I think I kind of like that idea. I’m not sure though. Someone clever will have to think it through and explain the consequences to me.
Should Ireland agree to the 15% Multinational Corporation Tax Rate?
- Thread starter Brendan Burgess
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I suspect you would notice it in your pay packet, who do you think will get caught for the shortfall in corporation tax,
The current corporation tax system we have is simple. We shouldn't underestimate how valuable that is. Corporate taxation in the US is extremely complicated, as is interacting with the county, state and federal government when running a business of any size.
The issue of IP is also interesting. If we want to protect our ability to be a credible location for IP registration then we need to invest serious amounts of money into our 3rd level institutions and encourage them to continue to prostitute themselves to MNC's. We are currently doing it right, just not on a big enough scale.
Duke of Marmalade
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I agree it is an interesting capitalist idea coming from an unusual source
Corporate taxes are after all, on a look through basis, taxes on the shareholders of the company. So adjust tax on dividends and capital gains to compensate. The scope for shenanigans greatly reduced. Like you @PurpleI look to others to expose the flaw.Sophrosyne
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Phrase 'at least' removed from draft OECD tax deal.
“The phrase has been cited by the Government as the main impediment to Ireland signing the proposed deal.
Its removal now opens the way for Ireland to sign up to the Framework Agreement, which is expected to be finalised on Friday.”
“Ireland is keen to have safeguards in place to prevent the country being compelled to increase the rates to either 18% or 21% in the years [a]head.”
“There is some confidence that any increase in the corporate tax rate would not apply to companies with a turnover of less than €750m.
This would allow the country to keep the 12.5% rates for many firms here and it would be viewed as being particularly advantageous to indigenous companies.
The OECD plan is not, however, complete.”
“The phrase has been cited by the Government as the main impediment to Ireland signing the proposed deal.
Its removal now opens the way for Ireland to sign up to the Framework Agreement, which is expected to be finalised on Friday.”
“Ireland is keen to have safeguards in place to prevent the country being compelled to increase the rates to either 18% or 21% in the years [a]head.”
“There is some confidence that any increase in the corporate tax rate would not apply to companies with a turnover of less than €750m.
This would allow the country to keep the 12.5% rates for many firms here and it would be viewed as being particularly advantageous to indigenous companies.
The OECD plan is not, however, complete.”
That'll also influence M&A activity globally.
There'll be a whole new industry to hide the links between companies. What happens when company A owns 49% of 10 other companies, all turning over €700m?
Sophrosyne
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In fairness, that among numerous other issues has always been a problem with a global taxation plan.
I'm not really getting all the drama about this 15% CT rate for Ireland and the prospect of losing €2bn a year.
At a very basic level if you increase the tax take from 12.5% to 15% it should mean that more money is captured by the Revenue, not less.
Of course the argument is that investors will start to look elsewhere, but where? Everywhere has a minimum of 15% and only if they are applying that rate.
If investors are looking elsewhere it won't be because Ireland has a minimum CT rate of 15%.
As for losing competitiveness to other countries, what was stopping any other country around the globe from applying rates less than 12.5% until now?
Somewhere like Hungary has a 9% rate, I don't recall any discussion about being undercut by them?
There are a lot more factors for investors other than the CT rate and if Ireland is applying the minimum rate accordingly I cannot imagine much negative effects from this arrangement. Instead it will probably be a good thing for Ireland overall.
At a very basic level if you increase the tax take from 12.5% to 15% it should mean that more money is captured by the Revenue, not less.
Of course the argument is that investors will start to look elsewhere, but where? Everywhere has a minimum of 15% and only if they are applying that rate.
If investors are looking elsewhere it won't be because Ireland has a minimum CT rate of 15%.
As for losing competitiveness to other countries, what was stopping any other country around the globe from applying rates less than 12.5% until now?
Somewhere like Hungary has a 9% rate, I don't recall any discussion about being undercut by them?
There are a lot more factors for investors other than the CT rate and if Ireland is applying the minimum rate accordingly I cannot imagine much negative effects from this arrangement. Instead it will probably be a good thing for Ireland overall.
There's also an element to the deal whereby Multinationals would pay their taxes i.e. in the country in which the sales were made. That's the bit that hurts us and most of the media analysis and commentary seems to have missed
True, but if the CT is what is attracting them to book their sales here then isn't there a prospect that in order to continue to avail of a competitive rate they may move operations here also?
Take US CT rate of 21%. A large multi national sets up a head office in Dublin to avail of CT rate of 12.5% while business operations are in say, Utah.
Under this new global deal the head office in Dublin no longer holds value and instead is shutdown. CT rates of 21% are now applied in the US.
Alternatively, why not keep the Dublin office open and move operations from Utah to Dublin to continue to avail of the more attractive 15% CT rate?
I appreciate this is a very simplistic basis but from purely the perspective of CT rates, 15% is still more attractive than 21%.
RetirementPlan
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One big factor in Ireland's favour, from personal experience with a hi tech multinational, is the two hour overlap in working hours with companies on the west coast USA, which is most of the tech world. 4pm - 6pm in Dublin is 8am - 10am in Seattle and San Fran, and that overlap is essential for collaboration and shared projects. On IT projects, it worked out really well to be handing over bugs at the end of the day Irish time, and coming in next morning to find they have been resolved overnight. Any further east in Europe makes it very difficult for ongoing collaboration on work, without absolutely destroying work life balance.
Sophrosyne
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Yes, it is very complex.
Seamus Coffey from UCC knows a lot, he has a blog, and sometimes contributes to www.irisheconomy.ie
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US firms must pay CT on worldwide profits.
Any profits of US MNC taxed at 12.5% here are subsequently subject to US CT.
But there are loads of exemptions in the US tax code.
You have to read all of Seamus Coffey's stuff to get a handle on it.
Admittedly it is beyond my understanding. Paying 12.5% CT in Ireland and paying CT in the US on top of that.
There is obviously a lot more to it but more overall sense is that this 15% minimum rate will have little impact on Ireland, if anything we may benefit from it instead.
The 15% is not the issue. This is all about where corporations are taxed.
There's no scenario in which we are better off at the end of this.
Judging by this it looks like the US guys were resolving alot of the bugs if you were handing it over to them the whole time, this shows the brains of the US multinationals by and large still reside in the US.
Ireland's likely problems with attracting businesses after corporation tax reform aren't really due to the fact that it's small or somewhat geographically isolated. The main problem is that important aspects of public life are substandard which in turn depresses Ireland's attractiveness especially for foreign workers. That includes mediocre education and health systems, poor public transport, filthy streets, lack of public amenities and exorbitant rents that make it increasingly difficult for companies to attract and retain highly qualified foreign workers who have lots of countries to choose from.
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