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How our low business tax boosts firm profits

IRELAND'S low corporate tax rate boosts output and employment but the country is likely to face higher financing costs for businesses, new research has found.

The research paper published by the Economic and Social Research Institute said that companies had higher profits because of the changes in the tax regime.

"The reduction in the corporation tax rate from 40pc in 1993 to 12.5pc in 2003 had a significant long-run impact on the business and financial services sector," according to the research.

But in a separate ESRI report, they pointed out that economies which depend on bank lending more than equity financing will be more seriously affected, the report said.

Five countries -- Ireland, Greece, Finland, Belgium and Portugal -- are expected to suffer a decline in output of almost 2pc as a result of retrenchment in the European banking sector.