Minister for Finance Michael McGrath has warned that Sinn Féin’s tax policies would damage the economy by making the State “less attractive for business leaders”.
Speaking on the sidelines of the World Economic Forum (WEF) in Davos, Mr McGrath said Sinn Féin proposals to impose a 3 per cent “solidarity tax” on incomes over €140,000 could jeopardise foreign direct investment (FDI), resulting in fewer jobs.
“If you change your overall offering, if you become less attractive for business leaders, for key decision-makers, for those who are making the investment decisions, that will trickle down and have an impact on the wider economy,” he said.
“So people earning much more modest levels of income will also be impacted because their job could be undermined,” he said.
Mr McGrath, who will contribute to two panel discussions at this year’s forum, is slated to meet several top business leaders on the fringes of the event to push the message that Ireland remains a leading location for investment. He attended an IDA-hosted dinner on Wednesday night.
“Being pro-business and being attractive to large multinationals in terms of foreign direct investment is not just about stability in your corporate tax policy, it also involves having an attractive income tax policy,” he said.
Sinn Féin’s “proposition that you can increase the burden of income tax on higher earners without it impacting everybody else is a false premise”, Mr McGrath said.
The Minister has just returned from a five-day trade mission to Silicon Valley in California, where he met with the leaders of several big tech and life sciences companies, which have large operations in Ireland.
The prospect of Sinn Féin being in government was not discussed, Mr McGrath said, but “it is certainly the case that those companies place a premium on policy certainty and a stable political environment”.
“I am confident, based on the discussions I had with top executives across a significant number of companies, that Ireland is well placed to benefit from further inward investment this year and beyond, notwithstanding the international challenges,” he said.
[ Could Davos actually be useful this year?Opens in new window ]
On whether there would be an election this year, Mr McGrath said he believed the Government should serve a full term – until March 2025 – before calling the vote.
“The world is very uncertain, there is an inherent instability in global politics, and if we can show the Irish public that we, as a Government, have been able to work through our difficulties... and that at the end of our term if we can demonstrate progress in housing while having an economy in good health, more or less full employment, running budget surpluses... then I think we’ll have a good story to tell,” he said.
On the latest pickup in inflation [it rose to 4.6 per cent in December, up from 3.9 per cent in the previous month], Mr McGrath said he did not expect inflation “to fall in a straight line” and that he was not “overly perturbed” by the latest figures.
“The overall trajectory is that inflation is falling,” he said, noting energy companies were cutting their prices. Despite heightened geopolitical risks relating to conflicts in Ukraine and the Middle East, Mr McGrath said the Government’s central projection was that the economy would grow modestly this year.
However, he warned that Ireland, as a small, export-led economy, was dependent on external factors and “there has been a weakening of the external environment”.
“The great intangible in terms of economic performance is confidence, and if confidence is undermined then investment decisions get delayed and it results in less economic activity,” he said.
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