The FT has reported:
Ireland, easily the best performing eurozone economy since the birth of the single currency, on Thursday became the first in the 15-country region to fall into recession.
Two things. First, it wasn't the best performing economy. It just stole other people's profits. That's the Microsoft / Google / Apple et al model for Ireland.
Second. The Celtic Tiger was always a myth. It was based on EU grants, not low tax. The grants have gone. Low tax can't save it now.
I mourn for Ireland: my second country of nationality. It's going to have a truly torrid time.
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Richard,
It just stole other people’s profits
How does that work? Who stole what profits? Whom were the profits stolen from?
Did Microsoft/Google/Apple et al steal their own profits from themselves?
Just how does this stealing work?
Georges
I guess you don’t understand much about tax.
Profits are relocated between territories by use of transfer pricing mechanisms, thin capitalization, intellectual property pricing and the use of ‘money box’ operations. An enormous range of mechanisms are needed to stop these abuses, most of which are only effective however when a parent company is registered in the state seeking to stop the abuse.
US corporations operating in Europe can, therefore, pretty much at will reallocate profit to Ireland.
This does not mean there is any substance to the reallocation. It is just not capable of challenge in law because the appropriate international mechanisms are not available to do so.
This does not justify the action: it just draws attention to the regulatory deficit.
Stealing ins in the sense I use it is a perception of injustice having arisen from deprivation by action beyond the law. That is what I am suggesting is happening.
Richard
As I said to my Irish cousin, I’ll count it as a success when they get a national health service together.
They’ll be missing bono’s contributions to the exchequer even more now.
Richard
Though Irish national only, I enthusiastically share your views on tax havens and even on the IFSC and low corporation and other taxes on capital in Ireland. I also agree it’s essentially robbery of other country’s wealth and believe that that is largely what the city of London is about too.
However, you are simply silly to say that the Celtic Tiger was based on EU grants and now that they’re gone there’s nothing else. The actual grants were only a small part of the real development that took place in teh 1990’s and up to 2001. The current mess is a product of government gross failure since 2001 and the global disaster which will affect Ireland (and SE UK) more than most.
Quickfire blogging outside one’s specialty often leads to such broad-sweep errors. Stick with the basic anti-tax haven message; you’re on much safer ground.
Good luck with the campaign (I would hope to contact you in the near-ish future about taking your message to teh heart of the beast and speaking on the issue in Dublin – but that’s for another day)
Jim O’D
Jim
I’d agree with you – any such argument is simplistic, but then all arguments are an extraction from reality (whatever that is)
However, I would suggest this (and the argument is based on my experience running a company in Ireland for 5 years in the 1980s) and that is that the EU grants were the pump priming money – the creator of the multiplier effect to use a Keynesian analogy
In that sense I am nit (quite) blogging outside my experience here – but you’re right to say extraction can result in over simplification
Contact me about Dublin!
Richard