Lower corporate tax rate boost Ireland'a GDP to 26% in 2015
Economists and financial commentators scoffed this month when Ireland officials announced that the country's gross domestic product had increased by 26% in 2015. They rightly pointed out that the arrival of numerous new multinational companies, which conduct the vast majority of their business abroad, had juiced this number.Liberals don't appreciate how the law of diminishing returns is also impacted by high tax rates. They don't get it with capital gains taxes or corporate taxes. BNut if you get the kind of growth Ireland got, even modest income taxes will provide a greater return to the government.
What was largely overlooked, however, was that Ireland's gross national product, the income produced in the country itself, had also grown by 19%. Growth in personal consumption, exports and imports also grew at impressive rates.
Meanwhile the rest of Europe is experiencing virtually zero growth. And the U.S.'s average growth of 2% since the end of the Great Recession is 50% lower than the historical average.
So how is Ireland achieving this growth? Largely by enticing economic activity in its country with a 12.5% corporate tax rate, which is about one third of the U.S.'s 35% federal rate. (Both Ireland and the U.S. have lower effective tax rates as a result of various tax credits and subsidies.)
As a result of Ireland's low tax rate, businesses there can devote more of their resources to developing new products, expanding into new markets, creating new jobs and paying their employees and shareholders more money.
This freedom has enticed numerous American corporations, including auto parts supplier Johnson Controls, drug manufacturer Baxalta and medical device developer Medtronic, to relocate to Ireland through corporate inversions in recent years. Countless other American companies, largely in the pharmaceutical and tech industries, are also expanding their operations there.