Treasure Ireland

One of the most controversial aspects of Ireland’s tax policy is its extremely light taxation of corporations. Corporate tax is only 12.5% and many corporations pay even less than that. Some would even go as far as to call Ireland a tax haven. Others defend it by claiming low taxes attract foreign investment which creates employment and provides tax revenue. Is it dishonest to aid corporations in their avoidance of paying their fair share or are low taxes necessary to keep the economy internationally competitive?

Lets first examine the claim that low corporation tax attracts foreign direct investment. This is regularly claimed, but there is a surprising lack of evidence to support it. Irish total foreign investment peaked in 2003 and then declined. There were even many quarters after 2003 when there was a net capital outflow. The average annual net inflow between 2003 and 2010 was only €2.3bn compared to €17.7bn between 1998 and 2002. During 2009/2010 Ireland had a total inward investment of $31.1bn and outward investment of $31.0bn. In other words Ireland is not the source of a large net investment. In the five years when the corporation tax was 40%, the economy grew by 7% per year, whereas in the 8 years that followed the reduction to 12.5% the growth rate has averaged only 1.5%. Now of course correlation is not causation and perhaps the economy still would have done poorly with higher taxes, but it does refute the oft-repeated claim that the 12.5% tax rate was the cause of the boom. It is a common myth that foreign investment drove the Celtic Tiger, yet an examination of the data fails to support this. There was little change in employment from foreign direct investment between 1983 and 2006.

Headline Corporation Tax across the EU (the real rate is lower once tax breaks are included)

Headline Corporation Tax across the EU (the real rate is lower once tax breaks are included)

It is often assumed that if corporations keep more of their profits, they will invest more, thereby creating more jobs. However, while this can be true, it is not guaranteed to be so. People often assume that investment rises when profits rise. After all, if businesses have more money presumably they spend more on building their business. Unfortunately this is not true. What many people don’t realise is that profits are actually increasing during the present recession after the disastrous year of 2009. Profits have risen from €39bn in 2009 to €46.3bn in 2011. Yet investment has sharply dropped in half, declining by €9.4bn. We are thus left in a position where businesses have more money but are spending less of it, in other words hoarding cash. Before the recession businesses invested only one-third of their profits, a figure that is very low by most international standards (and would surprise many supporters of low corporate tax). Since the recession this figure has dropped to one-seventh. This is below even the rate of depreciation. The extra profits from the tax increase were not reinvested in business infrastructure but rather in property speculation.

The difference between profits and investment. While profits are rising, investment is declining

The difference between profits and investment. While profits are rising, investment is declining

The problem with low taxes is that it is very easy for other countries to copy it. At the moment Cyprus and Bulgaria are two EU countries with corporation tax of only 10%. Other Eastern European countries are competing to lower taxes as are many tax havens. This could lead to a race to the bottom where governments compete with each other over who could defend themselves the most. In this situation only corporations gain and everyone else loses. Ireland cannot compete in the long term simply by being cheaper, because there are other countries that can always go lower than we can. We have to compete by being better.

You see, taxes are not the only consideration that matters to corporations nor even the most important. Businesses also take into account the skills and education of the workforce, the infrastructure of the country, the quality of institutions, our membership of the European Union and the fact we are an English speaking country. The path to prosperity for Ireland is not through being a cheaper option than Eastern Europe (a battle we will never win) but rather a better one. We should compete on the basis that we can provide higher quality goods and services than elsewhere. Crucially, in order to do this we must invest in the long term prospects of the economy. We need the government to invest a euro today so that we may reap two tomorrow. Extremely low corporation tax cuts into the government’s ability to do so.

Corporation tax is not central to Irish tax policy as many corporations do not even pay it. Boston Scientific paid only 4% tax of $1.4bn it earned, Apple paid only 2% and Google 2.4%. Some companies pay no tax at all. Novell (the software giant) paid zero tax. These (completely legal) accounting methods to dodge tax are so common that there is even a word for it, the “Double Irish”. The effective tax rate in Ireland is 4.2%, which while higher than tax havens like Bermuda and the Caymen Islands, is similar to that of Switzerland and the Netherlands. The US Senate (on page 30) described Ireland as a tax haven, a claim many would support. Most of the foreign corporations investing in Ireland do not hire anyone (the median number of employees of an IFSC company is zero) or even have a premises. Rather they exist merely on paper to avoid paying tax in their home country.

Comparison of Ireland's tax rate and those of tax havens

Comparison of Ireland’s tax rate and those of tax havens

Companies are also attracted by Ireland lax regulation and corporate secrecy, which makes me worry about what sort of companies we are attracting and what they have to hide. Lax regulation was a major cause of the financial crisis and criminal elements launder their money through countries worth few checks. Unfortunately, the level of scrutiny in Ireland is so lax that we have no idea if we are complicit in illegal activities. Its not just US companies that use Ireland to avoid tax. A Zambian sugar company routed its profits through Ireland to avoid paying local taxes that would have been used to ameliorate the severe poverty and malnourishment that Zambia suffers from.

Is there anything wrong with being a tax haven? Is it merely being pragmatic and a necessary step to get ahead in the competitive world? Or is it short sighted dishonesty? After all corporations need the government to make money, who else will train their employees and build the infrastructure while providing a safe environment to do business? All of this requires taxes to run and maintain so dodging tax is robbing the future of the opportunities that this generation has. Businesses today prosper at the expense of businesses of tomorrow. It is this sort of short sightedness that destroys economies. It is with the help of the state that corporations grow rich so it is only fair that they pay back their fair share. It is hardly socialism to expect that businesses pay for the roads they use.

Let’s be clear, tax evasion is theft. It may not be as visible or as frightening as someone physically stealing your wallet, but the principles are the same. When Ireland lets other countries dodge tax we are accomplices to dishonesty and theft. Some say they don’t mind so long as we get a slice of the profits, but this is no different than letting someone keep stolen goods in your house so long as they pay you. Everything we gain is at someone else’s expense. Perhaps I’m naive, but I would like my country to make an honest living and not prosper by defrauding others.

Those who do not pay taxes shift the burden onto those who do. Hence the less corporations pay, the more ordinary workers do. Increasing corporation tax would raise more money than the property tax. So why is it not even being considered? Corporations benefit just as much from state services as the rest of us, so why don’t they pay their fair share? Why should fabulously wealthy corporations pay less tax than ordinary workers? We will only get out of this recession if we all pull our weight equally, we cannot allow some groups (no matter how politically connected they are) to escape the burden.

Corporation tax is widely defended by all sections of Irish politics and media as crucial to the Irish economy. All attempts by Europe or America to change it have been resented. Yet despite the claims of its supporters, it does not promote investment, it does not create jobs, nor does it help the economy. The primary beneficiaries are the corporations who use their political connections to avoid paying their fair share and shifting the burden onto the rest of society. Enough is enough, we can no longer continue as a tax haven with our ill-gotten gain. It may be tough, but we must earn an honest living through providing better goods and services and not just reaching into our neighbours pockets. We cannot cheat our way to prosperity. We must raise corporation tax so that we invest in an Ireland of the future, one that can compete and prosper on the global stage.


Filed under Economics

50 responses to “Treasure Ireland

  1. What is this? Reads like economic obfuscation to me….from a Keynesian…Lol!

    • Come on now, I have the decency to provide a proper response to your posts, the least you could do is return the favour.

      • Why do you keep promoting taxation upon corporations….Corporations don’t pay taxes! People pay taxes! Every cent taken from a corporation’s “profits” (which don’t belong to the govt by the way) comes from the consumer of its products/services…whom the govt has already penalized in the form of a Sales or Value-added tax.

        So if the govt wants more taxes form the corporations and the corporations want better margins…the consumer is going to bear the cost…or…..If the people running these corporations don’t want to pass the cost onto the consumer, they will become more efficient (those who can’t will fall by the way side and shutter their doors.)

        Profit is a good thing. Why must we determine what a man or board does with its money? By taking it away to waste on government spending!?!?

        • cebreeze

          In the United States, corporations are people, as defined by the Supreme Court, and as taught by Mitt Romney. I am waiting for them to start paying like the rest of sucker people. And why is government spending wasteful? I can’t imagine that corporations will do a lot of things that the government does, including funding the majority of R&D that goes on in America. We can surely have a debate about all of the spending, I am so ready to get rid of the oil depletion allowance and subsidies of corporate farms, but if you need dialysis, and there is no government, then you die. Some things are indeed useful.

          • So….are you saying that court decisions and/or rulings are correct? Since when has Mitt Romney become an authority?

            Let me reiterate corporations get money from PEOPLE!!! If they are to pay more over to government…where do you think it is to come from??!?!!

            • cebreeze

              If you are right why do corporations have so much money. Apple has $137 billon dollars in the bank which under your theory is untaxable.

              And court opinions matter because in the preamble we strive to be a nation of laws. Under the law corporations are people and they have to pay taxes, even though they are very good at avoiding them which is the author’s point.

              • You have a beef with Apple because they have billions???

                Does apple not provide hundreds of millions us with (cool and wonderful) products? I use a MacBook Pro and have an iPhone. Have they not revolutionized the way we communicate, search for information and listen to our favourite music?

                Apple, if their statement is correct ,pays the most taxes of any person/corporation in the US.

                The issue here is why does anyone utilize/purchase any companies services or products. The answer to that is (and if you ask yourself why do you buy anything) we spend money on things that we perceive we will gain more value out of it that what we spent on the purchase.

                Why is govt entitled to tax my earnings (income tax), then to ten turn around and tax me again (thru a Sales and/or Value added taxes which are penalties for consumption) as a consumer when I want to use my earnings to purchase something from another individual. The seller then himself pays income tax and tax on any profits thereafter…It is quite perverse.

                A nation of laws creates a nation of lawbreakers…..

                • cebreeze

                  Interesting that you think that pointing out that Apple has $137 billion dollars in the bank means that I have a beef with them. Facts are just neutral, and the amount of money in the bank is just a fact.

                  It is equally a fact that how ever much they paid, they avoided a lot more that they should have paid. And money in the economy is much better than money sitting on the side lines. The point made by the author is that low taxation does not spur investment. It actually spurs hoarding. In general it is not good for capital to sit on the sidelines. I am not an economist, so I will leave it to economists to explain why money circulating is better than money not circulating.

                  And while we are talking about Apple and their peer institutions (to make it clear, I have been an Apple shareholder for about 15 years), let’s look at the amount of income that goes to corporate interests. 2/3 of US corporations pay no federal income tax. In 2010 for the first time corporations kept more for themselves than they paid in wages. The money going to corporate interests, and away from government almost entirely explains the lack of investment in roads, schools and transportation. The public commons was what this country great, and we are woefully underfunding the future of the public while corporations hoard cash.

                  It is not so much what any individual corporation does that it problem, it is the troubling trend that their collective behavior creates. Poverty is rising around the world, and especially here in the US. The rights that we hold sacred are being exercised by corporations to the detriment of individuals, because our courts have told us that money equals speech, and now corporations have most of the money.

                  I am sorry to hear you say that a nation of laws creates a nation of law breakers. It was with the highest of intent and purpose that our founders saw creating a nation of laws as a way to allow people to achieve maximum freedom, coming out of a system of feudalism. If we are not to be a nation of laws, then what comes next to elevate the state of mankind?

                  • Is it moral for govt to take your earnings? Is it moral for govt to claim they have more right to it than you do? Is it moral of govt to state that you owe a lot more money though you are the highest paying taxpayer?

                    These loopholes with tax avoidance are the creation of govt. Why is there no simplified taxation with a flat tax and no loopholes? You are misunderstanding what govt is doing behind the scenes. We need to be wary.

                    • cebreeze

                      I know you expect me to say that it is not moral, but it is indeed moral. Government is for everyone, and everyone should pay for its support. It is moral if you make the most money to pay the most in taxes. All of the moral philosophers over time would agree with this position. “to he that the most is given, the most is expected”.

                      Beyond religion, it is not a stretch to understand that a member of a society who benefits from the social construct has an obligation to
                      contribute to the cost. If we had no taxes, we would have no government.

                      Wealth is not created in isolation, it is as much a product of society as it is the individual. After all, society provides the enabling conditions for the individual to flourish — your success would not be possible were it not for the opportune conditions of the society one works within, and the actions of your fellow citizens. Thus the community might rightfully claim “dues” on wealth that is created within the safety of its confines. Wealth is a social product — a fact which the atomistic view (common to liberalism and libertarianism) leads us to overlook.

                    • Cebreeze, keep up the good work you’re playing a blinder.

                      RightFromYaad, you seem to be confusing a few issues. We receive a huge amount from the government, such as police, education and healthcare, it is only fair that we pay that back. Due to problems of equity and free riding, taxes are the best way to do this.

                      Why do you say Apple are the highest taxpayer? This is completely incorrect as they only pay 2% of their profits in tax (as I discussed above).

                      You also seem to only see one half of the circular nature of the economy. Yes business gets its money from people, but where do people get their money from? From business of course. Its an endless circle. You cannot look at only one part of the circle and draw conclusions. To say corporations are people makes as much sense as saying that people are corporations. To say that corporations make no money as it all comes from people makes as much as saying that people do not make money as it all comes from businesses.

                    • Is it the chicken or the egg? We receive things from govt, from what they have taken from us. Again i have never said that we don’t need government…and guys on the left always play this game of……”We receive a huge amount from the government, such as police, education and healthcare, it is only fair that we pay that back. ”

                      We pay it back?…or do we pay up front?
                      What are the true roles of govt….you view as govt as an institution to do good primarily, with unending privileges.. I view govt as imperfect as the humans who comprise its structure and restricted to certain functions.

                      Corporations are NOT people, but are composed of individuals. Individuals make the money, not the corporation. It’s important to understand the distinction.

                      Individual people make money (or earnings) through productivity and trading wither for themselves or in cooperation with other individuals as part of a group.

                      Corporations are people in the sense that they are individuals working together who are productive together, from the common man on the floor of factories to the CEO in the conference/board room.

                      The money that corporations make comes from trading their individuals productivity with their consumers’ earnings, which is generated from their own productivity….so govt in taxing ‘corporations’ is taxing the consumer again (sales taxes) and again (corporate tax).

                    • Cebreeze, You are wrong to say all moral philosophers support taxation, people such as Murray Rothbard, Walter Block and David Friedman totally reject the idea of taxation as an act of aggression against the person.

                      Government is for everyone because EVERYONE is FORCED to accept government. Democratic institutions do nothing to create freedom, rather they merely try to give the concentration of power a mandate.

                      Now i believe in limited taxation, I like you think it is a good thing to have public services and a safety net. However the question must be asked how much of tax payers money actually goes to funding public services and a safety net.

                      I dont think we should have a society where we say “if a company earns X then they should be forced to pay more and more taxes” That doesn’t create equality in society. It creates a system in which wealth creators are punished.

                    • cebreeze

                      maverick_libertarian – the guys that you named are economic anarchists (and philosophers), so by definition they any form eschew government. I guess I didn’t mean them when I talked about moral philosophers. I have also been careful to preferace my comments to say that I am an American, and our government wasn’t forced on us. We chose both our government and its form.

                      I think you are describing unregulated capital, which is something that our founders tried to avoid. There is a reason that the corporation does not appear in the Constitution of the United States because it was predictable based upon the founders experience that corporations would over time assume sovereign power. You can google Thomas Jefferson and corporations. He had choice words for them.

                      This republic was supposed to be an exercise in representative government, and it doesn’t work when you have corporations as people. The founders new that, and by and large the corporate form did not exist in America until after the American Civil War. And then it was not an act of Congress, but a footnote in a Supreme Court case that gave corporations the footing that was denied them by the founders.

                      So, while I can’t speak to others as to whether their governments were forced upon them, it is not the case in the US, and that is the point of view from which I spoke.

                      Lastly, I think it is a giant mistake to look at the outcome, and then try to assume the fairness of taxation. A person who makes $25,000 per year does not put the same burden on public resources as a multinational corporation. Shouldn’t they pay for what they use?

                      In my view, the American oil companies should have to pay a special defense levy, because the wars in the middle east protect them, and not us. We would have learned to be way more austere in fuel consumption if the oil companies had to price of the gulf defense.

                      So, no, I don’t think you can look at the outcome, and then decide a fair tax. You have to look at the burden. Looking at the burden, in no way to multi-nationals pay their fair share.

                      IMHO – this is my .02

                    • cebreeze

                      okay, I modify my statement to say except for anarchists to whom the topic of government is an anathema. There is no wealth without a society. To those whom much is given, much is expected. I don’t have any empathy for people who have more than they can spend in two lifetimes complaining about paying reasonable taxes, when their activities drive the need for government services. Companies do almost no training anymore, because the government does schooling. Companies use the roads the most, but the scream the most about paying for roads. Almost the entire FAA system goes to service corporate needs. They use more of the electrical infrastructure. No one is trying to make them pay more. They are trying to get them to pay their fair share. If everybody paid for roads (schools, taxes, electrical grid, etc) according to use, rather than by taxes, companies would pay a hell of a lot more than they are paying now. They have a good deal. They just don’t know it because greed knows no bounds.

                    • ML, everyone is not forced to accept the government. They can vote for a different one. Hell they can even vote for a libertarian or anarchist one. You may not like democracy but it is the only peaceful way of running a country.

                    • The argument that people tacitly consent to taxation is wrong People have no real choice in the matter. Anyways I never said I oppose all taxation nor did I say the unemployed should be left on the scrapheap hoping charity provides for them. A system of negative income tax would provide for those who did not rise to a basic standard of living. It would also create a fair mechanism for the abolishment of the minimum wage which usually has a negative impact on those it is supposed to protect.

                      I am opposed to taxation that funds giant governmental organisations when there is no need for them. I would even question the extent to which we need a police force (for lesser crimes at least).

                  • You have no choice in whether or not you want to be governed. Yes you may be able to choose a new set of rulers every couple of years, but you still have to accept being governed by some hierarchical system. The actual only peaceful way to run a country is to not have a state, (at least not in the modern sense). We shouldn’t need to elect a government, because a government shouldn’t be so invasive in the first place. Society would work far better on a voluntary basis. With centralized government strictly limited in its actions.

                    Governments have monopolised the provision of public service so they can claim they are needed (and have some moral right to take citizens property). But there is no reason to believe the community or private sector couldn’t provide most of these services in a far more efficient manner. Also the community or private sector, as voluntary organisations would engage in straight forward transactions with those who want the service provided, no need to tax B for A’s need.

                    Again I am not opposed to all taxation. There are legitimate public goods such as the safety net and higher level policing, but to fund those services legitimately there would probably only need to be a small rate of taxation. Instead of funding huge inefficient government departments, the government could simply create voucher systems which would not distort the market and at the same time ensure the most needy in society are looked after (something I deeply believe in).

                    Taxation IS theft by definition. It is the forcible transfer of ones wealth to the state under threat of violence from that state. So if there is going to be some level of taxation it must be restricted to providing essentials, that the free market would otherwise not support. It is morally wrong to demand that those who create wealth be penalised for it.

                    Ce_Breeze, they are moral philosophers. They concern themselves with fundamental questions about human interaction. Core questions of self-ownership, property rights, voluntary exchange, and non-aggression are all raised by these philosophers. Another one would be Locke. In fact one of the main problems of moral philosophy since Plato has been to ascribe the idea of “the good” to the state not the individual.

                    • cebreeze

                      “We hold these truths to be self-evident, … that they are endowed by their Creator with certain unalienable Rights, …That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed… That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government…” from the Declaration of Independence.

                      In the US we do have a choice. It may be an unused choice, but we clearly have a choice of whether to be governed. It is the basic premise of our government. You have a choice as well. You may not like the choice, but you could go to a part almost any country save the tiniest, and find a place where there is little government reach. Truth is most people don’t want to live where there is little or no government reach. And where there is government, it needs to be paid for. Since the basis of our constitution is the “consent of the governed”, it can hardly be called theft to pay taxes. Therefore taxation is not “theft”, no more the being compelled to go to school is “theft” of your time. The public good is served by paying for government, which in turn provides for some level of public services; schools, roads, bridges, defense…

                      In fact it is oxymoronic to say that the government has monopolized the provision of public services. That is the purpose of government. You can complain about the scope of government services, but I hardly think it is a cogent argument to say that government provides a monopoly on public service. As private enterprise is not compelled to deal with every member of the public, there must be an entity that provides core services to everyone who needs the service. That will never be private enterprise. And it is why the privatizing of the public commons is so detrimental to modern life.

                      And while I love a good debate as much as the next guy, there is just no point in arguing about government with anarchists. It is like arguing about Christianity with an atheist. There is no winning argument.

                    • Can you give me a definition of taxation that does not entail a similar process to theft? Democracy is not a justification for taxation in itself for two main reasons. Firstly democracy is never truly representative, no politician could represent my views in their entirety without compromising your views (if we were in the same constituency). So no individual is truly represented by government, in the way one may be represented by an agent employed by them. What do you think would happen if the people of New York decided they no longer wanted to be governed and started diverting tax revenue from the Federal Government to community organisations? Do you honestly think that the constitution would protect them?

                      Secondly if we are to view as good all democratic decisions and that they indicate that we are free to choose whether or not to be government, then the Jew’s weren’t killed by the democratically elected Nazi government, they voluntarily committed suicide.

                      Furthermore representative democracy is diminished by political hucksterism on a daily basis, people buy into what politicians say but in real terms things remain the same. That is why big companies donate massive amounts of money to both Democratic and Republican campaigns, because they know either side will put their interests before ordinary people.

                      Ask yourself why did governments build roads, post offices, police forces and armies in the first place? For the public good? No, they built police forces and armies to protect the interests the elite i.e. the government, post offices were created initially to keep an eye on subversion. And roads were initially build to ensure ease of access for state forces.

                      I am not an anarchist, I am a minarchist. I believe in a very small government that does not interfere with the free market, but rather is there to help those who fall on hard times and protects elderly etc. It can perform this task without creating giant bureaucratic organisations though.

                    • cebreeze

                      Maverick – your argument is “the perfect is the enemy of good enough”. But your premise is wrong. Theft is taking without consent. And while every member of the society may not consent to paying taxes, the majority do. And if you object to paying the taxes you can vote with your feet. There are many tax haven states where you can go live. But you don’t really want that, do you?

                      As to the hucksterism, you are right to a certain extent. But nobody wants the fate of Greece, and that is what you will get without payment of taxes at a sufficient level. We don’t have to guess what will happen, we can watch it, live on tv.

                      Minachristism will not work because of the imperfections of capitalism. Capitalism is a model based upon scarcity, including jobs. In the US we accept full employment as including six percent unemployment. So, in a minachrist government, what happens to those people? I know some say that churches and charities will take care of it, but then you are at the whim of whatever doctrine they follow.

                      Roosevelt got it right. The employer of last resort in a capitalistic democratic state is the government. In exchange for the payments that you get from the government you provide your labor for the public good. IMHO ~ its a brilliant model.

  2. My limited knowledge of the Corporate finance makes me think that low corporate taxes actually discourage re-investment: if a company considers reinvesting $1M of its $5M pre-tax profit, it may be able to deduct the re-invested amount. So by reinvesting $1M back into the company at 35% marginal tax rate, the company avoids $350K. So the choice is between distributing $650K to shareholders (or into cash on hand), or reinvestment of $1M, which roughly increases the company stock valuation by the same amount, assuming the company doesn’t make a terrible investment. At the lower 10% tax rate, it’s a choice between $900K distribution, or $1M increase in the stock price. There are, of course, other factors that make the company choose the dividend distribution over reinvestment, but all other factors being equal, the company would be more likely to choose reinvestment when it’s $1M vs $650K distribution, than when it’s $1M vs $900K.
    Is my logic or math off here?

  3. Taxation is a necessarily but good evil(oxymoron), according to my opinion. You are very correct; tax evasion is theft.

    Well written Robert.

    • So all of us are thieves and criminals then? If we could avoid paying a sales tax I know that near 100% of us would do that….and certainly the poor amongst our various populations would dearly love an ease off their expenses at the cash registers of the world.

      But I will turn it the other way, why is the govt not the thief who takes our money with force and threat of imprisonment if we fail to comply with their orders?
      -Kavon Fiennes

      • Using your argument, near 100% of people would not pay for groceries if they could have it for free. This would particularly help the poor. Does that make the stores thieves for making people pay? After all if I refuse to pay my grocery bill I will go to jail so does that mean all grocery stores are based on force?

        • C’mon Robert….if you steal someone else’s property, against their will then you should be punished and be fined or sent to jail depending on the theft. Taxes on the other hand are a form of force taking your money from you against our will, most of the time, if we resist this use of force against our property or evade it, then we go to jail.

          • Okay lets say I dont pay my car loan and the bank comes to confiscate it. Are they stealing my property? Consider taxes a repayment of a loan you receive in the form of education, security etc from the day you are born.

            If “we” opposed taxes, we wouldn’t vote for them. Taxes are payments that are collectively made by the community. If you dislike them, vote for another party.

            • Let’s look at your car analogy…. does not belong to you?……a loan is a voluntary agreement between the bank and the car purchaser….In this agreement the bank has a lien on the car’s title in the event you do not repay them their property. That is not stealing.

              If you fail to repay the bank the loan (their defacto property) you would be in essence stealing from the bank. Repossessing the car is reclaiming their property.

              There is no one I know in Jamaica or anywhere else that can give me concrete evidence of one thing that government provides for the community that is done at a high standard or efficiently and without political gain, whether it be “free” education and healthcare.

              This loan that you described which we receive from the day we are born is obviously non-optional.

  4. I feel I pay so much tax, there is Value Added tax, paye and so on while the services we receive from the government are many times beyond worse. If I could, I would find a way to avoid paying tax until such a time that the government meets its obligation to us as tax paying citizens. Call it evasion, call it theft, but I think it is the fair thing to do especially in a place where legislators can decide how much money they want to paid and the tax they are willing to pay on the same.

  5. Yes, tax evasion is illegal, but tax avoidance – fulfilling a corporation’s fiduciary duty to maximize profits is not. But this article is not about tax evasion, so @Prayson Daniel is completely missing the point.

    When money is left in private hands (including corporations), simplistically speaking that profit is either saved – increasing the capital stock, spent – adding to economic growth, or invested. When it’s taxed, then the government often wastes it on unproductive activities and overhead.

    Hong Kong and Switzerland have the right idea – low taxes create a vibrant economy. So spend and tax like them. But despite the abundant evidence, Keynesians continue to insist on more spending and more taxes. Laissez-nous faire!

    As Dan Hannan, Conservative MEP for South East England, says:
    “Most of us grasp that, when inflation devalues the coin in which we’re paid, we’ve been ripped off. You need to be an economist or a politician not to see these things …
    “You don’t see how governments can borrow their way out of debt? You’re just revealing your ignorance! You’ve had to cut back on your own spending, and you think the public sector ought to do the same? You know nothing about economics!
    “Still, I can’t help asking: if they’re so bloody clever, how did they get us into this mess?

    What’s so difficult about understanding the real secret of success? Stop obfuscating – simply emulate the successful!

    • Thanks for correction and explanation. I do not know right from left in this field. I left our home economy to my wife.

    • The government wastes money? Sure, but so do corporations. To pretend one side is composed of angels while the other is composed of devils is naive.

      Hong Kong doesn’t allow private ownership of land, should we copy that principle to? Keynesians spend less time on tiny city states (knowing their unique situations are not applicable elsewhere) and more on countries like Sweden, Norway and Denmark, the countries with the highest taxes but also some of the richest in the world.

      The quote/rant from the Conservative MEP is a bit odd, so I’ll just let it pass.

      • Yes indeed, but corporations don’t waste MY money – the money they waste is their own and I don’t have to give them any more. When the government wastes money, it takes more of my money through taxes…

        Rather spend time on investigating Switzerland than defending high tax states, I think you’ll find the Swiss are wealthier…

        But if you’re a committed keynesian, then you’ll continue to deny the obvious – that the more of your money you keep (aka lower taxes) the more you’ll have (aka you’re wealthier)…

        • Huh? Corporations don’t waste your money? Where do you think they get it from? They don;’t create it themselves, it comes from people of course. Every bit of corporate waste is added onto the price and makes your goods more expensive. The result is the exact same. You can choose which corporation will waste your money, but seeing as the average person as no idea what the extent of this waste is, they don’t have much of a choice.

          Switzerland is a wealthy country with low taxes and you praise as confirming your ideology. Sweden has very high taxes and is just as wealthy, so you ignore it and accuse me of being close minded. Pot calling the kettle black?

          Your last paragraph removed any doubt as to how much you know about economics. The government (it may surprise you) is not merely a black hole were money goes in and is never seen. It actually (shock of shock) spends this money on goods and services. So a tax cut reduces the taxes I pay but also reduce the services I receive. Only a fool would see this as solely a win. Sure I pay less tax, but have to pay extra for private education, private health insurance etc.

  6. In response to RightFromYaad, the claim that corporations will do more good with their money than the government, the situation in the U.S. now clearly refutes that. Corporations have horded tremendous amounts of cash and used it to buy politicians to lower their taxes and reduce regulations that stand in the way of them making even more money. Money is not free speech, money is power and in the U.S. one can see that corporations do not have any interest in the general welfare of the country, this is why the government must tax them to represent the interests of ordinary citizens against the rapaciousness of the corporations.

    Corporations state that their only obligation is to their sharehaolders, in other words they are totally narcissistic. Trust them is totally out of the question.

    • What you are describing is crony capitalism or corporatism. Govt should have no relationship with any lobby groups….as almost every industry from oil, to corn growers, to bankers to environmentalists to teachers. What they have done, all of them, is to gain an unfair advantage against others through the use of government privileges, with laws in their favour.

      This is just one of the many reasons why we need limited government of restricted functions and responsibilities.

      • cebreeze

        We need honest government, I agree. We need a government that does not so overtly create winners and losers. But we created a government when we created this country. I just don’t believe that we will have a more fair or more just society by leaving corporations to do as they please with no regulations.

        • What is fairness? It is impossible to legislate fairness…in some vague and futile attempt to bring about equality of opportunity or equality of outcomes…which is what this “fairness” issues is trying to achieve.

          Govt should be about protecting individual rights….corporations biggest enemy is competition; and govt tries to prevent that when corporatism is in play resulting in monopolies, oligopolies and immoral business practice.

          Where would we be today without corporations? Why are they enemy number one? The govt is the crux of the problem, not favouring competition and protecting citizens’ individual rights and freedoms.

          • cebreeze

            It is interesting t hat we live in a time that we can’t collectively agree on fairness. I guess perhaps we have never had fairness, because when we agreed upon what is fair, many of us sitting at the table today had no say. It will be hard, but if we don’t find a way to get to a common understanding of fairness, we lose our country and freedoms in the balance. To me the cost is not worth it.

            We would be in a much better place without corporations. Corporations defy individual responsibility, which is the essence of a free country. Corporate crime is more than 100 times the rate of street crime. But no one pays the price, because corporations can’t go to jail, and because the government is loathe to exact the death penalty against a rogue corporation.

            The founders voted down every amendment related to corporations being specifically included in the Constitution, because they had seen the East India Company exercise sovereign power, which is what we have now. It wasn’t until the end of the civil war that corporations gained legitimacy from the Supreme Court.

            They are enemy number one because they threaten our democracy. They threaten our freedoms and they threaten our economy. Those are three good reasons.

            • Collectively agree on fairness? There in your problem lies….how are you going to come to an agreement among hundreds of millions of people as to what “fair” is? As in, what is a fair wage for a resident in the upper west side of Manhattan is different for someone in the “heartland” of rural Kansas or the bayous of Louisiana. Of course what is a fair wage for a Unionized worker (15 years on teh job), is totally different from an unemployed man/woman searching for a job for over 18 months…think hard on that one!

              This is where “human freedom” can create “Fairness” for individuals. It is for individual to determine for themselves in coming to an agreement with employers what they deem their wage should be; and not the govt. Corporations can’t thrive for very long without competition, whether their competitor gets cheaper labour locally or from overseas.

              • You say we should reduce the size of the government as it only benefits corporations. If this was the case wouldn’t CEOs be socialists? Wouldn’t Wall Street use its money to support liberals and elect politicians to increase the size of the government? Wouldn’t the Wall Street Journal be a socialist paper?

                Why do business interests call for deregualtion? Why does the Chamber of Commerce call for less regulation? If government really was the friend of big business, why do corporations oppose larger government?

                Perhaps you are wrong and government is not solely a cartel for corporations but a counter balance to business.

                You talk about rights the government should protect rights. What about the right to work? The right to housing? The right to healthcare? The right to education?

                Yes we have different concepts of fairness, but I fail to see how this is a problem. Why do we need unanimous agreement? Its enough to know that (for example) inequality is too high and such-and-such measure would reduce it. We don’t need a precise and unanimous agreement for this.

                People agree among themselves? This assumes that there is equal power between employer and employee. I can tell you that this is not the case and my boss could easily fire me for the slightest reason. I don’t have any similar power. Power is weighted heavily in the favour of business.

                Also economies of scale easily allow corporations to exist even without government.

                • Reduced size of govt benefits everyone, including the poor trying to earn a buck and keep his money.

                  • Rather than engaging with my points or arguing your case when it is criticized, you simply restate your beliefs without any supporting evidence. Looks like a textbook ideologue. Perhaps the reason you cannot provide a proper response is that there isn’t one? Perhaps your case is flawed?

                  • cebreeze

                    That is a myth. We have been trying that in the United States and it has just produced greater inequality. There is a difference between optimizing government and ending government.

                    During the great depression, they recognized that capitalism has a huge problem in that it presumes a six percent unemployment is full employment. So what do you do if you are in the six perscent? Capitalists have no place for you. Without government you would starve, have no health care, have no housing. Shouldn’t the capitalist be expected to contribute to the government solution to the problem that is essentially created by their practices?

                    So the first problem capitalists creates for the government to solve is unemployment. The second problem that capitalists create for government to solve market power. Declining wages in the United States is a market power issue. Capitalists have just decided to keep more of the income to themselves (how did Apple get 137 billion in the bank), and to the detriment of the workers.

                    Adam Smith was America’s first economist. He said money is a proxy for labor. So in order for their to be a profit, the laborer should be paid first as an expense. What the capitalist have done because they have the power to do it, is to pay less for labor and declare more profits. It is very short sighted because it is market killing. But who cares when you can tell the Wall Street Analysts that you beat the estimate by a penny or two?

                    We have banks that are “too big to fail” because government quit regulating. Now a whale operating in London can take down the economy? Really? Is that in the best interests of the citizens or the state? Of course not.

                    We need good government. We just haven’t produced any statesmen in a while. And it seems to be really interesting that with the rise of corporate interests, we have somehow failed to produce any real statesmen.

                    • Adam Smith was Scottish.

                      Where do you get ending govt from what I said? Of course we need govt. But it cannot keep growing and spending…when will it end?

                      Where in the US have you seen a reduction in size or in the expenditure of govt?….you all are racing towards $US20 Trillion debt very soon. What kind of country will be left for future generations of Americans?

                      Lastly, statesmen no matter how good their intentions, succumb to the status quo.

                    • cebreeze

                      Actually the government is smaller. It has fewer employees and the deficit is shrinking. And no household would try to pay back its debts while shrinking its income. Yet that is the conservative remedy. When you put it like that the absurdity is obvious.

                      The conservatives gave the largest tax cut in US history to the wealthy, fought two wars without paying for them. That is wrongheaded policy not a government that is too big. And some how no matter how big the government is we just can’t find a way to shrink the worlds largest military.


  7. Pingback: Tax haven From Wikipedia, the free encyclopedia | Stephen Darori Early Stage Threshold Curve Model

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