Ireland cited as model economy for Europe to emulate

The Wall Street Journal has cited Ireland as the model economy for the rest of Europe to follow, and it attacks the European Commission's criticism of Ireland's low corporation tax rate for manufacturing companies. "The only thing unfair about that is that the rest of Europe doesn't enjoy the benefits of such enlightened economic leadership," it says.

"Ireland's record ought to have opened some eyes on the Continent. No way. Instead, most European policy makers still cling to the notion that the way to fuel economic growth is through prodigious quantities of government spending funded by sky-high taxes."

The "review & outlook" article notes the pressures exerted on Ireland to eliminate the 10 per cent corporation tax rate and charge all companies an across-the-board rate of 32 per cent because it was "unfair" to EU members with higher rates.

Attracting investment with low tax rates, the Commission maintained, was the equivalent to state aid to industry and "therefore verboten", according to the Wall Street Journal.

It describes Ireland's agreement to lower the tax rate on all companies to 12.5 per cent as a "neat hat trick" as that manages both to "meet the commission's demands and enhance Ireland's status as a low-tax country". As this is one-third the average corporate tax rate in Europe, "Irish citizens and the companies that employ them have every reason to cheer the result".

It says there is no such luck for the people in France. "At the same time that the Irish were getting their lecture from the taxophiles, France announced tax cuts for business so minuscule that the best thing that can be said about them is that the bureaucrats are ambling ever so slowly in the right direction."

It goes on to argue that France's "suffocating" corporation taxes will still remain among the highest in the world. The recipients of the lower tax rates are likened to "subjects grovelling before an oppressive king" while "many executives even cheered Mr Jospin [the French Prime Minister] for the small favour".

Noting the flight of companies and entrepreneurs from France because of the high taxation, it says US investment in France, calculated on a per-capita basis, is around one-sixth that in Ireland. The French have argued that it is not possible to slash corporate taxes because of the requirement to maintain a budget deficit in line with the criteria outlined in the Maastricht Treaty. "But again" the article argues, "a look at Ireland shows that thinking to be wrong; tax cuts don't cause deficits to balloon. The return on equity of Ireland-based companies is four times the average on the Continent."

It goes on: "Such are the profits earned by unburdened corporations in Ireland that Dublin has been able to take in tax revenues on a par with, or surpassing every other European nation, despite the lower levies that it charges."