Ireland’s austerity: poor pay to keep corporation tax low

The Irish austerity package (confusingly dubbed a ‘recovery plan‘ by the BBC) can only be described as eye watering. But the focus on the poor while omitting any contribution from corporation tax indicates the ideological nature of this latest set of measures.

The Irish government had already announced planned savings of €14.6bn in five separate packages over the last two and a half years but added to this today to the tune of €15bn – around 4% of GDP.

The hardest hit will primarily be those on low and median incomes:

– VAT – a regressive form of taxation – rises by 2%

– the minimum wage is cut by over 10% to €7.65 per hour

– the level at which income tax kicks in will fall from €18,300 to €15,300 a year – dragging 10% of low earners into the tax system

– close to 25,000 public sector jobs will be cut

– there will be €10bn in total of spending cuts including 30% from growth-encouraging investment

It seems hard to comprehend how the Irish government thinks that these measures are consistent with their prediction that GDP will rise by an average of 2.75% from 2011 to 2014. As BBC Newsnight’s Paul Mason points out:

“the markets clearly believe there is little chance of the growth story coming true. Since 2pm the cost of borrowing for Ireland has crept upwards.”

Putting all this aside, Ireland’s 12.5% corporation tax rate will stay exactly where it is in the blind hope that their recovery will be export-led. Don’t forget this is the tax rate – praised as a “shining example” by George Osborne – which helped lure businesses like Shire Pharmaceutical among others across the Irish Sea. Despite being handed an €85bn loan, creditor countries have got no concessions at all on corporation tax. The race to the bottom – which Britain has joined by cutting corporation tax from 28% to 25% in the coming years – will only continue.

Perhaps the only positive from today’s package is the introduction of a “site value tax” on land. Economist Philippe Legrain tweets today that it’s, “a reform the UK and others should emulate”.

33 Responses to “Ireland’s austerity: poor pay to keep corporation tax low”

  1. Paul Seery

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  2. Brian Moylan

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ #osborne #economics #ireland #economy

  3. Philip Painter

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  4. britesprite

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  5. gemma tumelty

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  6. Hazico_Jo

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  7. Roger Ledger

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  8. Will Straw

    Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ (via @leftfootfwd)

  9. Platform 10 » Blog Archive » The Blogosphere’s Best Thinking – Must Reads For Wednesday 24th November

    […] In The Guardian, Larry Elliott explains why the Euro will continue to hold Ireland back.  Will Straw points to the negative effect on the poor of Irish budget reforms announced today – following on […]

  10. Andy S

    RT @wdjstraw: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ (via @leftfootfwd)

  11. Lee Hyde

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  12. Duncan Weldon

    RT @wdjstraw: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ (via @leftfootfwd)

  13. LadyRoisin

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  14. Mikael Branting

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  15. William

    The race to the bottom?Since the mid 1970s,Eire and it’s people revamped their economy,based on an educated workforce and low corporation tax. Then, they entered the Euro,inappropriate interest rates,property speculation,and the bust ensued.The Irish need their own exchange rate and interest rates.

  16. FrancisDoherty

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  17. Lynn Hancock

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/guZmcp

  18. Norvik_1602

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  19. Tim Swift

    RT @wdjstraw: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ (via @leftfootfwd)

  20. John Turner

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  21. Chris

    @william

    “The race to the bottom?”

    Yes, a race to the bottom in corporation tax. Ireland cut their rate, so companies lobby their country to cut their tax or they’ll leave and set up HQ in Ireland. Just look at the US where individual states engaged in a race to the bottom for state corp tax and consequently there isn’t any.

  22. pam lorenz

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ #vinb #imf

  23. Spir.Sotiropoulou

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/guZmcp

  24. Jane Watkinson

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/guZmcp <<< shock doctrine in action #fb

  25. StarSparkle

    RT @JaneWatkinson: RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/guZmcp <<< shock do …

  26. Moonbootica

    RT @JaneWatkinson: RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/guZmcp <<< shock do …

  27. Mr. Sensible

    Well doesn’t that tell a story? €14 billion odd in cuts in 5 seperate packages and look where they are now?

    I think George Osborne should learn from Ireland and make sure that the same mistakes are not made in this country.

    I think, looking from the outside what Ireland needs is a general election.

  28. Wendy Maddox

    Poor being offered as sacrifices to banks: RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/guZmcp

  29. janie_s

    Ireland is just an extreme example of the UK. Govt overspending, massive private debt, housing bubble etc. They had to cut spending because no-one would lend them anymore.

  30. Michelle Graham

    RT @leftfootfwd: Ireland's austerity: poor pay to keep corporation tax low //bit.ly/dV4dFZ

  31. Chris

    @janie_s

    “Ireland is just an extreme example of the UK.”

    No it isn’t.

    “Govt overspending”

    Ireland were running surpluses for past 5 years! And their national debt was lower even than ours before the crisis.

    “They had to cut spending because no-one would lend them anymore.”

    If they’d put their corporation tax up they wouldn’t have had to cut so much. The Irish people suffer while the corporate fatcats pick up their pay, pensions and dividends.

  32. Mike Guillaume

    As a progressive liberal I am not shocked at having lower corporation tax rates.
    The main problems of Ireland do not originate in that but in the excesses of financial and purely speculative capitalism mixed with careless government laissez-faire regarding (public and private) debt.

    The poor will pay for irresponsible financiers and politicians, as well as, lest we forget, for a currencyy that was imposed by the eurocracy.

    These home truths may sound harsh to some ears, especially on the left, but they have to be acknowledged.

  33. Anon E Mouse

    Chris – It’s those “corporate fatcats” as you call them who pay taxes into the economy and provide employment in public service by doing so.

    Remember it was the useless Gordon Brown, along with Little Ed Miliband at the Treasury, who gave Fred Goodwin a knighthood to go along with his £703K pension. Labour wanted to take 1% extra in a jobs tax on the poor to help pay towards the Lord’s allowances.

    People who become rich from real estate dealing and tax avoidance, (like Little Ed, the union stooge – property millionaire and darling of posh boy eco toffs like Joss Garman and that bunch of middle class wusses) contribute nothing to our economy. Nothing.

    The only government to double Inheritance Tax in this country was the Labour Party – the party of big business that hates the poor.

    Your grasp of economics shows you really don’t understand how things work and until you do I think you really ought to stop making your pointless posts.

Leave a Reply