Tuesday, May 25, 2010
There wasn't a pot of gold, and now it turns out there wasn't even a rainbow
Baseline Scenario (blog): The Very Bad Luck of the Irish
Ireland’s problems are, sadly, far deeper than the need for simple fiscal austerity. The Celtic tiger’s impressive reported growth over the past decades was in part based on helping major American corporations reduce their tax bills. The Irish govt set corporate taxes at just 12.5% of profits, thus attracting foreign businesses to set up corporate bases and wash profits through Ireland to keep them out of the hands of the Internal Revenue Service. The remarkable success of this tax haven means that roughly 20% of Irish GDP is actually “profit transfers” that raise little tax for Ireland. These profits should not be counted as part of Ireland’s potential tax base. When we adjust Ireland’s figures accordingly, the situation is dire. The deficit rises from 11.7% to 14.6%.
6 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. gone-to-colombia said...
Celtic tiger?
Nah - Soggy pussy
2. mark wadsworth said...
Exactly. It's all well and good being a tax haven (there's good money in it), but there is no point pretending that you are something else.
I always said that the 'Irish miracle' was no such thing - while most of the other right wingers stick to the myth that "Ireland-cut-its-tax-rate-and-everything-turned-to-gold'.
3. timmy t said...
I was involved in setting up one of those "major American Corporations" in Dublin. Everything was great in the early days but guess what... the great plan fell apart when the people we needed to hire couldn't afford to live there. We were spending more to relocate people than we would have done in increased tax somewhere else!
4. flashman said...
Last year I bought four plots of distressed building land in Surrey. Three of them were previously owned by Irish developers. They all came with over-elaborate, ridiculously expensive, architectural drawings for unviable projects. Their attitude appeared to be that you could buy at any price, spend any amount of money and still make a profit. Allied Irish was the lender in each case.
I have now sold all these plots (for obvious reasons) but I was amazed when one of the Irish developers got back to me last month with an offer to buy a plot back at about 20% more than market value. Another bank must have offered to lend him the money. No lessons learned.
5. mark wadsworth said...
Timmy T, that is yet another fine example of Ricardo's Law Of Rent - rents and house prices are a function of net incomes, so all things being equal, an income tax cut feeds straight through into higher rents and land prices.
Or why does anybody think that flats in Monaco are so expensive? Another example is Darling's 50p tax rate - all the hedge funds guys cleared off to Switzerland or Jersey, so surprise, surprise, rents and house prices in S or J went up slightly (the extra rent = the value of the income tax saving by mocving there) - despite the fact that those two countries have much higher levels of property taxation than we do.
6. tenant super said...
The Celtic Tiger RIP 1995-2007 is a misconception
The kitty died around 2001 when real growth ended and inflation, government profligacy and rising wages meant the country had, as you say, lost its competitiveness . Everything after that (the Celtic Tiger Mark II 2003-2007) was built on debt and an unsustainable property bubble.