Ireland is concerned about losing its “sacred” low-tax regime


For the 16,000 residents of Leixlip, a suburb west of Dublin, economic prosperity has gone hand in hand with Ireland’s low-rate strategy since 1989, when Intel moved to the city.

The U.S. semiconductor company has since invested $ 15 billion and created more than 5,000 direct jobs on a vast campus where it makes chips and develops artificial intelligence. She donates equipment to local schools and pulls out her sketchbook for community and charity groups in neighboring countries.

“If you throw a stone, it would land on someone who has worked, or someone who currently works, at Intel,” says local councilor Bernard Caldwell. “We’re the enemy of many cities because of what Intel has put in place.”

The benefits reaped by cities like Leixlip help explain the enduring support for the philosophy of taxation on low-income businesses in Ireland – and why the country has partnered with eight nations, including Barbados, against a minimum levy. globally supported by the United States, China, India and most EU countries.

The changes accepted last week in the framework of negotiations held by the OECD include a minimum tax levy of 15 per cent and a system where countries will be able to tax large companies according to their place where they generate revenue. It could cost Ireland € 2 billion a year in tax revenue losses, warned Irish Finance Minister Paschal Donohoe. The other European holdouts are Hungary and Estonia.

Once considered the poorest man in Western Europe, Ireland struggled with high unemployment and emigration for decades only to enjoy a prolonged period of economic success during the so-called Celtic Tiger boom in the mid-1980s. 90. In 2009, Dell’s decision to move its European manufacturing base to Poland is a reminder that success could unfold quickly. This story informs a reluctance to abandon a regime that provided stable incomes.

The new Intel microchip manufacturing plant under construction in Leixlip © Barrow Coakley

“The majority of Irish people recognize that since the late 1950s Ireland has had a deliberate and successful strategy of having a low, not burdensome and stable system of corporate taxation and that it has attracted a lot of foreign investment. “said John Bruton, prime minister from 1994 to 1997.

Ireland’s lowest tax rate – currently 12.5 per cent – has increased productivity by 4 percentage points, or about € 6 billion between 1994 and 2005, think-tank researchers The Institute for Economic and Social Research estimates in a 2011 paper that the country accounts for less than 3 percent of EU economic activity, but has attracted more than 8 percent of net foreign direct investment of the blockade from 1990 to 2020, OECD data show.

Frank Barry, an economist at Trinity College Dublin, says he is “very concerned” about the consequences of a global minimum rate: “We can talk a lot about our educated workforce, our English language and being a part of it. of the EU (as attractions for foreign direct investment)… but they are all built on the cornerstone of the corporate tax regime. ”

“If you knock on a door, no one has to say, I think it should raise the corporate tax rate,” says Joe Neville, Leixlip’s adviser to Fine Gael, the second largest party in Ireland’s governing coalition. “It simply came to our notice then. . . and we feel it provides jobs and opportunities so you can understand the reluctance to change. ”


Views begin to change in some neighborhoods, albeit marginally. Richard Boyd Barrett, legislator for the People Before Profit party – which holds five of Ireland’s 160 seats – said stories of multinationals using loopholes to pay “mercifully low” levels of taxes challenged the “sacrosanct” regime of Ireland.

One of these stories features Google, which tax avoidance about $ 13 billion in profits in its Irish holding company in 2019 thanks to what has been dubbed the “Irish double” gap (and which was eliminated between 2015 and 2020).

Leixlip adviser Joe Neville: “If you knock on a door, no one has to say, I think it should increase the company’s tax rate” © Paulo Nunes dos Santos / FT

“Some people think it’s outrageous how little tax big corporations pay,” says Boyd Barrett. “But it’s also a case that there’s this fear out there… That multinationals could get out if there’s a change in the rate.”

Karl Rogers, an investment professional who worked in North America before returning to Dublin, says he used to see a lower rate as “beneficial for Ireland Inc.” Now, the question arises whether there is “more harm to the wealth of the average Irish citizen than good to having such a low corporate tax and such a high personal tax?” Ireland’s highest marginal tax rate is 40 per cent on incomes above € 39,300, to which is added a universal social security burden of 8% on earnings above € 49,357.

Raymond Hegarty, a manager who managed the start-up of five multinationals in Ireland, recalls working for a Japanese company that did not rank the tax among its top five selection criteria and instead looked at things like skills and a welcome approach to IED. The language was also key: “Our Japanese president.” . . I wasn’t going to learn a third language to find myself in a country that doesn’t speak English. ”

Connor Heaney, managing director of logistics company CXC Global, says the corporate tax was a “design but not the only consideration” when they chose Ireland as their Emea hub in 2015. He also liked the Ireland’s situation, its network of multinationals and they found it “by far the easiest place to create a business” out of the 60 markets in which they worked. “If Ireland’s tax rate changes, it doesn’t impose a move from there. We like Ireland.”

In Leixlip, when they are driven to consider caving under international pressure, minds remain alert. It wouldn’t be a big deal if 12.5 per cent were increased to the 15 per cent agreed to by the OECD since “Intel is too big a company to go outside of Ireland,” Caldwell said. Neville said he “would not be afraid to” raise Ireland’s rate to 15 per cent “if we need it”.

“Intel came here when I was a kid, and there was a question of why Leixlip, why Ireland,” he said. “Now Ireland is a primary center.”

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