Low corporation tax not vital to attracting multinationals
John FitzGerald: Ireland’s tax rate no longer crucial for creation of new jobs
Taoiseach Leo Varadkar at the opening of LinkedIn’s EMEA head office in Dublin: while the tax rate was for many decades a vital support in attracting jobs to Ireland, this is no longer the case. Photograph: Dara Mac Donaill
The Irish policy of using a low corporation tax to compete for international business was first introduced in 1956 and, in different manifestations, it has played an important role in economic policy ever since. In the 1970s and 1980s it was vital in attracting many foreign multinational enterprises (MNEs) to Ireland.
Initially, this low rate of tax applied to firms operating in manufacturing. As a result of EU regulations, it was extended to cover the services sector in the late 1990s. Research suggests this extension of the low tax rate to services saw a significant loss of tax revenue from financial and retail companies, but this was more than offset by increased MNE activity in the services sector.