Saturday, November 27, 2010

Hunting the Celtic Tiger

I find the letter to FT by Rhodri Morgan (Freakishly low Irish corporation tax is damaging) a bit amusing. Essentially, he seems to be complaining that Wales, Scotland and host of other places lost out to Ireland because of their inability to compete with Ireland's low corporate taxes. He moves on to a discussion about tax havens and asserts that Ireland needs taxes to fund the bail out. What if the whole Europe goes for 12.5 percent, he argues.

One thing is for sure, it is not Ireland's interest or well-being that Mr. Morgan has in mind. Irish problems have resulted from a host of factors, and low corporate tax is certainly not one of them. If anything, FT's article in the same edition (Ireland's Low Corporate Tax Rate Vital to US Business) clearly shows how low corporate taxes have created over 100,000 jobs in Ireland, creating wealth in general. Moreover, if corporate tax was the only reason for choosing Ireland, there are a host of ultra-low tax destinations within Europe that have even lower tax-rates (like Liechtenstein).

Right from German surplus to French protectionism, there is no country in Europe that can possibly adopt a "holier than thou" stance with a straight face. This is not to say that Ireland does not have its problem, but it does seem that its European partners wish to take full advantage of the problem to further their own interests rather than to help the Irish.