Matthew Lynn
Ireland’s low-tax miracle is over
2 May 2021, 10:04pm
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For a generation, Ireland has had the lowest corporate tax rate in the developed world. (Photo by PAUL FAITH/AFP via Getty Images)
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Okay, in fairness it might be the weather. Or the craic in the bars. Or the rugged coastline, golf courses, or the lakes. And yet for all its charms, there was always a far simpler reason why more than a thousand multinational companies have their main European headquarters in Ireland. Tax. For a generation, Ireland has had the lowest corporate tax rate - just 12.5 per cent - in the developed world. Even better, myriad breaks and allowances - in accounting circles the ‘Double Irish’ is not as you might imagine an especially stiff glass of Jameson’s but a fiendishly clever way of re-routing revenues - often take that down even further. The result? Companies from Apple to Google to Pfizer have huge operations in Ireland, creating tens of thousands of jobs, and an economy that is among the most prosperous in the world.
But hold on. It now looks as if Ireland's low-tax miracle is over. First, President Biden, despite getting sentimental of his family's roots in County Mayo whenever he faces an electorate he thinks might celebrate St Patrick’s Day, is proposing a global minimum corporate tax rate of 21 per cent. That won’t make a lot of difference to France (28 per cent), or Germany (30 per cent) or indeed the UK (19 per cent, rising to 25 per cent). But it will make a heck of a big difference to Ireland. In effect, it will have to double its rate. Now the European Union has joined in. According to a report in the
Irish Times, the Commission is pushing for the Irish to end its tax breaks as a condition of receiving its share of the money set to be distributed through the €750 billion Coronavirus Rescue Fund.
Raise taxes or you don’t get the cash is the message from Brussels.