DESPITE the positive economic conditions and having €1.5 billion to spend, Finance Minister Paschal Donohoe delivered an underwhelming budget that did little to address the challenges that lie ahead.
That was the general tone of the Shannon Chamber post-Budget briefing last week when the expert panel included Professor Eoin Reeves, Head of the Department of Economics at the University of Limerick and Grant Thornton tax director Theresa O’Gorman.
Prof. Reeves voiced his concerns about the risks the economy is facing and how economic policy should be framed to face the challenges that lie ahead.
“Ireland’s recovery is real. The public deficit is under control; the labour market has rebounded but this is against a background where public debt is high and private sector debt still ranks high in a European context.
“While interest rates may be favourable now, this won’t last forever and this presents a real risk,” he warned.
Turning to external risks and challenges, he mentioned Brexit and the negative impact a one per cent drop in the UK’s GDP would have on Ireland’s GDP; geo political pressures linked to rising oil prices; the potential pressures that Ireland may face to change its corporation tax rate and the need to spend on infrastructure, housing and public services.
“Ireland is second lowest in terms of public spending with a significant spending gap of €13 billion and, while some of this will be addressed by the NDP, the gap will remain.
“Ireland also ranks low on spending in education and on research and development, which could, over time, undermine the key advantages we have as an economy. We need to have a conversation about revenue sufficiency and how we can raise tax revenue rather than relying on transitory sources such as corporation tax or, as was the case during the property boom, tax on property transactions.
Grant Thornton’s tax director Theresa O’Gorman said that while the budget included a number of welcome initiatives, its failure to make significant inroads in addressing the tax disparity between private landlords and the operators of Airbnb facilities, was disappointing.
“Allowing the gap to continue does nothing to increase the level of private residential accommodation available,” she explained.
Shannon Chamber director Ian Barrett, who was a contributor on behalf of the Mid-West Chambers to Chambers Ireland pre-Budget submission said: “This is not a budget for workers, holidaymakers or hoteliers. The spending power of the Irish worker is being severely constrained, and this has negative ongoing repercussions for the retail sector.
“The modest income tax giveaways, lower than the rate of inflation, reduce workers’ spending power and are fully taken away through other tax increases including increased excise duty, increased cost of diesel vehicles and higher taxes on holidaying in Ireland, eating out and on hairdressing. The net effect is that the Government is actually increasing taxes by more than €300 million.
Calling on business representative organisations to represent their workers and push back on an extremely progressive and high tax system, where private sector workers have little voice, Mr Barrett stated: “Workers’ lack of spending power will have a detrimental effect on Ireland’s competitiveness as employers will come under pressure for increased wages”.
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by Tom McCullough
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