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Collective Action Problem With Taxing Large Mncs

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The Collective Action Problem with Taxing Large MNCs. A collective action problem is defined as a situation in which there is conflict between the individual interest and the group interest. Each member in the group faces a choice to be selfish or to cooperate. It is always in the individual’s interest to act selfishly, however it is in the group’s interest to have everyone cooperate. If all individuals act selfishly, then they all get worse outcomes than if they all cooperate. Collective action problems are an issue in today’s society because everyone should always be accountable for their own actions, or lack thereof. However, in today’s world, many individuals and states continue to act selfishly while others act in order to help society as a whole. A good example of a collective action problem is corporation tax on large MNCs in Ireland. The investment of multinational companies has been a big factor in Ireland’s economic recovery and development in recent years. As many of us know MNCs setting up in Ireland pay a relatively low rate (12.5pc) of corporation tax. However loopholes are also evident within the system. Many headlines in the international financial press say that large MNCs are paying as low as 1.5pc corporation tax as a result of settling in Ireland. This has raised many concerns within other …show more content…

Why should Ireland be able to establish such low corporation tax and allow loopholes so that MNCs can avoid paying even this low rate of 12.5pc, while other countries have a more fair corporation tax which allows other countries to compete with them to attract MNCs? It is clear that Ireland’s corporation tax can be viewed as a collective action problem. While other countries choose to cooperate with each other by setting a realistic rate for corporation tax, Ireland continues to take the selfish route by keeping their tax

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