Written answers
Tuesday, 9 December 2008
Department of Finance
Taxation Policy
10:00 pm
Joe McHugh (Donegal North East, Fine Gael)
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Question 166: To ask the Minister for Finance his views on whether the Irish and British Governments' diverging indirect taxation strategies contradict the Hain-Ahern 2006 assertion that companies should be encouraged to redesign logistical strategies and treat Ireland as one commercial zone rather than two separate entities. [45035/08]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Taxation strategies in general reflect the political choices made by Governments towards meeting the specific needs and requirements of countries. In this regard, Ireland has focused on achieving a low taxation economy, especially in the area of direct taxation, both income and corporation taxes, which has delivered significant advantages in terms of Ireland's competitiveness. In ensuring a relatively low level of direct taxation on income, we have therefore had marginally higher indirect taxation.
Recent developments have seen some widening of the differential arising from indirect taxation as a result of a reduction in the UK VAT rate. However, the UK Government has signalled that this reduction is a temporary measure to be reversed at the end of 2009.
The Comprehensive Study on the All-Island Economy, to which the Deputy refers, sets out a strong rationale for beneficial all-island economic activity. The study, which was published in 2006, highlights the "market widening effect" of a larger market on the island of Ireland, within which previously unexplored business opportunities can be exploited.
InterTradeIreland, the all-island trade and business development body which is jointly sponsored by the Department of Enterprise, Trade and Employment and the Department of Enterprise, Trade and Investment in Northern Ireland, has a central role to play in helping businesses North and South to tap into the all-island marketplace. I understand that a significant number of North/South initiatives, which were envisaged in the Comprehensive Study, have been implemented.
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