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Voters face cuts as corporate taxpayers call the tune

Published 25/11/2010

So the red line was not breached: the string of austerity measures unveiled by Ireland's government yesterday included everything from a cut in the country's minimum wage to a series of increases in VAT. Yet one group of taxpayers escaped unscathed: Ireland's business community, which will continue to benefit from a 12.5% rate of corporate tax.

The Irish government's argument, of course, is that keeping businesses sweet - particularly those international companies that relocated to Ireland specifically to take advantage of its low tax rate - is the country's only chance of growing its way out of its difficulties.

It is an argument reminiscent of the dilemma that has faced the UK Treasury since the financial crisis: much as ministers might want to hammer the banking sector, they are constricted by their inability to do so without the tax revenues the City still offers up.

A similar story on both sides of the Irish Sea then. The British obsession with financial services has left us beholden to the City. The Irish determination to compete for corporate citizens in an interminable race to the bottom on tax has left it at the mercy of those that have flocked to it.

'No taxation without representation', was a slogan coined by US revolutionaries 250 years ago. Taxpayers in Britain and Ireland in modern times will ask whether their fellow citizens in the corporate sector have too much representation - and pay too little tax as a result.

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