11 Sep 2015

Budget 2016 – A ticket to re-election?

Budget 2016 – A ticket to re-election?

John McCarrick considers the legacy of Ireland’s bailout programme and the lasting that this has created for our economy.  How will the government combat this in the upcoming election?

Ireland has successfully exited the EU / IMF bailout programme.  In the past two years, we have emerged as one of the fastest growing economies in the EU, outpacing industrial giants such as Germany, France and Spain in great strides.  As Europe’s golden girl, Ireland has become a bright star against an increasingly dark backdrop. 

Since taking office in 2011, Fine Gael has orchestrated a fine show of “keeping up appearances” to our European neighbours.  A puppet government against Merkel, Lagarde and the European Central Bank, Fine Gael has had little independent choice, at least in the way of finance.  The Irish public continue to suffer in silence while politicians publicise our new economic prosperity overseas.  This effective PR strategy reaps rewards, with huge amounts of Direct Foreign Investment pouring into the country.

The investment, however, is shallow. When companies like Google and Facebook locate here, corporate law firms draft evasive tax structures for them, leaving the public coffers completely lacking in terms of tax. This strategy creates high-quality jobs – easing unemployment as well as the citizen’s reliance on social welfare – and huge profit for companies anchored here.  The Irish people, who counter-act these multinational corporations’ tax avoidance by paying some of Europe’s highest rates, never see much of this income.   In 2013, Forbes named Ireland as the world’s best country in which to do business, yet this creates a false image.  With a hungry, well-educated workforce, and negligible corporate tax rates, it is a win-win situation for international corporations.  Nobody loses, except Irish indigenous business.

The rate of Irish personal income tax exceeds those of all the Scandinavian nations, known for their notoriously high levels of taxation and impeccable public services.  Abroad, Ireland has a reputation for neither high taxes nor a dedicated public service.  For earners in the lower income brackets, a rate of 20% is most important: however, the majority of Ireland’s population earns much more.  The average couple who have a mortgage and 2-3 children incur considerable costs in their daily life regardless of income tax: childcare, water charges, property taxes, health insurance and the cost of attending primary / secondary education is usually all too much to bear.  These costs are by no means luxuries, but necessities for growing families.

 

In Sweden, private health insurance is not needed, given the efficiency of their public health system. Childcare is provided for by the state. Generous state subsidies exist in primary, secondary and third-level education. In Ireland, the PAYE Employee, self-employed and small business owners are the most significantly punished by this lack of public infrastructure, leaving them out of pocket and paying for all these services.

 

Once Ireland has repaid the whole cost of its debts to the rest of Europe, perhaps we will see the fruits of such an inhibiting system of taxation, a dream that someday reach the lofty heights of Scandinavian public service.   It is reported that there will be a tax surplus of up to €3 Billion euros this year.  There is little doubt that these funds will be used to buy the electorate in the budget and manipulate him or her voting again for the current government.  Given the other two contenders – Fianna Fáil and Sinn Fein – there is little in terms of rational choice.

 

 John McCarrick is the President Elect of the Institute of Incorporated Public Accountants Ireland, and the Principal Partner of John McCarrick and Associates.  He has a wide experience, serving a dynamic range of businesses in the SME sector and having worked for the World Bank in the Far East.  He also is a member of the Irish Masters Athletic team and director of the Kenyan Child Foundation.

 

 

‹ BACK TO BLOG