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Copyright Christophe Ena/Copyright 2023 The AP. By Euronews Published on 15/03/2024 - 11:30 GMT+1 Share this article Comments Share this article Facebook Twitter Flipboard Send Reddit Messenger Linkedin VK France's inflation rate stood at 3% in February year-on-year, only 0.1% lower than the previous month. ADVERTISEMENT Consumer prices rose 0.9% in February compared with January, the French statistical office INSEE said on Friday. Although inflation is generally decreasing in France, many people may feel they are not actually seeing much of a change in their monthly expenses. Food prices are still rising, but at a slower rate than they were. Year-on-year food items were 3.6% more expensive last month - the figure reached 5.7% in January. Energy prices are also keeping household spending on the rise, with a 4.3% increase in February compared with the same month last year, and are 4.1% more expensive than in January on a month-on-month basis. The end of a government-imposed cap on electricity prices explains that hike. Despite the increases, the country's inflation has dropped in the past twelve months. France's inflation peaked above 6% during the last months of 2022 and early months of 2023. France's inflation rate is continuing to fall, in a similar way to its European neighbours, although it remains some way away from its 2% goal. Go to accessibility shortcuts Share this article Comments YOU MIGHT ALSO LIKE RUSSIA'S ECONOMY IS GOING STRONG: WHY HAVEN'T WESTERN SANCTIONS WORKED? NORD STREAM SUES LONDON INSURERS OVER PIPELINE BLASTS FEDERAL RESERVE SET TO CUT KEY RATE BUT CONSUMERS MIGHT NOT FEEL MUCH BENEFIT * France * Energy * Economy * Inflation ADVERTISEMENT TOP STORIES Now playing Next CHRISTMAS SAVING TIPS: HOW TO CELEBRATE WITHOUT BREAKING THE BANK Now playing Next TESLA RECALLS 700,000 VEHICLES OVER TYRE PRESSURE MONITORING Now playing Next GLOBAL MARKETS IN SEA OF RED AS THE FED DIMS HOPES OF SANTA RALLY Now playing Next VOLKSWAGEN TALKS OVER FUTURE OF PLANTS AND JOBS AT A 'STALEMATE' Now playing Next VOLKSWAGEN MAJORITY STAKEHOLDER SUPPORTS GERMAN FACTORY CLOSURES ADVERTISEMENT MOST READ UNION REACHES AGREEMENT WITH VOLKSWAGEN TO AVOID PLANT CLOSURES TRUMP THREATENS TRADE TARIFFS UNLESS EUROPE BUYS MORE US OIL AND GAS ECB INTEREST RATE CUTS IN 2025: HOW LOW COULD THEY GO? NATURAL GAS PRICES AT HIGHEST FOR TWO YEARS ON COLD WEATHER CONCERNS RISING BUTTER PRICES LEAVE EUROPEAN CONSUMERS WITH A SOUR TASTE ADVERTISEMENT Business Economy REWARDING TAX HAVENS? WHY IRELAND MAY CASH IN ON OECD REFORMS Dublin docklands. - Copyright Canva Copyright Canva By Eleanor Butler Published on 15/03/2024 - 10:47 GMT+1 Share this articleComments Share this article FacebookTwitterFlipboardSendRedditMessengerLinkedinVK The cornerstone of Irish economic policy has been low corporation tax, so what will a minimum levy mean for the country? ADVERTISEMENT Stretched out along Dublin’s river Liffey is an expanse of glass office buildings. Sometimes referred to as the ‘Silicon Docklands’, the nickname points to the neighbourhood’s status as a corporate magnet. Major firms - famously Big Tech - have long flocked to Ireland, enticed by the country’s low level of corporation tax. Since 1997, the official rate has been held at 12.5%, although this changed in January with the arrival of a long-awaited reform. Along with around 140 other nations, Ireland introduced a 15% minimum tax rate on the profits of multinationals, a policy spearheaded by the Organisation for Economic Co-operation and Development (OECD). "The goal was to try to reduce the distortions in investment decisions that were occurring as a result of competition to reduce tax rates amongst countries," explained Manal Corwin, Director of the Centre for Tax Policy and Administration at the OECD. Not only were firms making investment choices disproportionately based on tax costs, states were also being forced to lower rates to compete for this investment, she told Euronews Business. A NATION BUILT ON FOREIGN INVESTMENT Before recent breakthroughs, Ireland had long shunned efforts to harmonise international tax rules, as it was substantially benefiting from the existing system. During much of the previous century, Ireland had been one of Europe’s poorest countries, although this all changed with the rise of the Celtic Tiger - an economic boom - in the 1990s. Whilst the Tiger was shaped by a number of forces, foreign direct investment is often cited as a driver behind Ireland’s remarkable GDP growth, which jumped by 229% in the two decades to 2007. For many, the corporate levy of 12.5%, phased in gradually after 1997, was partially to thank for this period of prosperity. "It's paid a rich dividend on a number of fronts," explained Kieran Mcquinn, Professor of Economics at Ireland’s Economic and Social Research Institute. "I think governments and political parties of all shades are always a little bit tentative about increasing the corporation tax rate again," he added. "There's a perception that it might send the wrong signal to the international community." Ireland’s former Finance Minister Paschal Donohoe, who stepped down in December 2022, was notoriously hesitant to implement the OECD reforms. ADVERTISEMENT He told national broadcaster RTE in 2021: "What I’m doing is making the case for our 12.5% rate and for the right of smaller- and medium-sized economies to have a low rate, as part of their competitiveness." WILL THE TAX HIKE SCARE INVESTORS? Since investment in Ireland has historically been supported by the country’s generous tax system, some fear the 15% floor could harm the nation’s economy - although many experts would contest this prediction. To a large extent, Ireland is shielded by safety in numbers, as the decision to raise the corporate tax rate is not purely domestic. Added to this, experts highlight that the nation offers other incentives for investors beyond its tax policies. ADVERTISEMENT Since Brexit, Ireland stands out as one of just two EU countries that has English as an official language, and it has already established a community of multinationals on its soil. The Irish Tax Institute recently reiterated the view that Ireland will remain an attractive option for investors, although its President, Tom Reynolds, expressed concerns about bureaucracy surrounding the new rules. "Those of us who work in the tax functions of large multinationals are now getting our heads around how we comply with what is in effect a new and untested taxing system that sits alongside our domestic corporation tax code," Reynolds said. "Suffice to say that we need Revenue to be supportive and pragmatic in the bedding in period ahead." ADVERTISEMENT Rather than condemning the new tax floor, some experts are also more wary about an accompanying OECD initiative proposed, which seeks to reallocate taxes based on where customers and users of a service are located, rather than where a firm is physically based. The policy means that other countries may be able to collect tax, currently going into Ireland’s coffers, that is generated by business activity outside of Ireland. This proposal is known as pillar one, with pillar two referring to the global minimum tax. CRITICISM OF THE OECD REGULATION For other commentators, the main flaw of the OECD’s reforms is that they aren’t sufficiently watertight. ADVERTISEMENT "The problem is that there are a number of loopholes that were introduced gradually to the agreement that are basically drilling holes in the floor," said Quentin Parrinello, Senior Policy Advisor at the EU Tax Observatory. In particular, he pointed to something called 'substance-based carve outs', which can allow companies to dodge the minimum rate of tax. If a company has business activities in a country where the corporate levy is less than 15%, other nations should be able to collect the excess revenue until this threshold is reached. With 'carve outs', the picture changes. ADVERTISEMENT Provided that the firm operating in the low-tax country has certain expenses in this jurisdiction, they can then subtract these costs from the revenues subject to global taxation. According to Parrinello, this scenario undermines the fight against harmful tax competition, a move that harms everyone - including Ireland. "Harmful tax competition is a lose-lose situation," he said. "We’re all losing public resources that are desperately needed to tackle the inequality crisis and to tackle the climate crisis." ADVERTISEMENT WILL THE MINIMUM TAX BE A CASH COW FOR IRELAND? Globally, the OECD estimates that the global minimum tax will generate an additional $155 billion to $192 billion annually in corporation tax revenue. In euros, this amounts to between €142 billion and €176 billion, with significant benefits expected for investment hubs like Ireland. If the Emerald Isle does decide - and manage - to charge an effective 15% rate of tax, the country will see a substantial influx of cash, given the high number of multinationals already on its soil. The Irish Department of Finance projects that its corporate tax revenue will hit €24.5 billion in 2024, an annual increase of around 2.5%. ADVERTISEMENT Recognising the volatility of these revenues, the government announced last year that it would be funnelling the extra cash into sovereign wealth funds, meaning state-owned investments. Many Irish people will no doubt be hoping for immediate spending increases, perhaps to support the country's healthcare system or tackle Ireland's growing housing crisis. For now, the government says that some of this revenue must be stored away for a rainy day, providing a cushion for future shocks. It's important that "permanent fiscal commitments are not made on the basis of transitory revenues", said the Irish Minister for Finance, Michael McGrath, in January, adding that public services would see "sustainable" investment. ADVERTISEMENT Go to accessibility shortcuts Share this articleComments YOU MIGHT ALSO LIKE Now playing Next Business WHERE IS THE BEST COUNTRY IN EUROPE FOR WOMEN TO WORK? Now playing Next Business CHINESE BATTERY MAKER PLANS TO BUILD UK’S BIGGEST GIGAFACTORY Now playing Next World News IRISH GOVERNMENT UNDER FIRE OVER ASYLUM SEEKER CRISIS * Foreign Investment * Tax havens * Ireland ADVERTISEMENT TOP STORIES Now playing Next CHRISTMAS SAVING TIPS: HOW TO CELEBRATE WITHOUT BREAKING THE BANK Now playing Next TESLA RECALLS 700,000 VEHICLES OVER TYRE PRESSURE MONITORING Now playing Next NATURAL GAS PRICES AT HIGHEST FOR TWO YEARS ON COLD WEATHER CONCERNS Now playing Next GLOBAL MARKETS IN SEA OF RED AS THE FED DIMS HOPES OF SANTA RALLY Now playing Next ECB INTEREST RATE CUTS IN 2025: HOW LOW COULD THEY GO? ADVERTISEMENT MOST READ VOLKSWAGEN MAJORITY STAKEHOLDER SUPPORTS GERMAN FACTORY CLOSURES UNION REACHES AGREEMENT WITH VOLKSWAGEN TO AVOID PLANT CLOSURES TRUMP THREATENS TRADE TARIFFS UNLESS EUROPE BUYS MORE US OIL AND GAS STOCKS PLUNGE AS FEDERAL RESERVE'S TILT TRIGGERS ‘BLACK WEDNESDAY’ RISING BUTTER PRICES LEAVE EUROPEAN CONSUMERS WITH A SOUR TASTE ADVERTISEMENT Business Economy CHINA'S SEMICONDUCTOR PRODUCTION CHALLENGES COULD BE BOON FOR EUROPE A Chinese microchip is seen through a microscope set up at the booth for Tsinghua Unigroup project at the China Beijing International High-tech Expo in Beijing on May 17, 2018 - Copyright Ng Han Guan/Copyright 2020 The AP. All rights reserved. Copyright Ng Han Guan/Copyright 2020 The AP. All rights reserved. By Indrabati Lahiri Published on 15/03/2024 - 10:40 GMT+1 •Updated 10:47 Share this article Comments Share this article Facebook Twitter Flipboard Send Reddit Messenger Linkedin VK Ageing technology and COVID-19 belt tightening are some of the challenges faced by China in its race to achieve semiconductor independency. ADVERTISEMENT China is currently the world's top semiconductor consumer, accounting for more than 50% of global consumption, according to the Centre for International Governance Innovation. Along with this, it is also the world's fifth largest semiconductor manufacturer, following Taiwan, South Korea, Japan and the US. China has also highlighted several times in the past that it aims to become an artificial intelligence superpower in the coming few years. Naturally, the US has not taken kindly to these statements, amid increasing geopolitical and trade tensions between the two countries. This has led to the US putting several Chinese companies such as Semiconductor Manufacturing International Co (SMIC), China's largest chip market, on a trade blacklist, citing security concerns. This means that major US chip makers, such as Nvidia and AMD now face restrictions on chip sales and exports to China. The US has justified the move, citing concerns that China may use the advanced chips it gets from Nvidia and similar companies for military purposes, which could be problematic for the US down the line. Related * Russia's economy is going strong: why haven't Western sanctions worked? * France's Decathlon springs into rebrand ahead of Paris Olympics According to the **Centre for Strategic and International Studies: "**These actions demonstrate an unprecedented degree of US government intervention to not only preserve chokepoint control, but also begin a new US policy of actively strangling large segments of the Chinese technology industry - strangling with the intent to kill." China has responded to this with its own graphite export ban on the US. Regarding this, the Chinese Ministry of Commerce said: "The graphite export control policy is a normal adjustment in accordance with the law, and some items are included while some removed from the export control list. "The export control measures do not target any specific country, region or industry. China is always committed to safeguarding the safety and stability of the global industrial and supply chains, and will grant licences to exports that comply with relevant regulations." The country has also been trying to ramp up its domestic production of chips as fast as possible. However, this is not without considerable challenges. WHAT CHALLENGES IS CHINA FACING IN SEMICONDUCTOR PRODUCTION? Much to US dismay, one of the sanctioned companies, Chinese tech giant Huawei, managed to come up with a new smartphone recently, the Mate 60, which uses a 7 nanometer process chip. This type of chip is considered highly advanced, which has raised increasing concerns about how China is still managing to produce sophisticated chips, despite the sanctions. However, one of the biggest challenges that Chinese chipmakers are currently facing is that they are still using old chipmaking technology to produce increasingly complex and new-age chips, as the US has cut off most of China's access to more sophisticated chip making technology. Using older technology invariably raises costs significantly, meaning that Chinese chipmakers such as SMIC are having to charge about 40% to 50% more than other competitors, especially Taiwanese companies such as Taiwan Semiconductor Manufacturing Company. This primary impacts 7 nanometer and 5 nonometer production chips. Related * UK plans to ban foreign state ownership of newspapers * Merchandise: Which films are most in the pink for revenue? The costs are only projected to keep increasing with every new generation of chips. Although this would be significantly helped by an ASML extreme ultraviolet (EUV) lithography system, the US has also pressurised the Netherlands to restrict China’s access to its chip technology as well. The other major concern with older chip technology is that the yield is lower, with the number of usable and sellable chips produced being considerably less than with more advanced technology. Following the pandemic, the Chinese government has also had to put a large chunk of semiconductor funding on hold, as more pressing expenses, such as stimulus measures for various sectors took precedence. ADVERTISEMENT Political and lack of oversight issues, as well as widespread corruption eroding funding for chip research and development programmes have also considerably slowed down the domestic manufacturing process. Additionally, the country is facing hurdles with intellectual property, with several chip producing technologies already patented and closely protected by international companies. As foreign affairs and national security website War On The Rocks said: "The Chinese government has allocated the semiconductor industry not only one trillion yuan (€0.13 trillion) through state capital such as the Integrated Circuit Investment Fund (the Big Fund) but also high political priority, directing both political efforts and the market to infuse the chip industry with resources. "These efforts, however, did not seem to move China up in the semiconductor value chain. Even after billions were thrown at the problem, indigenous production is far from being a reality. Despite some progress in independent chip design for a variety of products ranging from cloud computing to smartphones, the country still could not break free from the foreign-dominated supply and manufacturing chain." ADVERTISEMENT HOW COULD CHINA'S CHIP PRODUCTION WOES BENEFIT EUROPE? Europe has also been an active participant in the semiconductor independence and artificial intelligence dominance race. In 2020, the European Union's share of the worldwide microchips market was about 10%. The European Chips Act, implemented in 2023, is expected to bring a significant boost to the EU's domestic chip production, taking its global share to about 20% by 2030. As the European Commission said: "The European Chips Act will bolster Europe's competitiveness and resilience in semiconductor technologies and applications, and help achieve both the digital and green transition. It will do this by strengthening Europe's technological leadership in the field." Now that China is likely to be considerably delayed in upping its domestic production due to these US sanctions, this gives Europe a rare golden opportunity to ramp up its own production and plug in the gap in the market. As such, it can potentially produce, market and sell its own chips and secure steady clients long before China catches up. ADVERTISEMENT Related * Nord Stream sues London insurers over pipeline blasts * How high can Novo Nordisk shares go? With China already being a rising global superpower with increasing influence in South East Asia and a dominant producer of both rare earth minerals and electric vehicles (EVs), the US and the EU have been feeling more threatened about an economic and trade disbalance in the last few years. This is because of rising concerns that China may use its dominance over things such as rare earth minerals as a retaliatory or bargaining tool with other nations, effectively cutting them off, if they decide to do so. An example of this was when China stopped exports of rare earth minerals to Japan in a dispute over fishing back in 2010. Heating EU-China tensions over a number of issues, such as EU investigations over Chinese EV imports to the continent, as well as concerns about data privacy and transparency, have led to increased concerns that China may retaliate against the EU in the near future as well. If so, it would be far better for the EU to be self-reliant for semiconductors, at least, because of their widespread need and application. ADVERTISEMENT Go to accessibility shortcuts Share this article Comments YOU MIGHT ALSO LIKE EU LAUNCHES PROBE INTO CHINESE SOLAR PANELS OVER POTENTIALLY 'DISTORTIVE' SUBSIDIES SPANISH STOCKS HIT SIX-YEAR HIGH: WILL SUMMER KEEP MOMENTUM UP? FEDERAL RESERVE SET TO CUT KEY RATE BUT CONSUMERS MIGHT NOT FEEL MUCH BENEFIT * Taiwan * US-China tensions * Electronic chip * Semiconductor ADVERTISEMENT TOP STORIES Now playing Next CHRISTMAS SAVING TIPS: HOW TO CELEBRATE WITHOUT BREAKING THE BANK Now playing Next TESLA RECALLS 700,000 VEHICLES OVER TYRE PRESSURE MONITORING Now playing Next GLOBAL MARKETS IN SEA OF RED AS THE FED DIMS HOPES OF SANTA RALLY Now playing Next VOLKSWAGEN TALKS OVER FUTURE OF PLANTS AND JOBS AT A 'STALEMATE' Now playing Next VOLKSWAGEN MAJORITY STAKEHOLDER SUPPORTS GERMAN FACTORY CLOSURES ADVERTISEMENT MOST READ UNION REACHES AGREEMENT WITH VOLKSWAGEN TO AVOID PLANT CLOSURES TRUMP THREATENS TRADE TARIFFS UNLESS EUROPE BUYS MORE US OIL AND GAS ECB INTEREST RATE CUTS IN 2025: HOW LOW COULD THEY GO? NATURAL GAS PRICES AT HIGHEST FOR TWO YEARS ON COLD WEATHER CONCERNS RISING BUTTER PRICES LEAVE EUROPEAN CONSUMERS WITH A SOUR TASTE ADVERTISEMENT France's inflation figures dip but energy prices keep spark alive China's semiconductor production challenges could be boon for Europe Loader Search BROWSE TODAY'S TAGS ChristmasGermanyMagdeburgAttackChristmas MarketMagdeburg christmas market attackRussiaWar in UkraineAfD Alternative für Deutschlandwork conditionsclimate changeFood Themes * Europe * World * Business * EU Policy * Green * Next * Health * Travel * Culture * Videos * Programmes Services * Live * Bulletin * Weather * Latest * Follow us * Apps * Messaging apps * Widgets & Services * Africanews More * About Euronews * Commercial Services * Terms and Conditions * Cookie Policy * Privacy Policy * Contact * Press office * Work at Euronews * Modify my cookies choices Follow us * * * * * * * * Newsletters Copyright © euronews 2024