The 12.5% Irish corporate tax rate - part of a culture of fiscal fiddling.

Government-inspired tax scams were a major cause of Ireland's ignominious boom and bust. When I came back here in 1997, having lived abroad for some years, the Irish property market was already booming – in no short measure due to the proliferation of developments being sold under “tax incentive” schemes. These schemes were initially dreamt up to aid urban regeneration in depressed times, when places like Gardiner Street in Dublin (just as an example) were crumbling.

Whatever good purpose they may have served at the onset, however, they quickly became a means for the well-off, self-employed, and company directors to hide their income from the taxman. Obviously, when I returned to Ireland I was looking for a place to live, and had first-hand experience of seeing these investors in action.

Initially, I ended up renting an apartment on North Brunswick Street – one of many units owned by the MD of a large Dublin solicitors' firm. This nouveau landlord was able to write off rental income for tax purposes, thanks to the Secton 23 Tax Shelters, and was able to build up a large portfolio of properties on this basis. This was replicated throughout the whole country. The new Irish landlord class could even write off tax on non-Section 23 properties, if they had a section 23 or two in their collection.

As I say, this was already well underway when I came back to Ireland in 1997. So then we became part of the Eurozone, with its low interest rates, in 1999.   As Ireland had come from a situation where interest rates were relatively historically high (like Britain – I remember rates of 15% in 1989), the prudent thing for any government to do would have been to introduce fiscal measures in its property market to counteract this.

Not so the Irish Government and Finance minister Charlie McCreevy. He extended the Section 23 schemes and cut capital gains tax from 40% to 20%. I remember, at the time, being dumbfounded by this stupidity, but McCreevy was lauded by much of the public and media as some kind of Irish financial guru.

The boom then got “boomier”, in the mangled words of Irish prime minister Bertie Ahern. For the best part of a decade, the broadsheet supplements reported very average houses “making” astronomical sums at auction. They were talking about asset price inflation, which feeds into the whole economy, as though it was a good thing.

You know what happened thereafter. It culminated in the EU and the IMF arriving in Dublin to bail out Ireland, and save us from the crass stupidity of much of our populace and all of our rulers.

If there is one thing that should be learned from all of this, it is that the Irish political class is incapable of implementing a fair, sustainable tax system. Not only do its tax policies consistently favour the wealthy and hammer the PAYE sector unremittingly – in 2007 PAYE workers paid €10 billion of a total €13.5 income tax take – they distort, and eventually destroy the economy.

Another tax scam is, of course, the Irish corporate tax rate. I pay tax at 41%, yet Microsoft pays it at 12.5%. Companies from all over the world set up letterbox operations here to channel cash through and minimise their domestic tax obligations. German and British companies do it, starving their exchequers of income.

The British taxpayer, alone, whose treasury is being denied income by UK companies using this ruse will have to fork out £7 billion for the Irish bailout,  while the Irish Government sees its 12.5% rate as "non negotiable". That cannot be right.

Irish corporation tax must be increased as part of any deal.

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