One of our inaugural articles on this site was a post in March looking at the causes of the “Celtic Tiger” boom in Ireland. It contained a striking graph and a wealth of analysis suggesting strongly that what caused the boom was, above all, Ireland’s accession to the EU single market, rather than its supposedly ‘competitive’ corporate tax policies. After all, Ireland has been trying to be a tax haven since the 1950s, but it was only in the early 1990s that take-off began (also see this rollicking historical account of how Ireland became a corporate and financial tax haven, or offshore financial centre.)
- Update: reposted on Naked Capitalism site in the U.S., and the Angry Bear tax and economics blog, and the Middle Class Political Economist.
- Update 2: See also Ireland’s Recent Success Not Built on Low Taxes, by Kenneth Thomas, author of Investment Incentives and the Global Competition for Capital. In which he makes similar arguments.
Did Ireland’s 12.5 percent corporate tax rate create the Celtic Tiger?
Ireland has long been a poster child for corporate tax-cutting. The standard argument goes something like this. “Ireland has very low corporate taxes . . . Celtic Tiger . . . just goes to show that corporate tax cuts grow your economy.” This argument is popular in Ireland too where government officials like to call the flagship 12.5 percent corporate income tax rate a “cornerstone” of industrial policy.
But is any of this even true?
Well, now take a look at this little graph that we created for this blog. We aren’t aware that a graph like this has been made before.