Macroeconomics Case Study

Ireland: Turnaround by Tax Policy

OR

Abstract: In the early 1980’s Ireland was termed as the ‘Sick Man of Europe’ owing to its high unemployment rates, burgeoning public debt, and high levels of emigration. But since 1987 it has made significant economic progress by undertaking a series of measures, the most prominent of which was its policy of granting special tax incentives to foreign investment in the manufacturing sector and financial services. This low tax regime was always an apple of discord between Ireland and the European Union. But it helped the country attract a large number of foreign companies seeking low tax jurisdictions for their investments. The result has been a remarkable turnaround in the Irish economy, which has since been dubbed the ‘Celtic Tiger’.

Pedagogical Objectives:

• To understand types of fiscal policy and analyse contractionary and expansionary fiscal policy in the context of Ireland
• To analyse the relationship between taxes and economic growth in the context of Ireland.

Keywords : Ireland turnaround by tax policy; Anglo-Irish Free Trade Agreement; Foreign direct investment; Protectionism; Ireland's economy; Tax competition, tax arbitrage; Fianna Fail; Supply side economies; European Union's (EU) tax package; European Single Market;