Why must we cling to 12.5 per cent?

Today’s Irish Times reports on French advertising to promote foreign direct investment.  It  quotes an effective corporate tax rate of 8.2 per cent, despite the headline rate being 33.3 per cent.

France is the main protagonist in pressing Ireland to raise its corporate tax rate from the existing 12.5 per cent.

Irish politicians are talking tough on this matter suggesting that the 12.5 per cent rate is ‘untouchable’ and ‘non-negotiable’.  Would that they were so gung ho about arguing for the bailout terms being ‘unsustainable’ and ‘killing any hope of growth.’

Vision and imagination

Why oh why are such strong positions taken on such simple headlines when so much more can be achieved through vision and imagination.

No country has proved more adept at building in breaks, incentives and bonuses as part of the tax system than Ireland.

The decision makers who determine the location of a multinational are well versed and well advised on tax loopholes and manoeuvres.  They are not some gullible giants that are only blinded by a headline rate.

Diaspora dividend

Ireland sells itself on a number of points.  These include political stability and international credibility as an ideologically ‘neutral’ location as well as the use of English as the primary language. We benefit from  the diaspora dividend that comes from our global network of emigrants and those touched by Irish influences.

The headline rate is a marketing exercise, but one which can easily be redrawn with greater vigour.

The incentives could then be used to affect social policy as well as economic.  Advantages can be given to companies who undertake research, who employ particular groups or in specific geographic areas; who use local suppliers and who support local and community initiatives.  There are any number of different imaginative schemes that can be put in place if we let go of 12.5 per cent.

The new government promised real reform and a new way of doing politics.  This is a way in which it can be achieved effectively and with real benefit for the country. Sadly it appears that the lowest common denominator of political intellect is still the benchmark.


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