Dare we ask the question?
I know this is a really unpopular thing to say – is it time to challenge the Sacred Cow and talk about raising the Corporation Tax rate in Ireland?
I think it is possible to do this and structure it in such a way that will still encourage companies to drive on in Ireland.
Before you think poor old Greg has totally lost his marbles hear me out ..
Why we need to look at this?
Let’s face it, people are bleeding and except for this government being prepared to grasp the nettle and take on some of those areas of excess (“real” sacred cows) that they have still left alone, they just can’t hit the regular Irish taxpayer any more – there is nothing left, nothing.
We need people to have some money in their pockets to keep the indigenous Irish economy going – inflicting more pain and extracting more cash from consumers will just do more damage than good. Aren’t we seeing this already?
Increasing the tax rate on companies who are making profits (let’s face it if you are losing money higher taxes won’t effect you) isn’t the worst thing in the world to do. At least they will be able to cope with it.
3.5 billion was collected last year from Corporation Tax at a rate of 12.5%. This was 10.2% of the overall tax take of 34.2 billion.
This 3.5 billion was the lowest collection of Corporation Tax since 1999 when about the same was collected when the CT rate was 28%.
This government must balance the books, they must collect more taxes, reduce expenditure, start generating jobs and begin to spark economic revival.
How can we do this if we scare the pants off prospective foreign investors by increasing the corporation tax rate?
We are led to believe with absolute certainty by those in “the know” that raising the CT rate is a no go area because it will start a mass exodus of these foreign investors.
Are we sure of that? Is this the main reason that is keeping them in Ireland? I’m not sure, but what do I know.
1. Raise Corporation Tax by 2.5% (hopefully for just a few years)
2. Introduce 100% immediate allowances for capital spend (this was done successfully in Australia)
3. Introduce tax incentives for companies who increase employee numbers.
4. Use 50% of the increase in CT tax as an investment fund for IT education (we are too far behind international standards and will have a serious problem in attracting these companies if we don’t sort out this supply pool of educated staff ) and an investment fund for indigenous Irish companies who need support at this stage to stay alive (only the ones that have a future)
While the CT tax rate would increase, for those companies that invest in capital and increase job numbers they could actually pay even less tax than now.
In a sweep we would collect more tax from those that can afford it, incentivise jobs and investment, invest in IT education and support indigenous Irish businesses. We might also have a bargaining chip in EU negotiations.
And..we would also be able to lay off the general public who are already bleeding way too much.
What do you think?
Ok, what the hell do I know? Maybe my assumptions are wrong, maybe they are too simplistic and maybe my figures are all wrong – maybe all of this is happening already and these incentives are in place?
At least lets have a discussion and flesh out this Sacred Cow before we cripple Joe Public even more without looking at the alternatives.
Is it time?
Greg Canty is a partner of Fuzion (he was an accountant at one point in time!)
Fuzion are a Marketing and PR firm with offices in Dublin and Cork