2023 AQA A-level ECONOMICS 7136/2 Paper 2 National and International Economy Question Paper &
Mark scheme (Merged) June 2023 [VERIFIED]
A-level
ECONOMICS
Paper 2 National and International Economy
Monday 22 May 2023 Afternoon Time allowed: 2 hours
Materials
For this paper you must have:
• an AQA 12-page answer book
• a calculator.
Instructions
• Use black ink or black ball-point pen. Pencil should only be used for drawing.
• Write the information required on the front cover of your answer book.
The Paper Reference is 7136/2.
• In Section A, answer EITHER Context 1 OR Context 2.
• In Section B, answer ONE essay.
Information
• The marks for questions are shown in brackets.
• The maximum mark for this paper is 80.
• There are 40 marks for Section A and 40 marks for Section B.
Advice
• You are advised to spend 1 hour on Section A and 1 hour on Section B.
IB/G/Jun23/E6 7136/2
, 2
Section A
Answer EITHER Context 1 OR Context 2.
EITHER
Context 1 Total for this context: 40 marks Corporation tax in Ireland
Study Extracts A, B and C and then answer all parts of Context 1 which follow.
Extract A
Figure 1: Corporation tax rates (%) in selected Figure 2: Macroeconomic performance
European nations, 2021 indicators for selected
European nations, 2021
France Ireland Spain
GDP at current
prices ($bn) 2935 499 1202
Exports ($bn) 775 641 462
Inflation (%) 1.6 2.4 3.1
Unemployment
(thousands) 3074 127 3105
Labour force
(millions) 31.0 2.5 23.3
Note: Main tax rates only.
Some figures rounded. Source: Official statistics, 2022
Extract B: Irish corporation tax
Ireland has dropped its low-tax policy of the past 18 years, which had helped to persuade some
of the world’s biggest companies, including Google and Facebook, to site their European
headquarters in Ireland. Countries who are members of the Organisation for Economic Co-
operation and Development (OECD), have agreed to a minimum corporation tax rate of 15%.
Initially, Ireland was one of nine countries that refused to join the scheme but they have now all 5
agreed to do so.
The deal brings an end to the country’s 12.5% corporation tax rate that has applied since
January 2003, which has been criticised in other EU countries and the UK, where higher
corporation tax rates have applied. The new tax, which will be limited to firms with annual global
revenues of over €750m, will come into force in 2023. According to some estimates, it will cost 10 the
Irish government between € 800m and € 2bn a year in lost tax revenue. Multinational corporations
(MNCs) located in Ireland and elsewhere, employing up to 500 000 staff, could be affected.
Over the years, as a consequence of its low corporate tax policy, Ireland has attracted an
estimated 1000 MNCs in the technology, finance and pharmaceutical sectors, including Pfizer, 15
Intel, Yahoo, LinkedIn, TikTok, Apple, IBM and Twitter. Such is the importance of MNCs to the
Irish economy, that figures released in May showed that just 100 companies accounted for
almost 80% of government tax revenue. The figures exclude those sectors closed due to the
lockdown, including hospitality and travel, but showed Ireland’s reliance on MNCs for
employment and tax revenue. In 2020, about 32% of all jobs in Ireland were in MNCs and those 20
employees contributed 49% of all taxes on income.
Source: News reports, 2021
IB/G/Jun23/7136/2
, 3
Extract C: Extra tax revenue?
According to figures published by the EU Tax Observatory, an independent research group,
Ireland could collect an extra €12.4bn in corporation tax under the 15% global minimum
corporation tax rate. The group stated that Ireland should not be that concerned about MNCs
leaving the country. The biggest blow to Ireland’s low-tax regime came in 2015 when, under
pressure from the EU, tax avoidance schemes known as the “double Irish” were made illegal. 5
Under this scheme multinationals paid as little as 1% tax on their profits, a fraction of the 12.5%
headline corporation tax rate.
The argument that the Irish Government would raise more tax revenue is simple: if all OECD
members have a common minimum corporation tax rate, then global MNCs would not move to
where taxation is lowest, and would just pay more tax in the countries in which they are 10
located. The report finds developing and low-income countries will benefit less than
more-economically-developed countries as most MNCs operate in high-income countries.
High economic growth rates allowed Ireland to run a budget surplus in 2018 and 2019.
However, Ireland is now running a large budget deficit, made worse by the pandemic, and any
additional government revenue would be welcomed. Ireland also has an ageing population 15
and could use the money to pay for pensions, social care and improved welfare.
Source: News reports, 2021
0 1 Using the data in Extract A (Figure 1), calculate the difference between Ireland’s corporation
tax rate and the mean corporation tax rate of the other five European nations.
Give your answer to one decimal place.
[2 marks]
0 2 Explain how the data in Extract A (Figure 2), show that Ireland’s economy
performed better than the economies of France and Spain in 2021.
[4 marks]
0 3 Extract C (line 13) states: ‘High economic growth rates allowed Ireland to run a budget
surplus in 2018 and 2019.’
With the help of a diagram, explain how high economic growth could help to create a
budget surplus.
[9 marks]
0 4 Extract B (lines 1–3) states: ‘Ireland has dropped its low-tax policy of the past 18 years,
which had helped to persuade some of the world’s biggest companies, including Google
and Facebook, to site their European headquarters in Ireland.’
Using the data in the extracts and your knowledge of economics, assess the view that
a rise in Ireland’s corporation tax rate is likely to have a damaging effect on its
macroeconomic performance.
[25 marks]
IB/G/Jun23/7136/2 Turn over ►
