Ireland: a tax dump

[Fr. Hank Tree]

Today on RTEs This Week they invetigated the situation where corporation tax revenues generated by Multinationals and paid in Ireland are derived from profits not generated in Ireland but abroad. The government and state agencies actively encourage this perfectly legal practice which involves transferring of profits into ireland by Multinations in order to avail of the 12.5% rates and avoid paying billions.

http://www.rte.ie/news/thisweek/

We are effectively taking free money, generated by productivity in other countries, not our own

This means that we are not as productive as we think and not as secure economically as we think

[Akrasia]

yep. it's called transfer pricing and it's what our sham economy is built on.

Smoke and mirrors

[Decko]

yep. it's called transfer pricing and it's what our sham economy is built on.

Smoke and mirrors

well its firstly up to the country on the losing end (usually the US ) to adjust the transfer price so as to increase the profits in their country and reduce them in Ireland.

What is annoying is that this case involves a company of just 8 employees yet they report profits of 150mm - clearly taking the piss to the extreme.

However a lot of US companies have significant substance in Ireland and yes, they do adopt agressive transfer pricing policies - a few years back a survey showed that GDP per capita was highest in the country in South Tipp!! - the reason well ---in large part a certain pharma company between Clonmel and Carrick (and yes it has lots of substance)

[rockofcashel]

well like D'uh.. someones finally copped on to question Irelands actual level of productivity, as opposed to our GDP levels.

Its amazing how little some people know about GDP, where its derived from, how its derived, and its overall effects on the Irish economy.

All we get from the economic illiterates is the mantra..

"Irelands GDP is one of the highest in the world, therefore we must be great".

How many people know, that if you were killed in the morning, and an insurance company paid out 1 million on your life assurance, that the nations GDP would rise by 1 million ?

Now tell me, how is that good for the economy ?

The amount of transfer pricing that multinationals carry on with here because of the low rate of corporate taxation badly skews the "real" level of economic production in Ireland, and masks the fact that indigenous Irish companies have been stagnant if not shinking in terms of productivity for years now.

If we were to use any economic indicator, we would be better off using GNP (Gross National Product as distinct for GDP), which adjusts for the difference between outflows created by multi-nationals and inflows created by Irish companies (eg Kerry Group or AIB's Polish concerns)

What would stand out if we really examined this, is that Ireland has the widest gap between GDP and GNP of any Western industrialised nation, confirming our dependence on wealth created by outside companies.

And just back to the GDP figures, and why these cause problems for Ireland.

European transfers for regional development and farming subsidies for example, are calculated on the basis of a members states level of GDP against the European average. If our GDP is higher than the EU average, then we get smaller levels of European assistance.

Because of our ridiculously skewed levels of GDP due to the proliferation of multi-nationals, we are losing out on money that we would be entitled to from EU transfers, which are more important than "being the greatest little economy in the world, woo hoo".

But hey, what do I know, no-one needs TD's with a basic knowledge of economics .. do they

[Decko]

well like D'uh.. someones finally copped on to question Irelands actual level of productivity, as opposed to our GDP levels.

Its amazing how little some people know about GDP, where its derived from, how its derived, and its overall effects on the Irish economy.

All we get from the economic illiterates is the mantra..

"Irelands GDP is one of the highest in the world, therefore we must be great".

How many people know, that if you were killed in the morning, and an insurance company paid out 1 million on your life assurance, that the nations GDP would rise by 1 million ?

Now tell me, how is that good for the economy ?

The amount of transfer pricing that multinationals carry on with here because of the low rate of corporate taxation badly skews the "real" level of economic production in Ireland, and masks the fact that indigenous Irish companies have been stagnant if not shinking in terms of productivity for years now.

If we were to use any economic indicator, we would be better off using GNP (Gross National Product as distinct for GDP), which adjusts for the difference between outflows created by multi-nationals and inflows created by Irish companies (eg Kerry Group or AIB's Polish concerns)

What would stand out if we really examined this, is that Ireland has the widest gap between GDP and GNP of any Western industrialised nation, confirming our dependence on wealth created by outside companies.

And just back to the GDP figures, and why these cause problems for Ireland.

European transfers for regional development and farming subsidies for example, are calculated on the basis of a members states level of GDP against the European average. If our GDP is higher than the EU average, then we get smaller levels of European assistance.

Because of our ridiculously skewed levels of GDP due to the proliferation of multi-nationals, we are losing out on money that we would be entitled to from EU transfers, which are more important than "being the greatest little economy in the world, woo hoo".

But hey, what do I know, no-one needs TD's with a basic knowledge of economics .. do they

spot on ROC -- are you SF Finance spokesperson yet?

[meriwether]

No doubt transfer pricing is a problem, but there are now a lot of tax treaties between countries to reduce this (the Yanks kinda copped on to this scam a while before its cover was blown on this week y'know).
I was interested to hear ROC's thoughts on the idea. He seems to be very concerned about our over-dependence upon foreign-multinationals. Id be also interested to hear how exactly the economic manifesto of his party would eliminate this.
It seems SF (and by extension ROC) have an almost pathological dislike of Foreign MNC's and seem to be under some illusion that a hike in Corporate Tax, which would have a knock-on effect of reducing foreigh investment, is somehow a good thing.
Its not. We (domestic Irish firms) simply cannot prop us up on our own. And there is also no reason for a domestic firm to up sticks and move to China either if they feel they can do business cheaper there.

[John_C]

Free money is a good thing.

[Fr. Hank Tree]

Free money is a good thing.

Not really in this case. That money is not based on anything solid like labour or capital. Corpo taxes account for around 6bn in revenue. If we are relying on that revenue and if a large chunk of it can dissappear in a flash that's not good at all.

[Ponzi]

[quote=Fr. Hank Tree]

Free money is a good thing.

Not really in this case. That money is not based on anything solid like labour or capital. Corpo taxes account for around 6bn in revenue. If we are relying on that revenue and if a large chunk of it can dissappear in a flash that's not good at all.[/quote:1eoxgj9t]


But we have Stamp Duty revenue so we are not as dependent on MNC corporation tax as we used to be. Sure it'll be grand so it will. :wink:

[Akrasia]

yep, and sure if that tax ever started to decline, we can just leave the euro and print our own money. As much of it as we like. we'll all be super rich!!