The Irish Economy
Commentary, information, and intelligent discourse about the Irish economy
The FT’s Lex proposes a grand bargain.
What’s the ‘grand bargain’, then? Not everyone can afford an FT subscription on top of everything else.
I kind of agree. Ireland clearly is not willing to cut its public pay bill – so it cannot play “dirty”, go after the bondholders and say “do your worst” to a cheesed-off Europe.
In the absence of that, it will be required to give up something it doesn’t want to – and partly through Enda’s trip to see Angela – Corporation Tax has become sufficiently hyped to be an obvious trophy.
I think this – or something similar – is more likely, but if the people don’t want it they, and perhaps a few more economists, may have to “man up” to the Crokies.
And please, put the minimum wage red herring away – that isn’t the problem.
“Ireland needs a comprehensive, agreed debt restructuring schedule with its creditors, to include at a minimum the €17bn of senior unsecured bonds in the Irish banking system. The European Central Bank and the European Commission may not be ready (yet) to consider such a step. But if Ireland was prepared to make concessions on its overhyped 12.5 per cent corporate tax rate, there is the basis for a grand bargain between Ireland and its creditors that could create the template for an orderly resolution to Europe’s debt crisis.”
So what’s the bargain? Default on two fronts! Don’t pay debts, and welch on the long-standing commitment to low corporate taxes. So, burn the bondholders AND the foreign direct investors. And then it will be ‘grand’.
It’s relatively easy to finesse corporate taxes, I reckon. Just do what the French do and offer a discount on corporate tax based on payroll tax… the big employers like it and the big employers are the ones that matter.
It wouldn’t do much for debt to GDP numbers, though, if GDP shrank back to an improving GNP…
The US & Ireland have strong ties, however, there has been some noises in the US as well about the Irish tax system.
If the US decided to put pressure on Ireland regarding this, who would support Ireland?
Oops – Blind Biddy’s snoring just woke me up ….. did I miss anything? Did any of the three mainliners sound anyway Sound on the Banking Question?
What thread am I on?
Blind Biddy: Did anyone say anything? Put on the kettle …. course they didn’t …
‘Something bolder is needed.’
Yes Lex, but one hell of a lot bolder than the paltry proposal that you offer here.
Blind Biddy wouldn’t get out of bed for less than a €60 billion write down – and she would hould on to that ould bit of liquidity from the ECB for a while …she’d ‘let it rest’ in the system for a while [and loan a good skelp of it out to other fools at 5.8%] … iffen only to keep Axel and Lorenzo on side for a while … (-;
This is clearly the fault of Dominique Jean-Raymond…..for raising the CT/fiscal dumping issue way back before Christmas.
Now everybody ( including Dan O’Brien and the leader writer in today’s IT) seems to think that when we finally get around to negotiating with “Europe” and its bankers we’ll have to make some concessions on CT!
I suppose the next “surprise” will be that we need to review our “industrial” policy ‘cos the CEOs of the MNCs won’t like this, no net employment is being created, unemployment is not going down and emigration is on the increase.
Truly amazing, unpredictable and entirely out of the blue!
We should not agree to change the CT rate.
However, we should if necessary agree to something on the tax base as it’s likely at some point that individual countries would require MNCs to pay some reasonable tax level on a measure of profit from their country sales.
Dan O’Brien’s op-ed is here.
Pardon for asking. You guys actually live in this real world of contemporary Ireland?
Would this Corp Tax thing be useful to purchase food, or fuel or pay a mortgage? Create a job? Yes? No? Exactly who will benefit/lose if the CT is left alone/raised? And no Spinola please, back-up any assertions with evidence.
Get real. Stirred enough?
“we should if necessary agree to something on the tax base as it’s likely at some point that individual countries would require MNCs to pay some reasonable tax level on a measure of profit from their country sales.”
And, like I say, we should tax German and French car manufacturers on the profits they export from this country, Tesco too, come to think of it.
Just think, a whole new era of protectinism… how nice.
@BpW ” You guys actually live in this real world of contemporary Ireland?
Umm! No actually.
For some time, Brian, the “world” in Ireland has appeared, seen from the actual real world out here, not to be very real at all. And increasingly so.
Because I’m an Irish citizen, I’m following equally unreal election debate in Ireland that, very luckily for us, no one pays any attention to “out here” in the real world where only the result counts.
For the umpteenth time, Europe and “Europe” only pays attention to Ireland to the extent that Ireland impinges on both which, right now, is a very negative “impingement”.
Prior to the present disaster, it would be fair to say that Europe’s impingement on Ireland was principally through a miniscule proportion of its (Europe’s) exports, a massive facilitation of the insane lending policies of Irish banks and quite significant purchases of the “Irish” exports of US MNCs on which little or no tax was paid to Ireland, Europe or “Europe”.
And we never became net contributors to “Europe”. ( “Real” Irish exports, don’t impinge on Europe or “Europe”, because they’re a tiny proportion of total “Irish” exports and go to the UK ( as they always did).
That’s it for the past (impingement) and a pretty dismal past it is.
We are now in a “real” mess that we CAN’T get out of by ourselves so we need help from Europe, mainly through “Europe” ( both of which are, today, Germany actually if you want to talk about the “real” world. Indeed, it might be contended that both Europes in are such a mess that they ( both Europes) CAN’T get out of by themselves either and the first installment of admitting this fact came with the involvement of the IMF in bailing out member countries of both Europes.
(Perhaps it’s best not to go into the fact that the IMF itself ( actually the US) CAN’T get out of this mess itself either without China’s help so we’ll leave that aside for now.)
So, forgetting the past ( some day the Irish state may indict and punish the banking criminals after a number of lengthy tribunals!) and concentrating on the present and the near future, the fact that Ireland CAN’T get out of this mess itself will be on the agenda of meetings in Brussels, Frankfurt and Berlin.
These meetings are our only hope of survival in the “real world” now and for many years to come.
Leaving aside silly notions of NEVER paying back ANY of what we madly borrowed to finance our distinctly unreal booms over many years, what have we got to “bring to the party” at these negotiations except our misery, the threat of “contagioning”(sic) both Europes and our CT rate.
I have been suggesting since before Christmas that here is where we would end up. And guess what? We’re here!
How nice indeed.
Bloomberg has reported that Google paid no corporate taxes in the UK even though it has 850 employed there and in Q3 last year accounted for 12% of total sales..
I suppose one man’s angle on protectionism would be seen by another as a tax haven activity.
Interesting that Lex is reiterating a proposal made in the FT op-ed pages on only Monday with no reference to that column. Michael O’Sullivan, under a misleading headline regarding a new Irish republic, proposed the following on Monday:
“Some of this [restructuring] should come in economic policy, where Ireland must offer the EU a rich quid pro quo for its help; one that breaks conclusively with the lazy assumptions that have governed Irish public life for the last thirty years. Ireland’s low corporation tax is an obvious example: a 1 per cent rise in corporate tax in return for every €15bn of debt restructured would be a good bargain for Europe to strike. Pension fund reform and more judicious use of EU infrastructure funds, could also be included in a broader plan.”
As far as I can tell, the US & the EU are making similar noises regarding the taxation of corporations.
Transfer-pricing to generate profits where the corporation tax is the lowest is being targeted.
If it succeeds then most countries in Europe would probably collect more taxes as a result. Will the UK gain more tax receipts from Google than they lose out on Tesco? Probably. Will Germany gain more tax receipts from Microsoft than they lose out on BMW, Mercedes, Audi etc? Probably.
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