Summary of ESRI QEB here.

Cronin-McQuinn paper on macro impact of fiscal policy here.

Central Bank macro-prudential regulations here.

Jim Stewart’s FT article on taxation of corporates here.

4 replies on “Ireland”

Re: corporate taxation. I came upon this the other day:

Longer term, inversion transactions may open up additional stateless income planning opportunities, if one believes, for example, that over time Ireland will consistently be a more tax-congenial platform than the United States from which to headquarter one’s base erosion strategies. (Interestingly, the Irish government may be a net loser in inversion transactions to date. The reason is that Ireland is not picking up significant new tax revenues from these deals, because in fact nothing changes; for example, senior executives in the United States do not pick up and move to the Emerald Isle. But the larger revenues of the expanded Irish parent company are treated as Irish for gross national product purposes, which has the consequence of increasing Ireland’s share of EU budget costs.42)

Edward D. Kleinbard, “‘Competitiveness’ Has Nothing to Do with It,” Tax Notes, Sept. 1, 2014.

The ESRI forecast is for 5% real GDP growth this year but its ‘nowcast’ forecast for q3 , of 2.3%, implies annual growth in 2014 of well over 6% in the absence of a big fall in q4 (and big revisions) which is nearer IBEC’s estimate. Growth next year is projected to be stronger, at 5.3%.

Of more significance is the Department of Finance’s projections ahead of the Budget ( which projects slower growth in 2015, of 3.6%, following 4.7% this year. Nominal GDP is projected to rise by 5% in 2015 against 5.1% this year.

One odd feature of recent forecasts is the divergence in views on the path of real government consumption. The ESRI thinks it will be flat, the Central Bank opts for a 1.7% fall while the Department of Finance thinks it will grow by 4.8%.

The ESRI says that for 2014 and 2015 it sees a further improvement in the current account surplus to 5.5% of GNP in 2014 and 6.8% of GNP in 2015.

When account is taken of the redomiciled PLCs / tax inversions, there was a current account deficit, expressed as a percentage of GNP, of 0.5% in 2013. This is forecast to become a current account surplus of 0.7% in 2014, rising to 2.3% in 2015.

It also says that the “fact that the current account surplus is forecast to continue to rise through 2014 and 2015, in spite of some growth in domestic demand, reflects the fact that external demand is expected to continue to play a significant role in driving growth in the economy.”

However, it notes a further uncertainty in the national accounts:

“New problems are arising in interpreting the published data on trade. In particular, some goods are being processed in Ireland on contract for foreign-based firms and the related import of the materials and the export of the final product are excluded from merchandise trade in the national accounts. This is because the goods at all time remained the property of a foreign owner. The net payment to the Irish processor may then be included in services trade. A similar issue arises with goods processed abroad for Irish based manufacturers. This has apparently had a significant effect on the National Accounts for recent quarters.”

There is a distinction between ‘growth’ and ‘general well-being’ … growth, these days, appears to load onto the upper echelons of ‘capital’ ….

First time I met ‘accounting’ I was somewhat perplexed that it did not appear to mesh with the basic laws of mathematics … as for ‘economics’ …. Ireland is a small place – but no-one appears able to ‘figure it out’ ….

What is Going On in the Irish Economy? October 9, 2014, Michael Taft

Taft concludes:

So where are we?
•Hard to tell, given that our headline numbers in GDP, GNP and exports are being compromised by multi-national activities and new accounting methods. The Central Bank has warned about many of these potential distortions.
•Domestic demand – a reasonably reliable measurement – has increased in the first half of the year but this was largely driven by changes in inventories.
•And despite a flurry of investment activities – which may be relatively short-lived – we are still far behind our EU partners. We are still awaiting a long-term investment strategy.

Is this clear as mud? Yes – because so many of our measurements are mud. What an open and honest Government would do is strip out all these quirks and anomalies to give a real read of the economy.

But if they did that we might find we are standing on a choppy sea of numbers.

A MUST READ for a confused Citizenry …

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