Madam, – Re the letter by Martin McCarthy to your paper on Thursday (April 16th), I would like to make the following points.
It seems strange to me that in the same breath, he states that Ireland needs to preserve its corporation tax rate of 12.5 per cent whilst at the same time he highlights the fact that there is a huge gap in the public finances. Surely it is about time that the corporate sector started to share the burden? Corporation tax only applies to profitable companies. If you are a loss making company you will not be required to pay any corporation tax. Theoretically, even if you were to increase corporation tax to say 80 per cent, it would not make any difference to the viability of any company in Ireland as only profitable companies would be required to pay it.
I am not able to make any connection between the corporation tax rate and competitiveness. However, I do make the connection between a low corporation tax and a high net profit after taxes and suspect that this is the real agenda behind those who insist that Ireland must keep its low corporation tax rate.
Competitiveness in today’s economy is a by-product of things such as: having a good transport infrastructure having excellent broadband coverage having a highly educated workforce Competitiveness has absolutely nothing to do with corporation tax rates.
Originally from Ireland, I now live abroad, but have been avidly following the economic storm that has hit Ireland. I run a very small company in Belgium. The taxes that I am required to pay here in Belgium are significantly higher than in Ireland.
Corporation tax is effectively over 40% (because on top of the annual taxes, a further 10% is payable upon dissolution of the company). Aside from corporation tax, salary related taxes are effectively around 60% when you consider everything. However the public services are excellent and the country is demonstrably more equitable than Ireland. Despite the significantly higher taxes that companies face compared to Ireland, there is no shortage of international companies who choose to operate in Belgium.
Quite the opposite of Martin Mc Carthy, I believe that part of the cause of Ireland’s problems is the low corporation tax rate. It attracts companies seeking to avoid paying a fair share of tax. These companies are prone to leave as soon as some other country can offer them an even lower rate of corporation tax. Such a policy is a race to the bottom. The Irish exchequer has and is not receiving enough tax from companies because of the paltry corporation tax rate.
Furthermore, the recent assertion by the Minister for Finance that “We are going to have to wake up to social welfare rates” is disingenuous. He makes his comparison with welfare payments in the United Kingdom. However, just because the United Kingdom has a poor welfare system, does not mean we have to go down the same road. He would do well to compare the Irish system with that of Belgium, Holland, France etc.
Those, unfortunate enough to be unemployed at the moment, need support and a sense of solidarity. The price of that support and solidarity is higher taxes across the board and the provision of a good welfare safety net for everybody.
– Yours, etc,