Corporation Tax in Ireland
A few days ago Ireland said it did not need money and would not take a loan. Now it is saying it will not give up its very low rate of Corporation Tax. It will be interesting to see how long it can resist the pressure, especially from Germany and France. In the end it will be a stand-off between Ireland digging in and the Eurozone pressing hard. Both have a lot to lose. If Ireland concedes, its main weapon for getting back on its feet and paying back what it owes will be surrendered. If it refuses and the Euro money is held back, it is likely that the Irish economy will implode. That would be a disaster for the Eurozone. This Blog’s advice is to let the Irish have the money and keep their low tax rate until they are back on their feet.
By then the Eurozone has absolutely got to get in place an effective structure of economic governance, binding upon its members. Clearly it would have to be democratically accountable, because of its impact on the lives of Europeans. To give it teeth referenda will be required in the Eurozone countries. The chances of a unanimous yes vote are not good, but without a government in charge the Euro cannot survive. In the end it may come to a battle between sovereignty and solvency.
Ireland needs to have a plan B. When the economy has stopped collapsing, if it wishes to restore its treasured sovereignty, it should quit the Euro, introduce an Irish Dollar on the lines of Canada, Australia, Singapore etc, cut its corpoation tax rate to 10%, its income tax rate to 15% and cut regulation to the bare minimum to protect, health, safety and the environment. Then the Irish will find their economy will really take off. They have already shown what they can do. They need to have the confidence to do it alone.
But first they have to get out of the hole and it is a very deep hole too. Above all they must not again think that money can be made by simply inflating property assets. If they keep heart and learn from the errors of the past, the Celtic Tiger will wake up with a roar.