Good things from St Patrick’s land

St Patrick’s Day is celebrated on March 17th, the traditional date of his death. Since he is the patron saint of Ireland, people celebrate the country as well as the man. Some of the revelry borders on the kitsch, with giant green felt hats emblazoned with Guinness logos, and celebrations of leprechauns, Ireland’s “little people.” I was once in Chicago on the day, and saw the city’s fountains turned bright green, and the bars serving green beer (which looked wrong).

Patrick himself, after he was kidnapped from Britain in the 5th Century aged 16, and made to work as a slave in Ireland, later returned to bring Christianity to the island, it is claimed. He is supposed to have driven the snakes out of Ireland, but there is no evidence that there ever were any, and the story may be a coded reference to driving out the Druids who practised the ancient Celtic religion.

There are many good things to celebrate about Ireland, apart from its rain, but two in particular stand out. One is the tax exemption on creative artists, introduced by Charles Haughey in 1969. Originally it exempted income earned by Irish writers, composers, visual artists, and sculptors altogether from income tax, but the canny Irish Treasury thought it was costing too much in revenue foregone, and it now only exempts up to €50,000.

The scheme has encouraged several high-profile people in the "creative industries" to settle in Ireland, while also nurturing home-grown talent. Anne McCaffrey and Harry Harrison, famous SF writers, became Irish to take advantage of it, and part of its legacy is the large population of immigrant artists the scheme has persuaded to become Irish residents. Would-be claimants have to apply for it, and gain exemption if the Revenue deems their work to be original and creative, and recognized as having cultural or artistic merit. It has boosted Ireland’s reputation on the world’s cultural map.

Another reason to celebrate the Emerald Isle is its attitude to Corporate taxation. Its headline rate of 12.5% on trading income is among the lowest for developed countries, and encourages foreign firms such as Google to locate there. It is central to Ireland’s economy, with foreign firms paying 80% of Irish corporate tax, employing 25% of the Irish labour force, and creating 57% of Irish non-farm value addition.

The headline rate understates the value to foreign firms that locate there. Multinationals pay an effective tax rate of under 4% on global profits "shifted" to Ireland, via Ireland's global network of bilateral tax treaties. Ireland has a complex set of Irish base erosion and profit shifting ("BEPS") tools that enable firms to achieve these lower rates by moving their profits through Ireland.

Furthermore, because these schemes favour intellectual property rather than physical goods, almost all foreign multinationals in Ireland are from the industries with substantial IP, namely technology and life sciences. This puts Ireland at the forefront of modern technology. The EU resents and resists Ireland’s policy, however, and is bringing forward a plan to end national vetoes on tax policy.

In the meantime, though, we have two reasons to celebrate Ireland, and both involve the attraction of low taxes. One draws in cultural talent, and the other brings in international business. So here’s wishing a happy St Patrick’s Day to our neighbours and to the world at large.