University of Limerick
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Taxing thoughts: Ireland, tax competition and the cost of intellectual capital

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journal contribution
posted on 2020-09-02, 07:55 authored by SHEILA KILLIANSHEILA KILLIAN, Martin MullinsMartin Mullins
This paper examines the impact of tax competition on the commodfication of ideas, and points towards a particular set of negative consequences that affect the developing world. As multinational business becomes increasingly independent of national borders, the power relationship between business and government has shifted from one in which governments imposed tax on business in return for the privilege of operating within its jurisdiction, to one in which governments distort their tax system to suit business, in the hope of enticing them to locate on their shores. The race to the bottom in terms of tax rates has been well-chronicled in studies such as Christensen et al (2004), and Murphy (2006) Countries which were successful at the first round of tax competition are now finding that tax rates alone will not hold the multinationals on which they have become so dependent. The economic growth associated with their earlier success has brought high operating and wage costs. Multinationals who have remained lightly rooted in the soil of these countries can easily move their manufacturing to cheaper, emerging economies, taking with them their coveted jobs and exports. In order to retain them, these first round winning countries are now encouraging multinationals to locate their research and development as well as their production facilities with them. They hope that this is a less mobile activity, less easily replicated in a developing country, and so will anchor the multinational firmly in their territory. In this new level of the tax competition game, incentives are given not only for gross production, but for the production of knowledge. As a consequence, knowledge itself becomes commodified, and intellectual capital widely defined and privatised. This means that ideas previously shared must now be bought, and products previously sold at a price determined by the local market may now only be sold if the market can support their original, patent-protected form. This paper tracks the development from the old to the new rules of tax competition, using the example of Ireland to illustrate the strategies adopted at each stage. The rational, self-serving response of multinationals is explored, and the immediate downstream effects for developing countries discussed. The writings of Michel Foucault are used to gain perspective on the idea of intellectual capital. Finally, the sustainability of the new form of tax competition is questioned, and some hypotheses are formed about the longterm consequences.



Accountancy Business and the Public Interest;7 (1)


Association for Accountancy & Business Affairs





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