An Irexit? October 13, 2016Posted by WorldbyStorm in Uncategorized.
There is another country in Europe with an unsustainable business model: Ireland. It offers low corporate tax rates and legal tax avoidance to foreign investors. The ruling by the European Commission to force Apple to pay €13 billion to the Irish Government in taxes is a sign that this model may not be sustainable for much longer. Brussels is also pushing towards a harmonisation of the corporate tax basis – the rules of what to tax.
Dublin has been resisting such a change, but with the UK out of the EU it will lose an ally in the fight against EU-imposed tax harmonisation. Ireland has done well from its tax haven status. But this model is unsustainable.
That’s a fair enough point. Though…he immediately skips to the following:
Perhaps the confluence of Brexit and the long-term loss of a business model will persuade Ireland to follow the UK out of the EU. This will obviously depend on whether Ireland can find an alternative model inside the EU. It is possible, but not inevitable. An Irish exit will not happen unless and until there is more clarity of the costs of Brexit. It will also depend on whether the euro zone successfully manages the various crises facing it.
If all this develops as I expect – badly – the economic case for an Irish exit would strengthen. Ireland might choose to stay in the EU for political reasons. But those in Ireland in favour of EU membership should give some thought to what could go wrong. They might otherwise end up in the same place as the overconfident Remain supporters in the UK: bitter and without influence.
The problem is to what purpose? What ‘model’ would Ireland adopt in such a context that would be superior either to alignment with EU norms or (in the very short term) the status quo (or more likely an adjustment of the status quo where, whisper it, Ireland would receive precisely what it expected from such corporations and businesses publicly in tax). Because one immediate consequence of the UK departing the EU is the fact that Ireland is now an obvious entry port for anglosphere corporations to conduct business in the EU, as it has been, but without the inconvenience of the UK as a rival to the immediate east. But how does it work with both the ROI and UK outside the EU? Which economy is better placed to deal with that?
Of course it could be that that is too nebulous a thing to provide any great advantage. We will see. Munchau himself notes that in relation to the UK itself:
So we are about to witness a shift away from an old unsustainable business model to something new. We should not pretend that this will be cost-free. The overt xenophobia at last week’s Conservative party conference may end up driving the very foreigners away the UK can least afford to lose.
Where do they go? Some to the continent. Some to Ireland. But go they must. We have to shift away from the model we currently have. But his suggestion seems premature in the extreme.