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Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Samizdata quote of the day

There is nothing new about this; it mostly started fifteen years ago, in 2001, and again the Irish were the main target. Ireland in the early 1990s had a high general corporation tax rate of 40%, but it introduced a special low 10% rate for finance companies in its Dublin-based International Financial Services Centre (IFSC). The Commission ruled that this was effectively an improper subsidy to the finance industry under the State Aid rules, and ordered its abolition.

That was really the root cause of the EU’s current row with Ireland, because the Irish response to the IFSC being declared illegal was to reduce all its corporation tax to 12.5%. Because that wasn’t targeted at a particular company or industry sector, it wasn’t illegal State Aid and so the EU Commission could do nothing to stop them, much as it wanted to.

So the EU Commission’s current action against Ireland over Apple is largely “Round Two”, a repeat of what it did fifteen years ago.

Richard Teather

9 comments to Samizdata quote of the day

  • Funnily enough, when the corporate tax rate was reduced from 40% to 10%, there was open political warfare in Ireland with the opposition stating the intuitively obvious that we would lose 30% of whatever the figure was, overnight.

    Europe thought so too as did the US and they smiled benignly at first. But the effect of the new rate was to attract Apple and Pfizer around that time and the rest is history. Like everything else in economics, there is always the optimum, the highest point in the curve and for Ireland, that was 12.5%.But it took guts to find it.

  • PhilB

    Yep – the Laffer Curve is something that is known to non economists but seems to be strangely missing from the knowledge of left wing politicians* and the money men.

    * I include the “Conservatives” in that definition n=based on behaviour,not their political rhetoric.

  • Deep Lurker

    As I’ve said for a while now, politicians have an incentive to set tax rates at the level that maximizes their power, rather than at the (almost always lower) rate that maximizes tax revenue.

    This Irish case was a fortuitous exception, driven in part by the Irish politicians being told “No, you can’t give yourself additional power by offering different rates to different companies.”

  • bobby b

    When you join a club with published rules, you ought not be surprised when those rules are enforced.

    Of course, if your system is based on the idea that the rules will only be enforced against “others”, you’d better be sure that you can still claim the title of “the people.”

    I’m sure that some of the kulaks were trying hard to be part of “the people” right up until the time their kids’ brains were blown out.

  • When you join a club with published rules, you ought not be surprised when those rules are enforced.

    And when the rules keep changing? The European Commission is actually playing a weak legal hand on this.

  • Jacob

    This is an interesting clash – Government (of Europe) against Government (of Ireland).
    The Government of Europe isn’t exactly a typical government (ruler of a state). As Stalin used to say: how many divisions does the government of Europe have?

    In the US there were clashes between the states and the Federal government. These clashes have been resolved in 1860-1865, at the cost of half a million dead. There are no more states rights now.

    But, in the US states are free to compete in subsidizing companies (that is: the federal government tolerates it) – for example: the state of Nevada gave 1.3 Billion $ to Elon Musk to build his battery factory there.

  • I mentioned before that this was a “Competition Ruling,” and not a tax ruling. As such, the complaint the EU has is that Apple’s deal was special and not open to all the other multinationals resident in Ireland. If Ireland had chosen to charge Apple 0% that would be fine with the EU as long as all of the others got that too. They have no gripe with the rate of tax being levied (yet!). In fact, they have publicly stated that it is up to each member state to decide that for themselves, hence my earlier point here.

  • Paul Marks

    If Irish Nationalism really was about Independence the Republic would get out of the E.U.

    However, Irish Nationalism is really about “we hate the Brits” (not any positive desire for Independence), so they will stay in the E.U.

    No matter how much the E.U. urinates on them.

    After all the E.U. is P.C. – and the Irish elite (like the elite everywhere) love to be P.C.

  • Paul Marks

    For those who do not know – if you can not set your tax policy you are not independent, “period” as the Americans say.

    The E.U. has promised a thousand times that “members” will be allowed to to set their own tax policy – the E.U. was lying.

    Well Irish “nationalists” what say you?

    You, Sinn Fein, and the rest of you say “good” because you hate Big Business and you hate Americans (such as the owners of Apple) – you hate Americans apart from when you are asking them for money (“to help the widows and orphans” of “the struggle).

    You are not patriots, you are watermellons – green on the outside, but red on the inside.