it went over the past years, what could have been its motivations. This question comes back all the time]. And today, the strategy from the European authorities is also patently clear. They want a coordinated and planned approach to the problems that Europe’s sovereigns are facing. I find that the authorities are on the whole quite lucid. Remember we are talking here about tens of thousands of people, public servants, many with a sound economics training, scattered around the capitals of Europe – they have seen the numbers for Ireland and can read them like the palms of a hand. The politicians and senior EC-EU officials have spoken at length about the reforms to be introduced by 2013, and what is needed between now and then to facilitate that process. The present Irish government has taken another step down that road today following the outcome of the Ecofin-Eurogroup meetings. If there was dissent by Ireland, surprise me. If you are not happy, you may have an opportunity to express that in the ballot box. Now you or I may not like the present European approach (I’d proceed differently myself if I were Mr Europe). But it is reality. And as Colm says, ““From an Irish standpoint, the sooner matters come to a head” etc. But again, the ball is in the Irish court, with the rest of Europe set on a game plan. The same can be said for the socialisation of Irish private debt by the public purse, which the article also decries. The numbers are impressive. As I said in the post “Bini-Smaghi: ‘Ireland’s meltdown is the outcome of the policies of its elected politicians’, I’m quite surprised that there doesn’t seem to be much awareness or debate – here or in the press – about this topic. I was also surprised to see too no reference or debate in relation to e.g. “Central Bank steps up its cash support to Irish banks financed by institution printing own money” from the Independent last Saturday. Very clearly, the ECB wants disengagement. This ongoing trend is capital. But then, that doesn’t suit the line, “it is the foreigners’ responsibility”. Yes, high interest rates in the Greek and Irish bailouts are justified, in terms of avoiding ‘moral hazard’. The solution is quite simple, as Mr Bini-Smaghi made clear over the weekend – cut borrowing, now. I wouldn’t portray these loans as a scheme to enrich the rest of Europe at Ireland’s expense. Europe’s governments would be far happier if they didn’t have to make these loans, so great is the risk, as they see it. The IMF – read the conclusions to its December assessment of the Irish aid programme – would be happier not having to help out Ireland. And we’ll see if the Irish in the next election vote for more hysterity, or for the start of austerity, at long last. Bets anyone? @ Ciaran Great post but the common thread to everything is the periphery being flooded with cheap credit (even the public sector pay was based on a temporary windfall from stamp duty receipts). It is inevitable if you launch a badly regulated currency at such low interest rates that you will get bubbles at the periphery. The proposition is that Ireland has unfair gains from competition on corporation tax. Now this claim may have had some weight in 2007, but in reality the good numbers in 2007 were based on borrowed money, not tax competition. In 2011 Ireland has a high deficit, high unemployment and high emigration. This “unfair” competition hasn’t been very successful, this is no macro evidence that Ireland has taken a perceptible amount of tax or jobs from larger economies. I think that Irish people are, by and large, all too aware of the mistakes made. The broader Euro community don’t seem to accept that mistakes were made in the structuring of the Euro as well which greatly magnified the effects of errors in Ireland. @Brendan Walsh Good article. Perhaps being hit by a punitive deal at first will benefit us long-run. Our case must be made internationally though. @Ciaran O’Hagan The economy has lost jobs for 4 years now. Emigration, first of recent arrivals, now of those born in Ireland, is rising rapidly. National income has shrunk significantly. Taxes have risen steadily. If your plan is to be adopted we would need to know how much worse will it get, and when will start to get better, from debt, job growth and incomes point of view. Any estimates? Not trying to lure you into an ambush, just very interested. Presumably you are also saying we have to act on faith – that we will be bailed out and that the economy is better off with a lower deficit when that happens. @Ciaran O’Hagan, You have consistently advanced the most sense on this issue on this board. Thank you. Colm McCarthy, in characteristically forthright terms, has set out what a credible Irish government – with a solid popular mandate – should be saying, in public and in private, to our EU partners. Perhaps it’s being said in private, but there is little, if any, evidence. It is right and proper to advance this case, but one needs to be aware of the political and institutional imperatives governing the behaviour of those we seek to persuade. In addition, there seems to be little perception in Ireland of the extent to which political, institutional and popular sentiment in mainland Europe has swung against Ireland. Wrapping the Green Flag around ourselves and acting as if we are innocent victims in all this won’t cut any ice. But it suits those insiders who are part of the problem and who will fight tooth and nail to protect their ill-gotten gains – and it has electoral attractions. While there is the vague possibility of cutting a deal or pulling a stroke all effort will be focused on this – rather than getting on with the reforms that are necessary to lift Ireland’s economic performance and to tackle the real crisis – unemployment. It was ever thus. @ Ciaran ‘… I was speaking today with some, let’s call them, non-Irish people, who were asking me about the levels of wages, pensions, taxes and benefits in Ireland. “Let’s all emigrate to Ireland” was their unanimous response. I didn’t tell them about the weather of course. Nor the price of drink (although the incumbent government did find the wherewithal to reduce excises recently). Nor the absence of some key infrastructure, despite the large deficits these past few years. ….did you tell them about house prices, the employment rate, or the number of graduates emigrating…infrastructure covers a multitide, but the cost of childcare/education and health insurance is a start.. a ‘low tax’ economy sounds great until you find out all the ‘extras’ you have to pay for.. …while I see a lot of truth in your views, especially about the functioning of the Irish state, and appreciate the patience with which you expound them, I hear a suggestion that we are a nation of free riders. We don’t have the accumulated weatlh, or the developed institutional networks of the former colonial powers. Like must be compared with like. As our state is dysfunctional and riddeld with vested interests, it’s likely that our whole economic development path is misconceived. The MNCs will never give us lift off. One way or another, the periphery going to get a big dose of austerity, and debt deflation. Mass emigration and/or civil disorder is the most likely result. What people on the island can’t see is how to get to a better place. http://www.bloomberg.com/news/2011-01-19/weber-emerges-as-ecb-man-to-beat-in-trichet-succession-as-eu-parcels-jobs.html this link provides a very good insight into how Europe conducts it’s business. National interests are more important than EU interests. There seems to be no equivalence with the US system of selection and ratification. There is no mechanism to hold these guys to account. Surely the Irish citizens are not the only ones who see that Europe is in real need of reform. They actually make Fianna Fail look good. The ancien régime remains firmly intact and the old victim’s cross is getting a good airing these days. The head of the GPs’ lobby has a letter in the IT today bemoaning greedy Boot’s circumvention of the protectionist prescription process: “Applying market forces to health fosters greed disguised by a cloak of good intentions and can give the impression to the public of an apparently improved service.” Surely the kettle calling the pot black? Of course, it’s all the fault of those mean Germans! Wouldn’t it be really a stunner if any of the vested interests, including the universities, said they could do more with less? I am not in the least surprised that both German and French politicians are making statements on Ireland and the issue of taxation. It is not difficult to appreciate where they are coming from. My understanding is that with one percent or so of the EU economy, Ireland was attracting around 20% of American FDI. (Prior to the deep recession and global financial crisis). If Ireland was attracting such a large portion of FDI destined for the EU, is it any wonder that the big players were getting upset. In Ireland we claim there are many reasons why we are attractive to FDI, but in France and Germany they see only one: corporate taxation. It isn’t simply that we set our rate so low, but that firms can route their profits through Ireland, sucking taxes out of areas where they have even larger operations. If this picture is true, why are we so surprised that France and Germany would like to see a change? It is true that the EU Commission failed to spot how horribly unbalanced Ireland’s economy and fiscal model were over the last decade of the boom. Indeed, from some of their reports as late as 2007 it seems they didn’t probe very deeply. But none of this absolves us from being primarily responsible for creating our own terrible mess and the consequent contribution to Euro Zone instability. Far better we stop seeing ourselves as victims of the EU and EU banks and start taking responsibility for our own mess. Only when we start to get our act together can we robustly defend our position on corporate taxes and FDI. @Colm McCarthy @Paul Hunt Some of you guys will remember that you were warned before Christmas, from here in Paris, that there would be sustained attacks on our CT rate. With respect, Colm, regardless of the validity of the points in your article, seen from here in continental Europe it’s you who are “missing the point”. Indeed, while agreeing with pretty much all Colm says, Paul Hunt has accurately described the real on the ground situation here when he says that political, institutional and popular opinion here has swung against Ireland regardless of the disingenuous motivations ( of Sarkozy and others) behind it. Tactically, Ireland will have to fight its corner using all the arguments in Colm’s article. However “wrapping ourselves in the green flag” and playing the innocent victim is not a valid strategy for the simple reason that it will provoke even more “flag-wrapping” as a response and WILL NOT WORK. We, the Irish used to the full our “national autonomy in tax policy” to attract the mainly US mutinationals who now account for over 90% of the exports ( mainly to our EU partners) that constitute the only means we have of growing our way out of our difficulties. ( For most of the time we were growing on this basis we did not become net contributors to the EU and this is clearly perceived, not only in continental Europe but also in the UK, our main export market and one which has battled to reduce its “unfair” EUnet contribution for years). Ireland adopted this “industrial” policy quite deliberately and unilaterally, a policy which has now pretty much ceased contributing net jobs, quite apart from the fact that mobile international investment has since become even more “mobile” ( notwithstanding Intel “coups”). So Paul Hunt is right, again, when he says that ( along with fighting our corner on CT) WE need to knuckle down ( albeit without a government right now!) to the reforms that are necessary to lifting Ireland’s economic performance and tackling the real, directly related problem, unemployment. It is my firm opinion that the next government needs to immediately and urgently set up mechanisms to completely review our unsustainable “industrial” strategy. Additionally, we need to completely revolutionise our attitude towards “emigration” in the realisation that whether in Ireland or abroad, future “employed” Irish people will need the sort of skills and experience that can only be learned by spending at least some real working time outside Ireland. These are the real strategic challenges Ireland faces and they will still be challenges after we have resolved our essentially “banking” problems. These are the real criteria in the minds of future investors in Ireland whether they be European bureaucrats or US CEOs. 1) Yet again I ask: where is the mention of tax incidence? Corporations do not pay taxes: whatever amounts they hand over to governments come from employees (lower wages), shareholders (lower dividends) and customers (higher prices). The mix varies. In open economies like Ireland most if not all comes from employees. (In the US it’s around 2/3). Have a look at Wiki: http://en.wikipedia.org/wiki/Flypaper_theory_(economics) “The flypaper theory of tax incidence is a pejorative term used by economists to describe the assumption that the burden of a tax, like a fly with flypaper, sticks wherever it first lands.” It is sad to see this combination of ignorance and illogic so typical of politicians not being picked apart on such an expert site. 2) It is illogical to say that the Irish corporation tax rate means that Ireland receives tax revenues that in some sense belong to other countries and then say that Ireland must increase its government’s tax take. For the first part implies that corporation tax revenue will fall if the rate is raised while the second says that there must be higher tax revenue. “The solution is quite simple, as Mr Bini-Smaghi made clear over the weekend – cut borrowing, now. ” Anyone care to show us the numbers ? Cut government spending to Government income levels and where does GDP go? Debt remains fixed. What would be the effect on debt dynamics? Best case and worst case. Everything would have to be cut by 40%. See how the voters like a 40% cut to their health spend. How many deaths would be acceptable ? 40% off education. For the sake of the banks. Who will vote for it ? ” (Mansergh) rejected the premise of a question from economist Irwin Stelzer, who said some IMF research clearly showed that countries that rapidly cut public spending go into an economic spiral (sic).” http://www.irishtimes.com/newspaper/finance/2010/1019/1224281443934.html So what sort of a death spiral would the Irish economy enter with 40% cuts to everything ? What sort of feedback could be expected ? It’s ultimately boils down to capital versus the people, doesn’t it ? *GERMANY WANTS GREECE TO BUY BACK BONDS WITH EFSF HELP: DIE ZEIT *GERMAN GOVERNMENT PLANS GREEK DEBT RESTRUCTURING, ZEIT SAYS *GERMANY WANTS NEW PLEDGES FROM GREECE ON BUDGET, ZEIT SAYS @Eureka, You seem to have had some sort of epiphany – a ‘eureka’ moment, perhaps 🙂 For many years quite a few people, while generally approving of the benefits of increased pooling of sovereignty among dmocratically governed sovereign nations, have had concerns about the balance between the governance of this sovereignty and effective democratic accountability. When one cuts through the usual Eurosceptic clap-trap, this lies at the heart of the concerns expressed by genuine English democrats – and genuine democrats everywhere in Europe. @Richard Fedigan, I am pleased you see some merit in my contentions. Your final point on Ireland’s strategic challenge is well taken. We now have a German Europe but Germany’s demography is hindering its ability to forge ahead. We need to engage – as its neighbours are. On a brighter note, Ronan Lyons, an occasional visitor to this parish, makes a good case: http://www.sbpost.ie/guest-writer/11-reasons-for-optimism-53948.html We need to boost and support these efforts and remove the burdens that constrain them. @Paul Power, Trying to tax mobile MNCs is like trying to pick up quicksilver with a fork, as Lloyd George described negotiating with de Valera (who, characteristically, asked why he didn’t use a spoon). Far better to tax ‘bads’ such as pollution, etc. It’s not that Ireland is taxing too little; it’s that mainland EU is trying to tax too much. @Eoin, The beginning of the end or the end of the beginning? @Richard Fedigan Indeed, while agreeing with pretty much all Colm says, Paul Hunt has accurately described the real on the ground situation here when he says that political, institutional and popular opinion here has swung against Ireland regardless of the disingenuous motivations ( of Sarkozy and others) behind it. JTO again: Talking of ‘popular opinion’ in this instance is wild exaggeration. ‘Popular opinion’ in Europe doesn’t give a toss what tax rates are in Ireland. I travel to Europe lots on business. Still to find anyone come up to me and admonish me for Ireland’s Copporation tax rate. Merkel and Sarkozy are bluffing. They are paper tigers. They have no power to enforce harmonisation of tax rates across the EU. Their own peoples don’t want any more political/economic integration across the EU. Look at the results of the Lisbon Treaty referenda in the Netherlands and France. Any attempt by Merkel and Sarkosy to force further political/economic integration across the EU will result in their own political demise and risk unravelling the whole EU project. @ Paul H end of the beginning i feel. Still a lot of things to be sorted out, and these will be addressed only very cautiously, not least because of the unprecedented nature of a sovereign bond buyback! It should be noted that the Greeks have denied the story, but beware of Greeks bearing bond restructuring denials and all that… @ seafóid So what sort of a death spiral would the Irish economy enter with 40% cuts to everything ? This is a type of question that would be posed by a defender of the status quo? The country over time has to be run competitively and within its means. Pay/fees for TDs, GPs, lawyers should be benchmarked with well-run economies in Europe? In 2009, Irish GPs were being paid almost five times more to administer the seasonal flu vaccine to patients than their counterparts in the UK. The high-cost legal system which has been impervious to reform, is mainly supported by public funds and the litany could go on and on. Bord Snip exposed the costly add-ons to the public pension system etc. It’s the invisible unemployed will pay for all the featherbedding, absent reform. @ Paul Power It is illogical to say that the Irish corporation tax rate means that Ireland receives tax revenues that in some sense belong to other countries and then say that Ireland must increase its government’s tax take. According to Bloomberg, Google’s Dublin subsidiary sells advertising globally and was credited by Google with 88% of its $12.5bn in non-U.S. sales in 2009. Allocating the revenue to Ireland helps Google avoid income taxes in the U.S., where most of its technology was developed. The arrangement also reduces the company’s liabilities in relatively high-tax European countries where many of its customers are located. The profits don’t stay with the Dublin subsidiary, which reported pretax income of less than 1 percent of sales in 2008, according to Irish records. That’s largely because it paid $5.4 billion in royalties to Google Ireland Holdings, which has its “effective centre of management” in Bermuda, according to company filings. Bloomberg said revenues from the United Kingdom totaled $840m in the third quarter of 2010 – – representing 12% of revenues — but the US firm paid no corporate taxes in the UK even though it has 850 employed there. Microsoft diverts patent and other income from sales in other European countries to a company that operates from a Dublin law firm. It pays CT to Ireland on some of this foreign income. @ Paul Hunt A wonderful synthesis of everything. Yes – the eureka moment was about 7 years behind everyone else by the looks of things. You mention the need to engage. Do we have anybody capable of doing that? Who or how do we engage? How do we appeal to their fear or self-interest to get a better deal for Ireland? Would a European version of the tea party movement (not the exact policies or anything) help stir things up? “Europe for citizens and not for banks etc.”. @Eoin, Any possibility of a read-across to Ireland? I agree with Colm McCarthy’s point about the EU’s ‘one-size-fits all’ approach. It’s generally driven by the legal and institutional restraints under which it operates. But Greece is a seriously dodgy sovereign with a few banks bolted on; Ireland is an excessively large, dodgy banking system with a generally viable sovereign bolted on. Portugal and Spain fall somewhere between the two – with Italy and Belgium occupying their own special positions on this spectrum. Some imagination required, or no? @ Colm McCarthy “In the latter case, the only satisfactory resolution is a composition with creditors.” So Colm, just to clarify do you believe Ireland has got to the stage where we are in the “latter case”? With the EU encouraging the CB to turn ECB debt into Irish Central bank debt and Eoins news about Greece above, are the core trying to wash their hands of the periphery? Sorry I should have said with the ECB (not EU) It is true that the freedom to set the corporate tax rate is guaranteed by a treaty. The treaty of Maastricht guaranteed the German taxpayer that he would never have to bail out other countries. The ECB was not supposed to have any sovereign debt on its balance sheet. The other countries had to swallow a bitter pill to help Greece and Ireland .Irishmen cannot at the same time ask others to trample their principles in order to help them and scream murder when somebody asks why the Irish government can run a huge deficit financed by others and maintain a lower tax rate that allows Google and Dell to pay practically no taxes on sales made in other European countries . Sarkozy’s merely said what everybody is thinking in countries with an average corporate tax. Ireland probably will have to renegotiate its agreement with the IMF and the EC .At that time it should be prepared to be asked for concessions on that front. Ireland is a victim of its bad economic decisions (an economic policy based on tax competition-several years of a real estate bubble which anybody knew would end in a terrific crash-the absurd decision to guarantee all the banks in 2008) and of a poor economic governance of the Euro Zone. In the present situation it will need outside help for a long time .It is not by ranting against the rest of the world that it will improve its prospects. @JTO John, next time you travel “lots” to Paris, let me know (I hereby authorise the moderator to give you my email address) and I’ll introduce you to a group of twenty French business people (including my wife) who will talk to you, at length, and in great detail, about the Irish CT rate and how it is fiscal dumping, unfair competition, the lot! Popular opinion in Europe USED not give a toss about the Irish CT rate, indeed never gave a thought to Ireland at all. That has very definitely changed. German popular opinion is fed up to the back teeth “paying for Europe” as they see it and, indeed, would rather rely on their own booming economy ( the ONLY substantive economy in Europe capable of competing with the US and China.). Merkel is under pressure to pull back from “European” involvement including bailing out economies like Greece and Ireland that are perceived to have lived high on the hog of EU/German money. Let me assure you that, here in France, a combination of 10% unemployment, 25% youth unemployment, falling “pouvoir d’achat”, increasing middle class “poverty”, extreme right wing threats to the right and Sarkozy’s abysmal poll rating has the average French citizen believing helped by Petit Nicolas, of course) that it’s all due to speculators and, yes, recently, fiscal or other dumping by Ireland and China! A huge scapegoat here is “délocalisations”, very often by subsidiaries of MNCs who move their French operations to Eastern Europe or the Far East but who have been doing this for 20 years ….in Ireland! I’m repeating myself but the CT argument itself, while crucial to Ireland, is something of a strategic sideshow. My main point is that Ireland’s almost total dependence on exports from US MNCs ( in Ireland for only one reason) is unsustainable and the sector is NOT creating net increased employment. Now is that clear, John? @Eureka, Good questions. I think we all wish we could find some ‘magic buttons’. Kevin O’Rourke previously: http://www.irisheconomy.ie/index.php/2011/01/13/divide-and-conquer/ raised something along the lines you’re suggesting. I think the first step is to take note of Dominique Jean-Raymond’s comments above and to stop ‘ranting against the rest of the world’. Yes, I agree that Ireland is a victim, as DJ-R points out, of ‘poor economic [and financial] governance of the Euro Zone’, but, in its usual circuitous and grindingly slow manner, the EU is addressing this. We need to keep pressing the case for some relief, but we also need to undertake the strcutural reforms that are required (both economic and political). We do not seem to recognise that, in the eyes of our peers, we have lost the ability to govern ourselves responsibly. We must regain this to secure acceptance as responsible members of the EU. Then a proper engagement can begin. JtO, I fear, once again, you are kicking the stone and missing the point. The core EZ countries and their voters were happy to contribute to help lift Ireland out of self-imposed backwardness (and Greece, Spain and Portugal out of both self-imposed backwardness and dictatorship) as they also benefitted. They are damned if they’re going to do the same again to rescue these peripherals from the implications of their own misgovernance – particularly when Ireland exhibited such unjustified ‘Celtic Tiger’ hubris and they are no longer convinced of the benefits to them of further generosity. Fool me once, shame on you; fool me twice, shame on me. doesn’t france and germany have unfair advantage by controlling interest rates?? The blame game……I don’t think anyone is missing the point that FF amd their policies are to blame but that doesn’t mean we have to think everything is rosey in the garden with the EU…….if something is rotten point it out, isn’t that where we (well FF voters) went wrong in the first place by voting FF in for a third time without heeding the wanring signs that were there!! @De Roiste, Agree, but we might have more credibility when pointing out the speck in our brother’s eye if we were, first, to remove the beam from our own. @ Michael Hennigan Thanks for that. Of course the country has to be run on a sustainable basis but how would you get to the point where the budget is balanced? how long would it take? And how would you tackle price gouging ? Today’s Irish Times featured 2 lawyers who work in Dublin who spent €9.5 million of their own money renovating a stately home in Sligo http://www.irishtimes.com/newspaper/features/2011/0119/1224287849227.html How good are Dublin lawyers in reality? How do you prise the money from their grubby fingers ? @Paul Hunt we have gone full circle……that is where blaming FF comes in again 😉 @De Roiste Y’know it’s fun chatting with you guys but it takes quite a bit of time ( not used to this and forgive the views of non-economist former CEO ( global organisation) out of Ireland for 30 years but it comes down to this: At this stage, it doesn’t matter what/who caused the mess, France is relevant only inasmuch as it influences Germany ( As Adenauer put it: “We have to salute the French flag three times before raising the German one”……. but we’re sick and tired of all that! sotto voce), We won’t have FF to blame any more and the problems will not be solved by the simple democratic expression of Irish voter’s ire. It may be that Ireland can get some mileage out of Mel Brooks’ Blazing Saddles line “drop your guns or the ni**er gets it!” but we’re already seriously wounded, we’ll have to negotiate for our lives and we’re negotiating with partners, all beholden to Germany, which actually could survive on its own without “Europe”. “Europe” doesn’t like this and will have to come up with a solution ( if Germany plays ball). China is watching, the US is not really all that interested ( in “Europe”) and this is the arena Ireland Inc. has no choice but to play in. Our young people have no choice other than to play in this arena and the proportion realistically able to stay “at home” or “come back home” some day depends on what we do next! Bon Courage. @ Paul Hunt Boy this is tricky stuff!! As is clear even on this blog anybody from another country in Europe is seen as a foreigner and not a fellow European Citizen. Europe has failed to forge a shared identity for its people and this is at the core of its ineptitude. Europe cannot manage crises. It took the Americans to sort out Kosovo. Maybe a possible solution is to sideline Europe entirely and do a deal with the IMF only. @Eureka “Europe cannot manage crises. It took the Americans to sort out Kosovo.” America can’t manage crises either. Look at Afghanistan. Or the state of the US economy and job creation. It’s the same problem on both sides of the Atlantic. Broken economic models, corruption and inept leadership. @Michael Absolutely, Irelands “12.5” (I think there are rebates / etc. attached for certain types of capital investment, Intel, Pfizer etc.) is meaningless when one considers Cayman / Bermuda / Dutch sandwiches etc. which the BOE Brown and Obama got uppity about way back when but the whip was withdrawn. It’s the loop holes not the headline that corp finance teams operate on that need changing, London exists on these loop holes. Another bubbling wikileaks expose via a Cayman Swiss banker (mentioned by someone else here yesterday / can’t find name sorry) might bring it back into the news. @De Roiste, Indeed. I doubt that directing to FF/Greens Cromwell’s injunction to the Long Parliament (as Leo Amery did to Chamberlain in May 1940) will go down well on an Irish site, but it was never more apt: “You have sat here too long for any good that you may have being doing. Go, in the name of God, go.” What Richard Fedigan said. Seriously, is anyone denying that the Irish are setting a low corporate tax rate so that they can grab tax that would otherwise be paid to their European neighbours? Thus increasing their own tax receipts but at the expense that the total European (Irish + non-Irish) receipts are down? Surely you realize that a higher rate in Ireland would cause the Googles of the world to pay a higher rate in Europe, and thus fork over more revenue. How does it make sense to keep a low rate – except to the Irish -, when the only way out of the mess is for European taxes to pay for the financial holes in the peripheral countries? The Irish tax rate has to go up, so that the total European tax receipts can go up. Either deny that causal relationship, or just come out with it and say that you don’t really give a toss about Europe – except when Europe is supposed to send the Irish money. @ Seafoid It’s not that they’re great it’s just that Europe seems paralyzed. The question is why don’t we just negotiate with the IMF? They often entertain restructuring and don’t engage in damaging bull about Corporation Taxes. @Eureka Well, Eureka ( my parting shot for a while fellas – -no gals?) it sure is “tricky” stuff. We might, indeed, have been able to do a better deal with the IMF alone. BUT, and they won’t tell you this, “Europe” didn’t choose to “invite” the IMF to “help”. “Europe” didn’t have the money to do it alone. To go a step(s) further, the IMF doesn’t have the money to operate without the US. And the US doesn’t have the money to give to the IMF without China! AND if we “sidelined” Europe ( boy!, aren’t we powerful?) maybe their markets would be even less amenable to importing the products and services from the US MNCs set up in Ireland to fiscally dump on them! But, shure, all this is well known. A bientôt, peut être! @a except the point of Colm Mc’s article is that the main thing that’s actually happening in the bailout is that the foolish creditors of the foolish or criminal Irish banks are being paid out with money that then increases the debt of the heads of the Irish taxpayer – who wasn’t involved in the deal in the first place. Colm’s point is that it’s not clear who is doing who the favour in this system. The level of CT is a distraction in the discussion of the bailout. Of course, the fact that the Irish govt is still borrowing 20 billion a year to fund excessive spending means that the Irish taxpayer doesn’t have much of a chance of getting a good deal in all this. @Seafoid Those lawyers may their pile by weaving their way through our absurd (alcohol) licencing laws, surely making the case for simplifying the law in areas like this. @ Richard. I didn’t mean sideline as in leave. I meant sideline as in reject their begrudging usury in favour of a more competent organization. The Asians will be funding our bailout ultimately but only after our amis have taken their cut and our corporation tax. I don’t propose for one minute that we leave Europe or the Euro. In fact going to the IMF alone is much more consistent with the Lisbon Treaty than the current set-up. And they can’t introduce tarifs on us for doing as the treaty instructed. @ seafóid Even more jaw-dropping is this and the power of connections: http://www.guardian.co.uk/world/2011/jan/18/irish-couple-800m-debt-odonnell All, There comes a point when people just stop listening. Think late Thatcher government, late Major, late Bush, late communism. People have been lectured about / engaged with arguments in favour of, things they were always skeptical about. Then they reach a point where they consider they were being had all along – and they shouldn’t have listened. Ireland is at that well worn point right now with respect to FF and its current government. From within Ireland, you might miss the point that the powerful parts of Europe are at that point now with respect to Ireland’s economic model. They don’t care what Colm writes to a domestic audience in Ireland. They remember Mary Harney being touted around on CNBC a few years ago as the woman who could at last sort out Europe’s failing economy. You can lecture them all you want about how they are wrong about Corporation Tax. They have had enough of Irish lecturing and so long as the country continues with its choice to ask for credit to fund its structural deficit, they are likely to do no more than appear to listen politely whilst thinking about something else. A bit of national solidarity and the ability for Irish politicians to turn up in Europe and point out that the only thing being borrowed for is to keep the banks going, and they might have to pay attention.That is on no agenda I’m aware of though. @Richard Fedigan I would be happy to accept your kind invitation on my next visit in May, assuming that there isn’t yet another national strike taking place in France, such as the one that resulted in a 2-week postponement of a visit I scheduled last October. Were I to do so, I would very politely tell your charming (I’m sure) wife and your other distinguished business friends that Ireland’s Corporation Tax rates aren’t actually any of France’s business. There is absolutely nothing stopping France lowering its Corporation Tax rates if it wants to. It has simply made a free choice not to, preferring instead to fund extravagant holidays, a short working-week and very early retirement. People in France work very few hours compared with people in Ireland and, even more so, with people in the U. States, which latter country they vehemently dislike because of it. The OECD gives the following figures for the average annual number of hours worked by those in employment. It doesn’t even take into account the fact that the average retirement age in France is 5 years lower than in Ireland, not to mention the never-ending national strikes. If one averaged it over a lifetime, and not just over a year, the difference between France and Ireland and, even more so, the U. States would be even greater. average number of hours worked annually by persons in employment: U. States 1,815 Ireland 1,668 Italy 1,619 Sweden 1,581 Belgium 1,559 Denmark 1,499 France 1,459 I shall inform your business friends that, when people in France agree to work the same number of hours in a lifetime as people in Ireland do, then France will be able to afford the same rate of Corporation Tax as in Ireland. In any event, if the new (I assume FG/Lab) government in Ireland caves in to pressure from Germany and France to increase its Corporation Tax rate, they may well find that, at the very moment they do so, N. Ireland’s Corporation Tax rate is reduced to 12.5%. What will Germany and France do about that? As for government finances, according to Michael Hennigan’s Finfacts, France has not had a budget surplus since 1975. Ireland has had near 20 budget surpluses in that time. Regarding German’s economic performance, well German GDP growth averaged 1% annually between 1990 and 2010. As I have posted before, this is not because it is backward, inefficient, lazy, or anything like that. Clearly, it is none of those things. It is because of its dreadful demographics. Leaving Ireland out of the picture (Ireland’s figure for the same period was 5%, but, if I mention this, followers of the Morgan Kelly cult will be posting in droves that it was all house-building), this is far below the average annual growth rates of those countries that follow the relatively low-spend low-tax English-speaking model. @Hugh Sheehy, I think it should be pretty clear by now “who’s doing the favour to whom”. The EU’s Grand Panjandrums are simply buying time until (a) their peripherally-exposed banks have built up capital to take a hit, (b) the core economies have regained some economic strength to deal with some bank losses (and failures) and (c) their voters have been persuaded/feel capable to backstop some bank losses/failures through increased taxation for bank recap or hits on their savings pots. On (c) it is proving necessary that the peripherals are taking pain – and are seen to be taking pain – as punishment for their previous misgovernance before any releif will be contemplated. Yes, from an Irish perspective it may seem terribly unfar that Irish citizens are paying not only for their own misgovernance, but also for the poor economic and financial governance of the EZ. But that is the price of securing any measure of the democratic consent required in the core EZ countries to resolve the current crisis and to reform EZ governance. And it should be noted that Pres. Sarkozy is already campaigning for re-election in May 2012 and Chancellor Merkel is facing elections in 11 lander this year. Why should we expect other EU politicians to be as pure as the driven snow when our own put the interests of their factions before the public and national interest at all times? Continued Irish ranting about how hard done by we are by the EU (accompanied by a failure to pursue necessary structural economic and political reforms) will simply harden the hearts of these voters towards us – and postpone any reform at the EU level and any relief that might be forthcoming. @Michael Hennigan The FT had an interesting look at bank bonuses a while ago. http://www.ft.com/cms/s/0/29c6d950-1d96-11e0-a163-00144feab49a.html#ixzz1Apzjn4of “High bonus payments are a symptom of a problem, not its cause. The banking settlement was deficient because it did little to address the asymmetries in the universal banking business model. This model causes investment banks to jeopardise global financial stability in bad times whilst allowing bankers to cream off film star compensation in the good times. The global reforms have done a bit to improve financial stability but almost nothing to constrain the profitability that produces the bonuses. That profitability arises from a business model that gives banks in general and investment banks in particular the best possible view of global economies and markets. They are able to use this information advantage to load the dice and generate super-profits. This is where the bonuses come from and this is why the banking lobby worked so hard and so successfully to defend the model.” It is the same with lawyers in Ireland. Access to the finest information and price gouging opportunities. But when is it ever discussed ? @Andrew S “Another bubbling wikileaks expose via a Cayman Swiss banker (mentioned by someone else here yesterday / can’t find name sorry) might bring it back into the news.” I’m looking forward to some ‘Elmer FUDd’… (Or it’s Irish version FU, Denial, Denial…) @ JTO “Ireland’s Corporation Tax rates aren’t actually any of France’s business. There is absolutely nothing stopping France lowering its Corporation Tax rates if it wants to. It has simply made a free choice not to, preferring instead to fund extravagant holidays, a short working-week and very early retirement.” Are you Mary Harney ? “German GDP growth averaged 1% annually between 1990 and 2010” You do know that Germany was reunited and East Germany integrated into the Western economy during that time, don’t you? @ hogan Switzerland is to rush forward legislation to have a minimum 3 year jail sentence for anyone who forwards Swiss bank data to a third party outside of the country , in reaction to the Elmer development. Wikileaks and recent advances in technology are potentially very damaging to the concept of Schweizer Bankgeheimnis. @Hugh Sheehy ( by the way, very good Vox/”Way to Work” interview – the “Big Bang” may be closer than you think!). Yes, strictly speaking, the CT is a “distraction” in discussing the bailout except that won’t stop the Sarkozys of this world wanting to be seen ( by their electorates) to be negotiating hard with profligate periphery “crooks” like Greece and Ireland to protect the virtuous core ( France hasn’t balanced a budget in 35 years!) and particularly the Franco???-German motor of Europe he likes to pretend exists. What isn’t a distraction are the direct links between our “single-plank” CT and exports-dependent (90+% MNC), non-net employment creating “industrial” policy, and the fact that nobody is talking about overhauling/replacing this non-strategy. Neither do I hear anyone facing up to the fact that we need to factor a completely different attitude towards de facto “emigration” as an integrated skills and experience-acquisition element into a new strategy. But then I’m blue in the face saying this since before Christmas so I’ll leave you to it. G’night now. @ Paul Hunt “Trying to tax mobile MNCs is like trying to pick up quicksilver with a fork, as Lloyd George described negotiating with de Valera (who, characteristically, asked why he didn’t use a spoon).” Well it certainly is at the moment but what if we had one rate for the whole of Europe as the French president suggests? Its not good enough to just say we are powerless to make business pay tax. All that it would mean is that all business would pay a fair rate of tax on profits. These are profits that we are toldthey cant even touch and are left sitting in the IFSC. It would definitely benefit Europe as a whole. It would also mean that Ireland would be forced in to doing the right thing and stop being a tax haven. It would also force Ireland into adopting strategies that lead to trying to encourage domestic exports not just non EU based (which have stopped creating net jobs). This is a nettle that we should grasp. Richard Fedigan is right. When we were the poor men of Europe. Europe were good enough to help us and we were more than happy to take that help. Now when they ask us to stop allowing MNCs to avoid tax, that they could do with, we say sorry we cant help. But please keep our show on the road by loaning us money we cant afford to pay back. It is not right that we are conducting this debate without the figures. What is the Average rate of corpo tax paid by non EU headed MNC’s in Ireland. We know it is somewhere between 12.5% and the 2.4% google pay. What is the size of their contribution as a % of the 3.923 billion total? @Kevin O’Rourke @Hugh Sheehy I see now that the “Walk to Work” interview was Kevin, not Hugh. Apologies all round. Probably a hierarchical gaffe énorme! Just shows I’m out of my depth with you young sharks. “German GDP growth averaged 1% annually between 1990 and 2010″ You do know that Germany was reunited and East Germany integrated into the Western economy during that time, don’t you?” Yeah, if only Ireland and other peripheral states could integrate somehow with such powerful and deep markets, share a currency and push through the tough times to form a more perfect and peaceful cultural union as a beacon of hope and justice to the world after centuries of strife. Europe could become great again, shame it’ll never happen. wait! what? @Hugh Sheehy. I understand that the Irish think they are just bailing out foreign banks. Fine. If you really think that’s true, then you should have a big problem with your government. The CT may or may not be a sideshow for the bailout. All I know, or what I think I know, is that the low Irish CT is siphoning off receipts from the rest of Europe, and not 1-for-1. A higher Irish CT would mean higher CT receipts for Europe (less for Ireland, but even more elsewhere). Do you deny that fact, or do you just not care (Hell with the frogs and all that)? Since Europe is crying out for tax receipts, it does not seem a wise idea to let Google off paying less tax. @eamon moran Well it certainly is at the moment but what if we had one rate for the whole of Europe as the French president suggests? Its not good enough to just say we are powerless to make business pay tax. All that it would mean is that all business would pay a fair rate of tax on profits. These are profits that we are told they cant even touch and are left sitting in the IFSC. JTO again: Like most posters on this site, and like most Dublin 4 economists (which, obviously, I have no idea if you belong to), you are totally forgetting that the Republic of Ireland is only part of this island. Consider the implications of what you propose: (a) The chances of the U. Kingdom Government agreeing, especially a Conservative-led one, to a proposal to harmonise Corporation Tax acrose Europe are ZERO. Therefore, we can exclude totally the possibility of the U. Kingdom agreeing to such a proposal in any shape or form. (b) There is allready a proposal to lower Corporation Tax in N. Ireland to 12.5%. The Nationalists are in favour. The Unionists are a bit lukewarm, but only because they are always cautious about cross-border ‘harmonisation’ within the island of Ireland. If the Republic of Ireland increases its Corporation Tax, the Loyalists will instantly be enthusiastically in favour of lowering Corporation Tax in N. Ireland to 12.5%, because then it would not be ‘harmonisation’, but N. Ireland gaining a major competitive advantage over the Republic of Ireland. What would then follow would make cross-border shopping in Newry in early 2009 seem like a picnic. There would be a mass exodus of MNCs from the 26-counties to the 6-counties. a says: The CT may or may not be a sideshow for the bailout. All I know, or what I think I know, is that the low Irish CT is siphoning off receipts from the rest of Europe, Not likely. They would just move to Singapore. Talk of the Irish tax rate siphoning off revenue from the rest of Europe is overdone. Even if our CT rate is one third of that elsewhere, we would be rich in revenue if we were taking a perceptible amount of revenue from economies 10 times our size. The reality is that schemes like the “double Irish” mean that revenue is siphoned out of Europe entirely via places like the Netherlands. I don’t see why Ireland should not defend its rate, while working on pan EU proposals to make these kind of stunts more difficult. Rumour seems to be the Zeit leak suggests Greek buyback via EFSF but agreed minimum corporation tax, restrictions on public sector pay and constitutional changes relating to debt. Do something yourselves chaps! Take the initiative. @Seafoid You quote the FT article – I assume you agre with the sentiment: “High bonus payments are a symptom of a problem, not its cause. ” Towards the end of Michael Lewis book “The Big Short” (Thnks EB for the rec) he makes a strong case that the bonus payments were largely the cause of the problem. The giant wall st family owned (and partnership) investment banks were one by one turned into public corporations. The executives in these corporations then paid themselves enormous salaries and bonuses which were linked to so-called profits. Some collapsed (bear Stearns Lehman Bros) others should have (Goldman Sachs) but were bailed out. In many cases the huge bonuses were still paid. We have seen similar but maybe smaller scale events here. The salary/bonus structure in financial – and other publc corporations is often a blatant looting. As for the est of the thread – I diddn’t believ I would ever agree with the bulk of what JtO has to say but in this one I do. There is soething undignified in crawling to Sarkozy as some of your posters seem to recommend. I agree with Colm: “From an Irish perspective, what looks to him like financial assistance from Europe could as readily be characterised as a bailout of European investors foolish enough to lend to Anglo Irish Bank and other insolvent banks, courtesy of the Irish taxpayers. “ @AMcGrath, I don’t think anyone is suggesting “crawling to Sarkozy”. In any event the organ-grinder is Chancellor Merkel. Let’s not forget who is the lender/funder of last resort in this system. Craven toadying is out as are deluded shrieks of defiance – e.g., ‘our economy has grown and is growing faster than yours, so there’. Some respect is required. But more important is the self-respect that is based on a demonstrable capability to admit error and to amend one’s ways. I don’t know if people have seenthis before but Barosso’s anger with Joe Higgins and with Ireland is palpable in the second half of this clip (after Joe Higgins has described how we should get away scot free): http://www.youtube.com/watch?v=uah_BVTmHeM&feature=player_embedded It is getting very serious when you see that kind of passion from Barroso. Here are my impressions and recollection of the facts. I would welcome any corrections: Irish CT rate 12.5% French rate 28% (?) But the above figures don’t tell the full story. There is wide divergence in what is deemed to be tax deductible. In some cases, as far as I recall, some French companies have an effective tax rate of 8% of their accounting profit. The French politician, Michel Barnier, has called for standardisation of the various tax reliefs. So, in practical terms we are very far from even considering standardisation of the tax rates. But I’m sure Sarkozy’s speech went down well with his electorate. However, if we are going down that road, let’s throw everything in the pot. What about the various British protectorates (Channel Islands, Cayman Islands, Bermuda etc) that are tax havens? What about the Netherlands? Why is U2 transferring income to this country? Taxation on corporate profits is one thing. Taxation on dividends is another. Maybe we should have a look at some other tax havens in Europe. Let’s look at Monaco for instance. Why is it in French interests to tolerate such a tax haven on her doorstep? In conclusion, I don’t think we should accept any moral denunciations from other countries in Europe on this issue until they clean up their own act. P.S. I lived in France for a couple of years about 7 years ago. The issue of Irish corporation tax rates never arose among businessmen I spoke to. But I do remember Polish plumbers coming in for a lot of criticism in the course of the Lisbon Referendum there! @a As I’ve said in numerous posts on this site, the “Irish” are far from blameless in all this. Here’s your classic narrative.. Dodgy Irish bankers borrowed money to lend to to dodgy Irish builders. The builders borrowed the money to build houses to sell to unwise (but unknowing, mostly) Irish people who also borrowed money from the same dodgy banks to buy the overpriced houses. The dodgy Irish govt picked up loads of tax from all the activity, encouraged a boom, overpaying the public service and generally raking it in and swanning around pretending to be gurus while studiously ignoring any regulatory problems in the banks. Many people who seemed to be making money on this scheme bought houses in Bulgaria, cars in Germany and even oil wells in Nigeria. The Bulgarian houses aren’t worth much, the Mercs are old, and the oil wells in Nigeria are – well – oil wells in Nigeria. Eventually the dodgy banks consisted of nothing but property loans and the careless lenders finally got nervous…which was sensible but years too late and despite widespread warnings. Now the whole thing collapsed. All the builders are broke. All the construction workers are unemployed. All the banks are bust, although the govt didn’t think so and guaranteed all their debts and promised to pay them all back. Now we have Irish taxpayers, most of whom had nothing to do with the boom and many of whom are in negative equity being forced to pay back the banks’ creditors. The govt has done nothing even remotely adequate to reduce excessive spending, so Irish taxpayers will have to pay off the salaries and pensions of the protected few too. Meantime, the debt continues to pile up and the money is mostly gone…so…who pays? Most of the “guilty” are broke or have good lawyers or both. Most of those that are left are also near broke. Many had nothing to do with the boom but still need to pay. The ones that made money are going to be hard to recover money from – at least without retroactive taxes of some sort. Meantime, for the “Irish” to say “this is not our fault” seems ridiculous or near criminal from a Euro point of view. Many Irish feel similarly angry and defrauded. The debt continues to pile up and the money is mostly gone. @John Martin The UK has been cutting some very juicy tax avoidance deals with companies like Vodafone , documented extensively in Private Eye. Companies are ripping off states all over Europe. How about “this is not only our exclusive fault”. We’ll take pay cuts, welfare cuts, tax increases etc. You will not not charge us a premium interest rate nor preclude at least some sharing of the burden by those who made unwise investments. @Paul Well Merkel whoever – she seems to have a choice of monkeys – we had a similar arrogant lecture from that Italian ECB guy the other day. I suppose given their not so distant history it has to come from the monkey rather than the organ-grinder as you describe her. Richard Fedigan above say. “Merkel is under pressure to pull back from “European” involvement including bailing out economies like Greece and Ireland that are perceived to have lived high on the hog of EU/German money. ” It must be nice to belong to a country who never had to suffer the indignity of being bailed out? In respect of said bailout – as many including ColmMcC have pointed out – it is a loan, and not a particularly cheap one, by which they are using the Irish taxpayer to fund the bonuses of their banking executives. It isn’t that hard to join the dots. @Zhou Actually I thought Joe won that on hands down – Barroso again conflaed fiscal and financial systems problems – that will never wash with the public no matter how fast you say it in one sentence I have still not seen one reason why we cannot deal with the IMF on its own. I fail to see what Europe is bringing to the table apart from problems. @Eureka We couldn’t have that – the IMF might have excluded the bank bondholders from the deal – just not on – they need their bonuses. @Zhou I thought Joe Higgins got the better of that exchange. He said it should go to a referendum which was a very good point. He was right about Barroso and co. being led around by the nose, a nice agricultural reference. Barroso when he lost his cool was no better than Tony Killeen losing the rag with FoT in November. Normally Barroso s authority would be enough to get over a Joe Higgins verbal assault but Joe knows the big fish are floundering. They have very little credibility at this stage. All the experts and all that advice and the crisis just intensifies. It is the same in the US. The medicine is not working. This crisis has already destroyed many political careers and Barroso might be added to the list by the end of the year. Seriously. Is Borroso your president? Did you elect him? Either Europe can give us 3% for 5 years with restructuring and no attacks on tax rate or we go straight to the IMF. That’s the negotiating position isn’t it! “the perception that this country has been the recipient of substantial EU transfers over the years, which is true” Or maybe not so true. In fact, if you balance against those transfers the value of fish taken by European fleets from Irish waters over the last 36 years, the net transfer may even have been in opposite direction. Legally available quota for the non-Irish fleet in Irish waters is currently valued at very close to €1 billion per year. During the nineties, quotas and values were both higher; and illegal fishing was massively higher – The annual transfer in that decade was probably well in excess of €2 billion per year. I don’t think we owe anybody anything. @AMcGrath / Seafoid Who one the debate is beside the point. Political relationsa re more akin to romance than debating. Being right is no use if you want to get the leg over! @ Cicero You have a sound moral case. The history of the world shows that natural resources are usually seized by the powerful and the well organised. Many native peoples have been wiped out, as indeed have many animal and plant species. As Gore Vidal says, I think, our civilisation is built on the destruction of other peoples societies. The counter argument, as advanced by the ‘settlers’ is that native peoples are incapable of exploiting resources in such a way as to create a wealthier and better society. That position is clearly not without merit. The reasons why we have not had the necessary fishing fleet and associated industries are no doubt interesting, but too complex for this thread. feckin typos! – one -> won I never used to mispell words. I certainly never spelt out completely different words. The herd-edge buffaloes are being picked off steadily. @zhou What has wheat got to do with it? 😉 [Takes his anglo-american translator machine and runs for the door] @HS 🙂 very good. Don’t tell Sarkozy (or Joe Higgins) that we’re still eating the fancy crackers! @Dominique Jean-Raymond, If you are still reading, and you have any slight influence over your own government, is there any slight chance that you might be able to persuade them towards the idea that the European Union should go away and leave us alone on this? Stop lending us money, and stop interfering with our Government’s policies. We are still living far beyond our means. Feeding us more debt is allowing our politicians to continue putting the brakes on reform, and is ensuring that when the sovereign default, or transfer of debts to EU partners, finally comes it will be spectacular. A sudden total cut-off of credit would be preferable to funding us to dig ourselves in deeper, as we are doing now. But a middle ground where we deal just with the professionals of the IMF for liquidity funding, rather than having amateurs from the EU running the show, would be preferable again. All it will take is for the EU to walk away. If you have influence, please use it. @BeeCeeTee Sorry,I have absolutely no influence on my government. I am curious to know how you propose to finance the cash needs of your government: go on the market? I am not aware that the IMF is willing or able to do more than he has done. Usually the IMF is used to frighten children into submission except in Ireland where he is the good fairy.Anything is relative. @ Cicero ..and maybe we owe money to countries where some of the fish travelled from?? After 50 years of independence, we didn’t have much of a fishing industry. Miracles could have happened but what would farming have been without CAP? 50,000 due to emigrate this year! Current approach not working. Europe stood by while thousands were killed in the Balkans. Europe is self satisfied, arrogant, complacent and superior. Look how we are to be punished for our mistakes and look how to get off the hook for their own. @BeeCeeTee We are still living far beyond our means. JTO again: This is nonsense. The balance-of-payments is in surplus. ESRI today forecast that it will be in surplus to the tune of 2% of GDP in 2012. Ergo, we are living below our means. Out of the hundreds who post on this site, the only one who appears to understand what the balance-of-payments means is Brian Woods II. @Messrs Barroso and Higgins This is simply a dispute between two rival Marxists. Normal people should pay no attention. @ JTO Where does the budget deficit fit in your model ? @JTO Yep – haven’t a clue what it means. You’re not up for a job in the reshuffle by any chance? Michael Hennigan: How does showing that Ireland gets taxes on outside activities answer my point about the illogicality of complaints about this by people also wanting the Irish government to get more tax revenue? Slightly related, but citizen Sarkozy should perhaps note the numbers. Ireland is paying for its sins. If the emigration rate for Ireland 2011 (forecast, at least) were transferred to other countries then the equivalent rate for Spain would be 500k+ emigrants, for Germany 900k+, for the USA 3.5 million, for France 700k+. @Dominique Jean-Raymond, The opinions and perceptions of people like you from outside this little island of saints and scholars are very welcome. I would welcome even more. You may have noticed that Karl Whelan has just opened a thread dealing with the financing needs of the government which may help to address the question you have raised. @seafoid It was all explained at length in the thread put up by Professor Brendan Walsh just after Christmas, the one containing lots of nice graphs. I’m sure that you can find it. In its simplest terms, the private sector in Ireland is now running a large surplus, while the government sector is running a large deficit. Sometime around mid-2010, the former exceeded the latter and the trend is expected to accelerate this year and next according to today’s ESRI forecasts. “@Messrs Barroso and Higgins This is simply a dispute between two rival Marxists. Normal people should pay no attention.” Joe Higgins has a knack of winding up his fellow socialists! @ Dominique Jean-Raymond the IMF modus operandi has changed somewhat in recent years due to the changing nature of our global economy (ie Asia, Mid East reserves) and due to a feeling that they were a bit too heavy touch with their aid operations during the Asian crisis in the 1990’s. They are far more soft touch now, deliberately so, and so explains why they have been relatively ‘friendly’ with the likes of Ireland and Greece. In some ways they were struggling to find a raison d’etre up until this crisis, and are seeking to deal with it a bit more sensitively than previous incursions. Here’s the plan: Stay in the Euro Stay in the Eurozone Deal with the IMF for our rescue package We don’t have time to dither. We are only realizing what many Europeans already know – European institutions are not fit for purpose. Don’t waste time. I’m sure the Bosnians thought they’d help them out too, Im sure the Rwandans thought that after arming the militia the French would take some stance on the genocide in its former colony. Europeans are incapable of tesponding to anything that does not directly affect their very narrow view of their national interest. @ Zhou “This is simply a dispute between two rival Marxists. Normal people should pay no attention.” Joe Higgins has a knack of winding up his fellow socialists!” In fairness Barosso totally sidelined Higgins question. Higgins asked why the Irish working people should have to bail out bad private investment decisions of Private capital. Barosso never answered but went on a rant about how Europe was helping Ireland. That right, Europe is helping Ireland ‘to bail out private investment decisions of of private capital’. Gee Europe, thanks! @Eureka: “We don’t have time to dither.” In that case, why do we permit the continued existence of the present excuse for a government? bjg @ Paul Power We have more than one gabelle tax. It would not be strange for example for a country to complain about another hiking tariffs whille seeing the merit for that country to expand its revenue base. @ JTO The bond market isn’t buying your story. When will we see the famous NTMA roadshow ? Is it on after Wanderly Wagon ? @zhou “Being right is no use if you want to get the leg over!” Interesting analogy but – I suggest a bit off the mark. Rather than Joe trying “to gret the leg over” Barroso – he asked him explain the morality of ECB asking the Irish taxpayer to present their collective a** to the European bankers. Barrosso chose to change the subject. Joe ust said what a lot of people are thinking – and hit a nerve. The irony of the socialist asking the maoist why irish workers are bailing out capitalists If Joe Higgins gets that message out in the election campaign he can’t lose. à la recherche du temps perdu Irish Times, 22 June 2006 “Taoiseach Bertie Ahern described Socialist Party TD Joe Higgins as a “failed person” and told him to “go away” during heated exchanges on the cost of housing In March 1996, the average price of a home in Dublin was €82,000. This year, 10 years later, it is €384,000, an increase of €300,000. That represents a shocking €30,000 increase per year, the equivalent of the current average industrial wage each year for 10 years. Prices outside Dublin have increased pro rata. ” Mr Higgins said that speculators were buying houses in working class communities left, right and centre. “A frightening percentage of homes in hitherto stable communities are now rented. Stable communities are being replaced by transient communities, by people who are forced into the laps of landlords, such as migrant workers and those on rent supplement.” Mr Ahern said that house price increases were primarily driven by the increase in demand for housing. “Now that we have stopped mass emigration by working class people, unemployed trade unionists and those who lived in working class communities but had to seek refuge in Australia, Canada, the United States and Britain, people are again living in the working-class areas which the deputy and I represent.”” Under current the European architecture, taxation is a national question (mainly …). But the current European architecture isn’t working. For instance, it allows small countries to run policies (light regulation of banking, low corporate tax rates) which are beneficial for themselves (or at least for the national oligarchy) but damaging at the European level. Stick to the rules and Ireland can’t rely on getting any bail out from European governments. The European governments in question (notably Berlin) understand that now is not the time to increase the Irish corporate tax rates – but when the facilities come up for renewal, the question will not be what Ireland is legally entitled to do with taxation, but the negotiation of a new arrangement. Sarkozy is playing his usual game – he wants to be seen to leading the charge which he is actually following. Berlin will call the shots. In five years time, there is likely to be a two-speed Europe, with Ireland in the slow lane. Accidents in the slow lane won’t be considered to be that serious for the countries in the fast lane. This is the thrust of Schäuble’s proposals and Irish corporate tax rates will be a small part of a larger negotiation. @Dominique Jean-Raymond “I am curious to know how you propose to finance the cash needs of your government: go on the market?” Substitute “family” for “government”, and many thousands of families hear the same from loan sharks just before Christmas each year. Just because they desperately want the money doesn’t mean that it’s wise to take it. That doesn’t make your question a bad one. The answer is that the government has to live within the limits of its tax revenues, plus whatever it has stashed away, plus whatever liquidity the IMF will provide. It means cuts to public service pay and welfare payments, and probably to public services too. It means more tax increases, which will fall mainly on people on low to average pay because taxes elsewhere are mostly close to the point where they will do serious damage to economic activity if they go any higher. But all that is coming anyway. Any because it’s coming anyway, we will be much better off if we get it over and done with as quickly as possible. The growth projections that make everything look as if it may turn out right are nonsensical, and even if they were right our public debt position would be out of control by 2014, by any reasonable assessment of the tax bearing capacity of the Irish economy. We’ll probably have to immediately freeze repayments of capital on government and bank bonds, as well as on existing liquidity from the ECB, to conserve cash. And we’ll have to consult with the relatively rational folks at the IMF about whether any further debt restructuring is needed. As well as being in the best interests of Ireland’s people, the end result will be far better for our creditors than it would be if our government continued to binge on money it doesn’t have, and we can’t give it. The Economist thinks a haircut of one third may be necessary, but as someone who is still proud to be Irish I very much hope we can pay back more than 67%. If the loan sharks of the EU would only leave us to our own devices, we would have a good chance of achieving that. @Gerard Go to the top of the class, that man! “The European governments in question ( notably Berlin) understand that now is not the time to increase the Irish corporation tax rates but when the facilities come up for renewal the question will not be what Ireland is legally entitled to do with taxation but the negotiation of a new arrangement…. Sarkozy playing his usual game … wants to be seen to be leading…..actually following…Berlin is calling the shots…..Irish corporate tax rates will be part of a larger negotiation. So, no more to be said really. Put Gerard ( are you a tough negotiator?) in charge of the team, advised by Edgar Morgenroth ( a German at ERSI if I’m not mistaken), stop talking about France ( monkey!) and lets’ get to work now on a new Irish “Industrial Strategy”. I’m leaving you on this thread now that Gerard has taken charge and concentrating on changing our attitutes to the fact that emigration is now a FACT and not necessarily, always, “a bad thing”. @Gerard Haven’t we been members of the MF for about 50 years now? Michael Hennigan; you’ve lost me completely. Nothing you wrote disproves or refutes standard economic theory going back around a century that corporations do not pay tax. As Colm mentioned M. Sarkozy’s rant on Ireland’s economic policies was given before the employees of the EADS Airbus factory/ For the record we should note that the World Trade Organization has ruled that European countries (especially France and Germany) have provided billions in illegal subsidies to Airbus. Could I ask a question. Could one of the many fine economists here tell me what effect say a 2.5% cut in our corporate tax rate would have a) initially in our tax take, b) the medium term effects on our tax take say 5 years hense? What might the employment creation effects be? Could any of the politicos here calculate the potential effects such a move would have o Sarcozys blood pressure and is there a corrolation? No, seriously if 12.5% is good then surely is 10% not better? Comments are closed.