Ireland isn’t as rich as it pretends to be
Even then, modified GNI fails to strip out all the globalisation effects. For this reason, Irish economists tend to put more weight on measures of household income and expenditure. In particular, real consumer spending (per capita) is significantly lower in Ireland than in the UK.
Put another way, if Irish household incomes really are twice as high as those in Brexit Britain, then it’s about time someone told the Irish.
The upshot is that the Irish economy is not doing as well as many suggest. But it is certainly richer than it would otherwise have been, thanks to a low corporation tax rate.
The Irish are definitely benefiting in one respect from creating such an attractive environment for multinational companies – the boost to tax receipts. As a result, Ireland is expected to run budget surpluses worth tens of billions of euros over the next several years.
It’s hard to find a better example of how a lower tax rate can actually bring in more revenues than a higher tax rate. Ireland’s headline rate of corporation tax is only 12.5 per cent and, while it will rise to 15 per cent next year, this will still be super-competitive.
This was the driver behind Apple’s decision to shift its intellectual property assets to Ireland in 2015 (pre-Brexit, of course). And it is the main reason why so many international companies base themselves in Ireland rather than elsewhere in the EU.
Ireland is certainly not just a “one-trick pony”. Among other things, it has a well-educated English-speaking workforce, strong in science, technology, and finance.
But there are valid concerns that the Government has become too dependent on revenues from multinationals. More than half of Irish corporation tax is now paid by just ten companies, including Apple and Alphabet (the parent company of Google).
These businesses could easily decamp elsewhere. Indeed, more than a third of Irish goods “exports” are not actually produced or physically traded in the country.
This is a big part of the thinking behind the proposed creation of an Irish Sovereign Wealth Fund (SWF). Norway is a good example here.
Booming revenues from oil and gas mean that the Norwegian government has run huge budget surpluses for many years. (2020 was a rare exception.) Knowing that this bonanza will not last forever, it has built up a portfolio of global assets worth more than one trillion US dollars.
An Irish version would be able to bank corporate tax revenues for investments that will also benefit future generations, whether by purchasing global assets or by investing in local infrastructure, such as much-needed housing.
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