Over the last several weeks the issue of Brexit has been consuming many column inches, not just here, but across global print and electronic media.
Our concerns, quite rightly, have focused on how it will affect us and what we could and should do to protect ourselves.
The overall view in Ireland was that our best bet was to ‘keep our powder dry’ until we had a better understanding of how it would pan it.
That was a reasonable conclusion given the total and utter lack of any foresight on the terms that the EU would agree with the UK.
If any terms or conditions associated with the export of UK products into the EU turn out to be onerous; the UK reducing its corporate tax rate — as George Osborne recently suggested lowering from a 20% to a 15% rate by 2020, instead of the 17% he originally announced a number of months ago — might just be enough to compensate companies for the additional costs of shipping to the EU.
On the other hand, a more relaxed regime for the UK would mean that a 15% rate in the UK, if the EU were to accept it and that is far from certain, could be a big problem for us.
If it stopped there it would be fine and dandy. But unfortunately, it doesn’t.
As we’re all aware several of our European neighbours continue to have considerable problems with our low corporate tax rate and have been trying for a long time to have that rate changed upwards.
Brian Hayes, Fine Gael MEP for Dublin, recently confirmed his and Fine Gael’s opposition to the final report of the European Parliament’s Tax II Committee, saying “that this represents a further EU push for tax harmonisation.”
It would appear that the parliament’s view is that the aggressive tax planning that some companies utilise to reduce their tax bill can only be solved by harmonising corporate tax rates right across the EU.
No doubt the bigger EU members resent Ireland’s success in attracting foreign direct investment but they also ignore the fact that we are a small open economy on the periphery of Europe.
Supposedly, the issue of corporate tax rates is a red line issue for most European countries and is one where each country is supposed be able to set its own tax rates and to have, in effect, a veto on any change.
It would appear by this constant trawling up of the harmonisation issue that the parliament believes that it can either browbeat us, and others, into accepting its vision for European tax rates or alternatively reach some compromise where irrespective of what we agree, we would not be winners.
It is an attempt to harmonise taxes by the back door. Funny, but this never-ending attack on our tax rate is actually ironic given our own propensity for resetting referenda until we get the right answer.
Brian Hayes made it clear that Ireland’s wish is to remain as part of Europe. Given general comment on Brexit he is probably right in that contention.
One of the potential fallout issues from Brexit is the issue of the financial services industry in London.
The view is that if Britain actually exits from the EU its position as one of the major EU financial centres will become untenable. That seems to make sense.
Given the considerable high-quality jobs involved and the importance of the financial sector to the EU economy every major centre is chasing the opportunities.
The French government has reportedly already stated unashamedly that it would make locating in France very attractive by reducing tax rates for those who come with the sector and giving long-term tax ‘holidays’ to individuals.
By so doing it immediately and openly undermines any possibility we might have of attracting those jobs to Ireland. The reasons are simple; our personal income taxes are too high, particularly the very low level at which the top rate of tax kicks in.
On top of that, even if we were lucky enough to be successful in attracting these companies here, where would the employees live given the housing shortage which is particularly focused on Dublin where most of the jobs would likely end up.
The tax harmonisation drive needs to be stopped dead in its tracks.
However, we must also look at what we need to do to ensure that we maintain our competitiveness.
After all, competitiveness is not just about low corporate tax rates and the availability of a young well-educated workforce.
Mind you posting a claim of 26% economic growth isn’t going to help our case much.
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