I repeat my blog of last March given the latest mutterings in advance of this week’s Summit.
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Our EU friends – President Sarkozy and Chancellor Merkel – have put Ireland under terrible pressure in relation to our domestic corporate tax rate and indeed have not been too generous in acknowledging that Ireland’s banking crisis has significant implications for their own banks. We have been accused of ‘fiscal dumping’ by M. Sarkozy and according to the French President Ireland has ‘unfair advantages’.
One could be forgiven for thinking that Ireland was a competitive threat to these economies.
What the French and the Germans have failed to mention are the enormous subsidies which they provide to their private sector.
Consider the following facts (all based on statistics provided by the European Commission):
- France provided €135 billion in State subsidies in the past five years (2005-2009); Germany spent €237 billion, well in excess of Ireland’s GDP, over the same period. Excluding crisis measure, and on average, Ireland spent a more modest €738m per annum.
- France provided over €1.14 billion to 25 large scale projects over just three years (2007-2009) with a staggering €340m in grants paid to one company; an average of €46m per company. Ireland provided no grants to companies in this category.
- Both France and Germany have stepped up the amount of State subsidies over the past years. Ireland‘s trend is for an absolute reduction in the level of State aid. In fact, the level of French subsidies increased by nearly 50% over the three year period 2007-2009.
- France (2009) provides 18 times more State aid to French manufacturing companies than Ireland; the multiple for Germany is 21 times.
- In the strategically critical area of R&D, French and German State subsidies (at around €4.4 billion in 2009) were 14 times higher than the level of support provided by Ireland.
- Regional development State subsidies in France and Germany are very popular as they are used to attract companies. In the past five years these grants were worth nearly €30 billion (somewhat less than what Ireland will collect in tax this year); or 20 times more than the equivalent amount which Ireland spends on regional development.
- Consistently, France and Germany are the by far the highest contributors of absolute amounts of State subsidies to industry and services.
- French FDI activity was up 22% 2010 on 2009 in the midst of the EU’s worst economic recession, with over 1,500 investment projects approved in the past two years.
These bald facts tell us that the debate on corporate tax should be extended to cover the incredible levels of State subsidies which France and Germany continue to spend in providing grants to their enterprise sector.
A case of the pot calling the kettle black!
Sure ‘tis no wonder that the German economy is booming and that France secures over 20% of all EU FDI.
