David Prosser: Taxpayers with too much power

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The Independent Online

Outlook 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 that 12.5 per cent rate of corporation 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 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.

In Britain, the Government now seeks to outgrow its reliance on financial services with a new focus on manufacturing and other parts of the economy. We will see how successful it is in that ambition, but at least it is trying. In Ireland, on the other hand, there is no sign of a change in philosophy, possibly because there is no obvious way out in this darkest hour.

"No taxation without representation," was a slogan first coined by American revolutionaries 250 years ago. Taxpayers in Britain and Ireland in modern times will wonder whether their fellowcitizens in the corporate sector have rather too much representation – and pay rather too little tax as a result.

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