Corporation tax and the Celtic Tiger

 

A chara, – David McWilliams argues (“Ireland a tax haven? I don’t think so”, Opinion, Weekend Review, July 10th) that Ireland’s low corporation tax rate played a key role in stimulating the surge of inward investment which underpinned Ireland’s high economic growth rate over the last 30 years.

There was no change in the rate of tax payable by foreign firms operating in Ireland between 1980 (when a 10 per cent rate was introduced) and 2003 (when the rate was raised to 12.5 per cent).

The surge in inward investment commenced in the early 1990s, about half-way between those dates.It is difficult, therefore, to see what role the tax rate (which remained unchanged) had in setting off this surge.

What did change was the quality of employment created by foreign firms during the so-called “Celtic Tiger” period, which was far superior to the low-skill assembly and packaging jobs which were a dominant feature of earlier inward investment.

It is much more likely, therefore, that the increasing availability of skilled workers was the key driver of the rapid growth of inward investment in Ireland in recent decades.The increase in the tax rate in 2003 had no discernible impact on this growth. – Is mise,

PROINNSIAS BREATHNACH,

Maynooth,

Co Kildare.