Today’s Eurointelligence bulletin predicts that any EFSF intervention for Ireland will involve an increase in the corporate tax rate. Whether Ireland’s low corporate tax rate is good for wider Europe is certainly open to debate (a good recent paper is “Corporate Tax Harmonisation in the EU” by Bettendorf et al [Economic Policy, July 2010]) .
However, it is worth pointing out that Ireland collects a reasonable amount of revenue from this source (see table below). It is certainly possible that short-term revenues would rise with an increase in the tax rate but it would be a shock to the multinational-dominated export sector. Since this sector is playing a key role in providing momentum to the economy, it is doubtful that this would be put at risk during a crisis situation.