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In Europe’s Tax Race, It’s The Base, Not The Rate, That Counts

The country of Ireland is known to be a popular choice for investors – partly a function of their 12.5 percent tax rate. This is one of the lowest tax rates in the developed world. However, low tax rates are not the biggest draw card for investors. The profits a country chooses to tax, referred to as “base tax”, has been decreasing for many years in Europe. This is something Ireland understands well, and is taking full advantage of in the current tax race. The benefit of this is that, by resolving to not tax a portion of the profits a business produces, firms are drawn to move toward such countries. This, in turn, means more jobs available, and an increased GDP for these countries. However, this can get fairly complicated, fairly quickly, in the context of the EU – where there are 27 different corporate tax systems, but one common market.

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