Ireland Comes Out of an Economic Downslide; New Rule to Outlaw Tax-Inversions
Ireland has come under much fire in recent times for its tax laws that have helped American companies change their tax domicile and enjoy lower taxes in the land of leprechauns. On Tuesday however, the country sought to redeem itself in the eyes of the world by announcing its plans to end the corporate accounting rule that has aided in tax inversions. The rule had allowed hundreds of US multinationals with European bases in Ireland to shift their non-American profits between two companies registered in Ireland and thus avoid paying taxes.
Is Ireland’s fault that American taxes are too high? This is what many financial pundits are wondering about.
Double whammy for the Double Irish
The tactic which is famous as the ‘Double Irish’ among corporate tax attorneys, would be outlawed from the 1st of January 2015, says Ireland’s Finance Minister Michael Noonan. Existing beneficiaries, among them global companies like Apple and Google, will have to find new tax shelters by 2020. The change has come much earlier than was expected as Ireland unveiled its first expansive budget for the first time in six years after the collapse of the Celtic Tigers economy.
This marks the end of an era of austerity for the Irish and as the growth and development returns to the European nation, it hardly needs controversial tax regimes to keep its economy afloat anymore.
Celebrity singer Bono, of U2 fame, may have said that the tax rule was the only thing bringing in prosperity to the country since the economic breakdown six years ago, but the administration is desperate to shake off the image of a ‘tax heaven’ that it had cultivated over the years and usher in some change that have some financial writers scratching their heads about. There are also many people trying to figure out what is wrong with being a low tax country?
Ireland hopes for a bright future.
New budget, new hopes
The 2015 budget is supposed to increase spending and tax breaks in the country by $1.5 billion. The budget also includes a plan to build 6,700 state-funded homes for the poor as the country seeks to stimulate even more tax-driving growth. But how does this stimulate growth? There are many people wondering how a country can cut off a large source of its revenue but then increase spending on people that bring very little to the economic growth of the country?
The last seven budgets have been severe and the cost cutting took away nearly a quarter of previous domestic demands or a combined €30 billion Euros annually. But it saved tax payers money. Now, hopes are up for a revival and as Minister Noonan told lawmakers in his statement at the budget unveiling, the “recovery of the Irish economy is well under way”. Well, Noonan seems to be confidant at least.
The new budget is also expected to boost Ireland’s growth to 3.9%. The country, which just four years ago was teetering on the verge of bankruptcy, has been able to affect a major and miraculous turnaround and Noonan’s budget is proof of it. Was this helped by the jobs created by incoming companies? The Irish have led a hard life for some years now, and Noonan made it a point to thank them for their sacrifices saying that the road to recovery has indeed been very difficult.
Noonan has a plan!
The country will still post a 2015 deficit of 2.7% GDP, but after years of austerity (because their social program spending was too much) some Irish will definitely welcome this change. Now did we hear someone say “Éirinn go Brách” (Ireland Forever)?.
