Ireland gets bailed out

[30ashopper]

"After weeks of insisting that it needed no bailout, Ireland conceded Sunday that it will need a financial rescue package from the European Union and International Monetary Fund, according to media reports."

Ireland seeks bailout; IMF promises aid - MarketWatch

Crazy, two euro zone countries down, probably two or three left to go. Without this money Ireland's banking system would fail. That's about as close as you can get to sovereign default without actually defaulting.

 

[beachmouse]

So much for the Irish economic miracle. And weren't their tax policies to stimulate growth constantly being held up by American conservatives not too long ago as something we should emulate?

 

[30ashopper]

So much for the Irish economic miracle. And weren't their tax policies to stimulate growth constantly being held up by American conservatives not too long ago as something we should emulate?

Yes, their corporate tax rate is something we should definitely adopt. We loose tax revenue thanks to our high rates, especially in the tech industry. I've consulted for U.S. based, Irish incorporated tech companies before. Large techs like to break up their corporate structure and base some operations there.

I'm sure these businesses would love to have all their units incorporated in Delaware, but when the tax rate differences are ~20 points, well, you can guess what happens.

 

[30ashopper]

FWIW:

Taxation in the Republic of Ireland - Wikipedia, the free encyclopedia

 

[30ashopper]

Interesting take from ZeroHedge:

A few days back we asked whether if as part of the now certain Irish austerity package, the imminent rise in the corprate tax rate for offshore companies based in Ireland would result in a crunch in the bottom line for US corporations such as Google. Now that a hike from the prevailing 12.5% rate is inevitable, US companies have launched an offensive to make it clear that only Irish citizens will be subject to the critical austerity measures. The Telegraph reports that "the Irish government has been given a stark warning from some of the biggest American companies in Ireland on the risk of a mass exodus if the country's low corporation tax rate is raised." If companies, which are purely circumventing much higher US corporate tax rates, also have to share the austerity burden, they will simply depart from the already insolvent country, leaving it with even less tax revenues, thus accelerating the toxic loop of greater insolvency coupled with even less revenue. And since the IMF is backed primarily by the US, which is end-domicile to the bulk of the corporations in question, it is obvious that MNCs have all the leverage and will most certainly get their wishes, further widening the chasm between the "corporation" and the simple Guinness-drinking, potato chewing peasant. In the brave new world, the pursuit of life, liberty and happiness applies only to (bailed out) banks and corporations. Everyone else has been relegated to footnote status.

http://www.zerohedge.com/article/google-and-msft-and-hp-and-bac-about-be-biggest-loser-irish-bailout

 

[30ashopper]

"An expose in Bloomberg details how courtesy of various, perfectly legal, tax avoidance schemes, Google's effective tax rate is 2.4%, which has boosted the company's stock price by a whopping $100/share!"

Dang, I like Google just like the next guy, but jeez, 2.4%??

 

[futurebeachbum]

So much for the Irish economic miracle. And weren't their tax policies to stimulate growth constantly being held up by American conservatives not too long ago as something we should emulate?

I first started visiting Ireland on business in the late 80's and I was amazed at the moribund business environment. It was common knowledge that most well educated (ie: employable) young people were leaving the country in droves. At the same time the VAT was 28% and income taxes were around 50%. These tax rates got everyone some level of public health care and a social safety net. Most business folks that I dealt with despaired of Ireland ever being a prosperous place. Back then it was a very low cost place to visit and buy goods.

Then in the late 90's the whole Celtic Tiger thing started and Ireland was suddenly filled with double income young famiiles with money to spend.

When we last visited there in 2003 we couldn't believe the level of home construction or the cost of living (which had skyrocketed unbelievably.) This was all stimulated by the massive tax-free and low-cost tax deals they made to lure industry in.

Ireland needed economic stimulus, but it also needed tax receipts to fund infrastructure, their massive social safety nets, etc...

Instead of laying out a plan with reasonably reduced taxes which rose a bit over time, they gave away the store to get the business investment. Unfortunately, the investment was all directed towards a service based economy. Unlike agriculture and manufacturing, service based economies have a very short life cycle and don't bring much lasting value to a country. Now they are finding out that investment in programmers and call-centers is easily uprooted and moved and they'll end up with a bunch of unemployed folks and some large empty buildings.

It always amazes me how hard it is for people to react to situations with moderation and how long term planning is such a foreign concept. Its like the whole world operates with a pair of rose-colored glasses on.

It will be interesting to see if the EU and the EURO survives all of these bailouts. Eventually the Germans are going to quit bailing out countries and what happens then? They've still got Spain, Portugal and others to save.