Kevin Colby: News, culture, political blog

The present government has favored a low taxation policy to encourage foreign direct investment in Ireland. Consequently, the government opposes moves by the European Commission to restrict tax competition. The previous government of 1994-1997 introduced a corporate tax rate that is only 12.5%, versus between 15% and 60% in the rest of Europe.

Corporation Tax is a tax in the Republic of Ireland. This tax is charged on the company’s profits which include both income and chargeable gains. The corporation tax in Ireland is quite low, and is often cited as an example of tax competition, as it is used as an incentive for foreign companies to invest in the Irish Republic.

There are three rates of Corporation Tax in the Republic of Ireland:

* 12.5% for trading income
* 25% for non-trading income
* The rate for Manufacturing, IFSC and Shannon Free Zone companies at 10% ended on 31 December 2005.

The government receives much of its revenues from taxes on goods, these include a 21% VAT rate on most consumer goods, high levels of excise duty on tobacco, petrol, and alcohol and several smaller taxes on items such as plastic bags, cheques, ATM cards, credit cards and debit cards. A Value added tax (VAT) is an indirect tax, in that the tax is collected from someone who does not bear the entire cost of the tax.

This was led by a surge in inward investment in high end industries in services, and lower taxation levels. From 2002, this was augmented by low interest rates set by the European Central Bank which encourage private sector consumption. In July 2006, a survey undertaken by Bank of Ireland Private Banking showed that, of the top 8 leading OECD nations, the Republic of Ireland was ranked the second wealthiest per capita country in the world, showing an average wealth per head of nearly $190,000. This is behind Japan, and ahead of other countries such as the United States, United Kingdom and Germany.

Ireland has the second highest per capita income of any country in the EU next to Luxembourg, and fourth highest in the world based on measurements of Gross Domestic Product (GDP) per capita. The Gross National Income is $41,140, the seventh highest in the world. The unusually large divergance between GDP and GNI is due to the repatriation of profits by multinational companies. In any case, the vast majority of wealth held by Irish citizens is invested in property. Furthermore, the construction sector accounts for a significant component of Ireland’s GDP and GNP and any downturn in this sector is likely to have a profound impact. In 2005, the World Bank measured Ireland’s GNI per head at $41,140 - the seventh highest in the world, sixth highest in Western Europe, and the third highest of any EU member state.

The United States actually has a bill in Senate for a simpler tax system. It is called the FairTax Act. Do you know what the FairTax is?

* Ensures Social Security and Medicare funding
* Enables workers to keep their entire paychecks
* Enables retirees to keep their entire pensions
* Refunds in advance the tax on purchases of basic necessities
* Allows American products to compete fairly
* Brings transparency and accountability to tax policy
* Closes all loopholes and brings fairness to taxation
* Abolishes the IRS

For more information visit www.fairtax.org.

Click here for more information on Ireland’s economy

Click here for more information on Ireland’s corporate tax system

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Tags: income tax, irelad corporate tax system, ireland, ireland economy, the fair tax act