Tag Archives: Irish Crisis

Is Ireland tilting at Windmills?

As a business owner in two countries I’m of course of the opinion that corporation taxes should be kept as low as possible wherever possible, low and simple tax schemes give businesses incentives to grow, to take on new projects, staff, materials and property: but that tax break shouldn’t ever be at the detriment of the overall economy – it should always generate revenue within the medium term.

It looked like Ireland’s gamble paid off – their ultra low tax regime attracted international brands, times were good, a lot of money was splashed about and everyone felt the benefit. Unfortunately in this time of plenty, the powers that be in Ireland didn’t have the political courage to begin to move their tax regime from one of rapid growth to one of sustained continuance.

Corporations wouldn’t have abandoned the Emerald Isle, they might have grumbled; but ultimately where would they have gone? Many of the inbound countries chose Ireland strategically as well as economically – English language being native, good gateway to Europe, not landlocked – it had so much going for it. All it needed was politicians that could accept that the ‘boom’ would have to transition to equilibrium. Yet they didn’t do that: Ireland’s politicians lived in a fantasy world of never-ending boom, maybe they took Gordon Brown’s claim at face value?

Whatever the case, it’s backfired miserably – the IMF are now assisting the EU with their audit of the Irish books and time is now running out for Ireland to accept a suitable bailout to help them balance their books while their spending cuts take full effect. This is the only way to maintain sovereignty long term: if they wait now, they’ll find themselves selling bonds in the untouchable bucket alongside crackpot banana republics.

Ireland are insistent that the low corporate tax rate brings in more than similar tax regimes in other European states, this may be the case – but with a deficit so high, unemployment rising and the housing market collapsing, taxes are going to have to rise across the board, and most importantly in places where the tax will actively bring in revenue. If unemployment is rising as sharply as the figures suggest, taxing the working citizen significantly more simply doesn’t make sense in knocking back the deficit, so Ireland are going to have to be pragmatic and look at their other streams of tax revenue.

So – all this being said. It’s shocking, although depressingly not surprising that the Indie is reporting that Ireland is now trying to ransom the people coming to bail it out with a demand that it shouldn’t have to lower it’s corporate tax rate. In characteristically brusque style Irish ministers are publicly stating that the low corporate tax rate is “certainly not up for negotiation”. With the unexpectedly early arrival of a party from the IMF, one thing we can be certain of, The big european & eurozone economies are being very patient, that patience won’t last forever – and ultimatums from politicians in Ireland are going to rapidly start to look very ridiculous.

Press reactions to Ireland & The Eurozone

Well, it appears that there is now a series of options on the table for Ireland after talks continued late into the night – more on that later today – but you’d be hard pressed to find much detail of these discussions in the UK press as the majority of newspapers seem to be rejoicing in the possibility of a cataclysm, including a particularly moronic piece from Ambrose Evans-Pritchard in The Telegraph, full of half-true hindsight and distinctly dodgy future predictions.

What’s interesting is how almost all commentators seem to be foaming at the mouth with glee about the imminent ‘collapse’ of the euro and the european project, ignoring the impact that any potential failure would have on Britain, both politically and economically.

Let’s be blunt, the failure of the Euro would cause a financial firestorm, it would rock markets worldwide, and the blast-wave that would roll over the City of London, and then onto the wider economy of the UK would huge. Just consider there are more Euros traded in London on a weekly basis than exist in the rest of the Eurozone put together: The City contributes 14% of the total tax coffers; a significant proportion of which is earned on Euro investments and trades and the last time I looked this inward trade to the The City alone made the amount that every anti-europe commentator drags up about how much we pay into the EU every year look like pocket change.

Tea Party-esq ramblings from Little Englanders’ are horrifically ignorant. The idea that we are not inextricably linked to Europe in finance and trade and that we’d ‘do just fine’ alone on our little island against the might of China, the USA and Russia (all of whom it should be noted employ protectionist policies whenever it suits) is naive in the extreme.

It’s funny really because the view in the press is not the view I hear in my daily life. I should say I’m not surrounded by europhiles, quite often it’s quite the opposite – but none of the people I meet in my personal and business dealings have the rabid anti-europe sentiment that the press portray the British public as having. That said – one thing is clear: whether we agree with it or not, we will pay to bail out Ireland one way or another – and what’s patently clear is that if we stand by and watch the eurozone fall apart we’ll pay even more dearly than any of the Little Englander’s could ever imagine.