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Irish Eyes Are...

Kitty Miv, Editor
13 June, 2019

From the 'B's last week, to the 'C's this... namely corporate taxes, which are dominating the headlines. And it appears to be Ireland's turn in the spotlight, but I'm going to resist the old 'Irish eyes are smiling' cliché, as the Republic has mostly been coming in for criticism for its tax policy.

Initially, in early June, the European Union recommended that Ireland broaden its tax base and take further steps to crack down on aggressive tax planning. Last verse, same as the first...

The EU said that Ireland's public finances have improved, but suggested that the risks of revenue volatility remain and that the revenue base could be made more resilient.

According to the EU, "limiting the scope and number of tax expenditures and broadening the tax base would improve revenue stability in the face of economic volatility."

The Union recommended that Ireland should "continue to address features of the tax system that may facilitate aggressive tax planning, and focus in particular on outbound payments."

(Again, please sing along at the back if you know the words...)

Then, hot on the heels of the EU grumblings, not for the first time, the Irish Fiscal Advisory Council warned the Government about funding spending increases or tax relief with high corporate tax receipts.

According to IFAC's latest fiscal assessment report, corporate tax receipts "are now a long way from conventional levels and from what the underlying performance of the economy would imply."

The report noted that corporation tax receipts had more than doubled since 2017. Receipts rose to a record 18.7 percent share of total tax receipts last year, up from 10.3 percent in 2011.

IFAC said that between EUR3bn (USD3.4bn) and EUR6bn of the EUR10.4bn of corporate tax receipts in 2018 could be considered "excess" – namely, "beyond what would be projected based on the economy's underlying performance and based on historical/international norms."

IFAC went on to stress that the Irish Government "needs to gradually wean itself off the reliance on corporation tax receipts that has built up in recent years." As the sustainability of these receipts is unclear, IFAC urged the Government to commit to not using them to fund long-lasting spending increases. It recommended that the Government consider setting a fixed rule under which it would set aside excess receipts above a certain threshold.

However, given the economic storms that the Emerald Isle has weathered in recent years, I wouldn't be too worried if I were you; successive governments have remained steadfast in the face of international and domestic criticism, presumably reasoning that the benefits of attracting business to the Island outweigh the opprobrium of their peers. So perhaps those eyes are smiling after all?

Tags: Euro | Government

About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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