Ireland and incentives

NBT makes good contributions to this blog. Sensible stuff. He/she is correct that Ireland reduced ‘statism’ and that contributed to the economic resurgence but let’s not make sweeping statements.

This chart is taken directly from the 2006 Irish Development Agency annual report. I know it is tiny but I don’t know how to make it bigger. If you can read the note it shows the definition of “Cost per Job Sustained”. This includes “all IDA expenditures to all firms in the period of calculation“. From 1991 to 1997 the IDA made direct expenditures to firms (grants, training subsidies, free land, etc.) of 20,218 Euros (about $32,000 CDN) for every job created. By 2000 to 2006, that # had dropped to 12,485 Euros (about $20,000 per job CDN).

Now, just for comparison, Business New Brunswick provides about $7,500/job for the average call centre job. Of course, the taxes paid on the Microsoft jobs in Ireland are way higher than the average call centre in New Brunswick but I think you get my point.

Use Ireland as an example of good economic development, yes. Don’t use it (AIMS) as an example of not providing grants/loans to industry.
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3 Responses to Ireland and incentives

  1. nbt says:

    Ireland has seen their slowest economic growth since 1991. This could be for two reasons (that I can think of): 1.) even though their corporate tax rates are attractive at around 12.5 per cent, their top rate on personal income is 42 percent, and capital gains are hit with a 20 percent levy. And because of this, more than 3,000 of Ireland’s most productive people have become non-residents for tax purposes.

    As the Sunday Business Post reports “although Ireland’s tax rates are relatively low by international standards, an increasing number of high-net-worth individuals are deciding to leave the country of their birth and move to places with more welcoming and forgiving tax regimes. […] New figures prepared by the Revenue Commissioners finally reveal just how many tax exiles have decamped Ireland for other jurisdictions. According to new figures obtained by The Sunday Business Post, there are 19 high-net-worth individuals who are Irish domiciled but who are legally non-resident for tax purposes. […] According to the Revenue Commissioners, Ireland now has more than 3,000 tax exiles who claim non-residency. Many of these individuals are not in the top 250, but have serious wealth nonetheless. The reduction of tax rates on income is a cornerstone for growth as it not only keeps money in the hands of hardworking families, workers and entrepreneurs, it is an excellent jurisdictional incentive with the potential to encourage more people to relocate to where personal taxes are the most attractive.

    2.) the Treaty of Lisbon represents a fundamental shift in the balance of power between the nation state – and this nation state in particular – and the European Union. In other words, The Maastricht Treaty establishing European Union in 1992 has greatly effected the governance of a place like Ireland who now has limits on transfers and borrowing under the Maastricht guidelines.

    So again, the statistics don’t always tell the entire story in Ireland, much like with Bernard Lord’s tax reduction for small business and the failure of that sector. It comes down to spending reductions, sweeping changes in legislation (as unpopular as the one we have seen with Lamrock) and a bit of old fashion courage to make the tough decision instead of pandering to every living breathing interest group while holding the status quo line.

  2. Anonymous says:

    nbt said…
    Ireland has seen their slowest economic growth since 1991. This could be for two reasons (that I can think of):

    How about the one single relevant reason, have you heard what has happened in the USA? Its not only the Irish economy that has slowed, the economies of any country where banks have become ensnared in the sub prime debacle have taken hits. I wont list them all but it includes the UK, Germany and France plus the US.
    One thing the Irish are content about is that there will be a slower growth but growth nonetheless. The estimates for this growth depends on which organ you read it in – from 1.8% – 4.2% last weekend in the Sunday Times. Another factor in the Irish economy has been the cooling of the property market caused by opportunist politicians promising reform of the property tax system in the run up to last years general election. This has begun to abate somewhat but there are no expectations for a full recovery until early to mid 2009.
    I will give another factor not mentioned above – the craziness of the stock markets.
    The NB economy does not seem to operate on any parallels with foregin economies so why drag them into a debate on the subject. Tax reductions, increases or incentives are only relevant until some other country (India for example) slashes their rates to encourage investment. Although this has resulted in many multi nationals locating elswhere Ireland has retained 90% of their investors and is still adding to the stock (300 software jobs in the south of the country from a US corporation).
    This is a lesson for NB.
    Besides, how long can we put up with a government that makes policy decisions based on its popularity with various interest groups. For too long the tail has wagged the dog in this province because of the lack of leadership from the front. Whats the betting on a rethink of the immersion policy following the outcry? I know where my money is going!

  3. mikel says:

    Both of the above are based on the premise that the rich should be subsidized, either by bailout or by simple wealth transfer.

    For NBT, there are a couple of options other than the one he says. For example, wealth is typically GAINED within specific countries. So thats why corporate taxes are high or else personal taxes are high. Otherwise, you might as well chuck the whole system and just go back to the 1700’s and have lords and serfs.

    The WRONG idea is that ‘wealthy people create jobs’, which we KNOW to be completely false, in fact the largest corporations are the biggest job killers out there.

    So for Ireland, or Canada for that, you CAN do the smart thing and simply tell people like Irving that if they want to do business in the province then they have to pay taxes. Otherwise, they leave, and the companies get sold to someone else. But as the above states, that blue and red tail has been wagging the dog for some time so we know that’s not happening.

    But NB is the perfect example of that, two multibillion dollar families with multiple business holdings in the province and corporations contribute less to the provincial budget than corporations in PEI.

    But that is really funny, I thought MY ideas were marginalized, I’d just love to go out and try to float that boat of “the rich just aren’t given enough tax breaks”. NBT always complains that NBers just won’t accept ‘tough love’, and this is a case where they are right on the money.

    It’s ironic because NBT IS talking about incentives, he just wants incentives that go to the wealthiest, thats what low taxes are . But again, we know reality is far different, an hotel/inn in richibucto employs more people than the Irving gas terminal will, but the hue and cry would go up if some tourist operation even got dime one from the government.

    But again, comparing a small provincial economy in canada to a nation within a larger economic union is a non starter. A nations economy is the same as any large complex organism, anybody can pick a piece of it and claim that it ‘backs them up’.

    And finally, like the previous post on eastern europe, Ireland has one of the highest poverty rates in the EU, I seem to remember this discussion before and I think for childhood poverty its the highest. And people wonder why socialism never goes away.

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