A chara, – Suzanne Lynch's article "Appeal against Apple ruling puts Ireland on wrong side of global debate", Analysis, September 8th) states that Ireland had a zero per cent corporate tax rate when it joined the EU in 1973.
In fact, the zero tax rate referred only to profits derived from exports. This was deemed by the European Commission (EC) to give an unfair advantage to exporting firms (mostly foreign) over non-exporting firms (mostly indigenous), and was replaced in 1980 by a 10 per cent tax rate which applied to all manufacturing firms. It was not a “general corporate tax rate”.
This tax rate was not introduced under “special rules that allowed struggling areas to use tax incentives to spur investment”, as the article suggests, since all EU member states have the sovereign right to set their own corporate tax rates (as long as they are not discriminatory). The 10 per cent rate, while continuing to be attractive to foreign investors, was set to be revenue-neutral, ie the revenue gain from applying the tax to exporting firms would balance the revenue loss arising from the fact that the new tax was much less than the previous tax rate for non-exporting firms.
Similarly, when the Irish government applied the 10 per cent tax rate to services exports (which began to grow rapidly in the 1980s), the EC intervened on the grounds that this discriminated against non-exporting services firms. This led to the introduction of the 12.5 per cent tax rate in 2003 that applies to all trading income in goods and services, whether deriving from sales abroad or on the home market.
Again, the additional tax on manufacturing and on services exports was designed to offset the revenue loss arising from the fact that non-exporting services firms would now be paying a lower rate of tax. This had nothing to do with Ireland no longer qualifying as a less-favoured region of the EU, as much of Ireland still retains less-favoured status.
Suzanne Lynch refers to “growing resentment that Ireland was luring investment from other EU countries through a low-tax regime”. While there may be such resentment, I would suggest that there is much greater resentment at how Ireland allows itself to be used as a conduit for transferring vast sums of untaxed revenues out of the EU.
Indeed, your writer refers later in the article to the “much deeper problem of global tax avoidance”. – Is mise,
Dr PROINNSIAS
BREATHNACH,
Senior Lecturer
Emeritus in Geography,
Maynooth University.