Realist, not conformist analysis of the latest financial, business and political news

As Ever The European Union Is Decades Behind The Curve

The European Union is telling Ireland that they’ll only get a share of the money pot if they stop allowing international corporations to avoid paying into the money pot. This is a bargain that Ireland would do well to reject – leaving business be is likely to lead to a better economic outturn than depending upon grants from the Brussels bureaucracy.

It’s also evidence that the bureaucracy wants to insist upon monopoly. By insisting that business cannot avoid taxation because the rules are the same everywhere the rates charged can be screwed up. Like any monopolist the absence of choice enables the extraction.

But more than that it’s evidence that Brussels is many years behind reality:

The European Commission is pushing for Ireland to change its tax rules in exchange for a slice of recovery funds meant to help economies bounce back from Covid.

Each nation in the European Union is in line for a share of the €750bn (£652bn) Next Generation pot, but first must have its economic proposals signed off by Brussels in an attempt to ensure the money goes on projects that enhance long-term prosperity.

According to a document seen by The Irish Times, the Commission wants Ireland to increase taxes as part of the plan. The country’s low tax rates have encouraged international businesses such as Apple to set up operations in Ireland, boosting its economy but also angering some European rivals who see this as unfair competition.

Of course it’s beneficial to not pay taxes in, say, France. Because France is more likely to piss the money away than somewhere more sensible. But the actual driver for avoiding tax here in Europe is that if that is done then the system used – used – to allow it not to be taxed at all.

Well, almost. If an American company got it out of Europe then the cash remained untaxed as long as it didn;t take it into the US. Which isn’t all that great, because it couldn;t go to shareholders, which is the point of being in business in the first place. But non-taxation was possible.

Now non-taxation isn’t possible. The Trump reforms meant that some tax had to be paid even if that cash remained offshore. The likely Biden reforms say that it will pay tax at the usual rates even if it remains offshore.

So the incentive to shift profits has rather declined. Because such shifting doesn’t lead to non-taxation. That is, the problem is now solved. There’s no reason to beat on Ireland any more. Tax will be paid on profits. And?

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Spike
Spike
3 days ago

Sez the funds were “meant to help economies bounce back from Covid”? Or bounce back AND crack the whip on member nations?

John B
John B
3 days ago

‘There’s no reason to beat on Ireland any more.’

There is no practical purpose, it’s about doing as the Reichsführers say and demonstrating your obedience.

A bit like being forced to dig a hole and fill it in again, repeatedly.

Last edited 3 days ago by John B
TD
TD
3 days ago

The incentives are there for a company to just become Irish. You have to wonder, at what point will VCs start to think that all startups should be Irish from the getgo.

Leo Savantt
Leo Savantt
3 days ago

The the holder of the third most powerful position in the EU, the head of the European Central Bank, is a convicted financial criminal; it has been said, with a modicum of hyperbole, that this is somewhat similar to convicted paedophile being the principle of a primary school. The holder of the second most powerful position in the EU, Vice President of the European Commission and the High Representative for Common Foreign and Security Policy, was found guilty of insider trading in Spain only a year ago. The holder of the most powerful position in the EU, Commission President, was… Read more »

MrVeryAngry
MrVeryAngry
2 days ago

So, the logic here is that either (a) Ireland, by cutting taxes, gets more wealth creating private business to set up in Ireland which leads to more wealth creation and jobs to help Ireland ‘bounce back’. Or (b) it does not do that and instead receives what is essentially a benefit payment from the EU to help it bounce back (the historical evidence for the success of which is precisely zero).
Er. I’ll take (a)

MrVeryAngry
MrVeryAngry
2 days ago

Also, that’s the Pyramid of the Socialist system. N’est pas?

Michael van der Riet
Michael van der Riet
2 days ago

I would have thought that a good way to get a COVID bounce back would be to encourage business via deregulation and tax cuts. The EU wants more tax and more regulation. Well, if you jump from a great height without a parachute, it is true that your body will bounce, just a little.

Mark
Mark
2 days ago

Not if you land in shit

jgh
jgh
2 days ago

“To fund our state we need taxes of 10%”
“NOO!!!! You must tax at 20%!!!!!”
“But to fund our state we need taxes at 10%, we don’t need all that extra money”
“DIDN’T YOU HEAR! YOU NEED TO TAX AT 20!%!!!11!!!”

This is eerily reminicent of China insisting that Hong Kong build up huge surpluses before handover.

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