Occasionally, the Irish Comptroller and Auditor General (C&AG) office produces some remarkable, in their honesty, and the extent of their disclosures, reports. Last month gave us one of those moment.
There are three key findings by CA&G worth highlighting.
The first one relates to corporate taxation, and the second one to the net cost of banking crisis resolution. The third one comes on foot of tax optimisation-led economy that Ireland has developed since the 1990s, most recently dubbed the Leprechaun Economics by Paul Krugman that resulted in a dramatic increase in Irish contributions to the EU budget (computed as a share of GDP) just as the Irish authorities were forced to admit that MNCs’ chicanery, not real economic activity, accounted for 1/3 of the Irish economy. All three are linked:
Irish banking crisis was enabled by the combination of a property bubble that was co-founded by tax optimisation running rampant across Irish economic development model since the 1990s; and by loose money / capital flows within the EU, which was part and parcel of our membership in the euro area. The same membership supported our FDI-focused competitive advantage. Irish recovery from the banking crisis was largely down to non-domestic factors, aka – tax optimisation-driven FDI and foreign companies activities, plus the loose money / capital flows within the EU enabled by the ECB. In a way, as Ireland paid a hefty price for European imbalances and own tax-driven economic development model in 2007-2012, so it is paying a price today for the same imbalances and the same development model-led recovery.
This post was published at True Economics on Friday, October 6, 2017.