The fact is, it\'s tax

Tony O'Reilly, the first Irish billionaire:

Yet the key passage refers to tax. O’Reilly’s view is that the main reason for the Irish economic “miracle” has been the low level of corporate tax in Ireland. He is working to persuade the UK Government to reduce the rate of corporation tax in Northern Ireland to that of the south; that is, from the UK’s 30 per cent to the Republic’s 12.5 per cent. He comments that the Irish miracle is not “because the pubs are great, the golf is great and the climate is, well . . . the fact is, its tax.”

This is, indeed, one of the political truths that politicians ignore at their peril. O’Reilly’s “the fact is, its tax,” is just as valid as Bill Clinton’s “it’s the economy, stupid”. Of course, from the British point of view, there can be no question of cutting the Northern Ireland rate of corporation tax without cutting the UK level. If 12.5 per cent is good for the Republic — and it is — then indeed it would also be good for Northern Ireland. If it would be good for Northern Ireland it would be equally good for England, Wales and Scotland. Not only good, but essential. [...]

Politicians do not appear to understand that global businesses are free to arrange their tax affairs on a global basis. Most private individuals are still tied to the place in which they earn their living, though the genuinely rich can afford to live where tax is lowest. International companies, by definition, earn their profits internationally. They can, by and large, choose to place their headquarters in a low-tax jurisdiction. For instance, in the Republic of Ireland.

In other words, global businesses take advantage of dynamic geography.

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I didn't realize this until

I didn't realize this until recently, but Ireland is now the third-wealthiest nation in Europe, behind Luxembourg (not sure what's going on there) and Norway (major oil and natural gas exporter). Iceland, the fourth-wealthiest, trails by more than $5000 per capita.

Luxembourg is a very small

Luxembourg is a very small country where almost everyone is a professional. That's why their per capita GDP is so high.

Ireland's miracle was a boon for regular people as well. Irish unemployment fell from something like 15% to something like 3%. Standard Econ 101 tells us that, if 12% of the adult population looking for work finds it, wages will fall. But not only did wages not fall, but average real wages grew 9% between 1990 and 1997, then at 5.5% a year between 1996 and 2001, the latest date for which I can find statistics.

- Josh

The success of Luxembourg

The success of Luxembourg suggests that tiny polities, being so small, have a better chance of being good to the people inside because it's so very easy for people to leave if they get pissed off by their little government. It's far from being proof but it does suggest the idea to my mind.

How high are personal tax

How high are personal tax rates in Ireland? While cutting corporate tax rates are nice I suspect the greater incentive to produce could have played an equal if not greater role in Irish prosperity.

I suspect a lower corporate tax rate has helped a lot by encouraging companies to locate there, but this is not a universal rule. While lower corporate taxes result in more corporations and more reported income the effect is not double or triple unless you are canabalizing corporations from other countries. If everyone else in Europe cut their corporate tax rate to match Ireland then non-local corporations will probably go back home.

I think Luxembourg could

I think Luxembourg could also be explained by simply being essentially one big metroburb with no rural areas. If you pulled out Chicago, California Bay, NY metro, or even a densely populated state with no big cities like CT or NJ, you'd find that they have an extraordinarily high GDP compared to the US national average. Comparing Luxembourg to other countries in Europe is like comparing NJ to TX. Standards of living and GDP in Dallas or Houston are probably comparable to most of NJ, but a lot more people in Texas are living in rural-ish areas than in NJ where even the boondocks are semi-surbanized with lots of professional employment and people commuting to NYC/Philly/wherever.

Yep, the difference between

Yep, the difference between mobility of capital and people, while sort of sad, is a good demonstration of dynamic geography. Capital is much easier to move, therefore countries court it. And we all get to enjoy products which are cheaper b/c they are made where taxes are low. But we suffer in high-tax countries because we have roots there.

How high are personal tax

How high are personal tax rates in Ireland?

20% up to about €30,000 (there is also a tax credit which includes relief on on mortgage interest/rent payments) then 42% after that.

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