The Government should accept a 15 per cent minimum global corporation tax rate because the fight to keep the 12.5 per cent rate "is just not worth it", former chairman of the Irish Fiscal Advisory Council Prof John McHale has said.
The reputational damage being caused to Ireland by opposing the rate of 15 per cent agreed by all but nine states of the Organisation for Economic Co-Operation and Development is too high, he said.
“Substantial reputational damage is being done with the international story noting Ireland as a holdout. I think it’s sensible to recognise the reality now and embrace the move, probably to a 15 per cent rate, more openly.”
The Government had been under “substantial pressure” about the corporate tax rate and had been waiting to see what happened in the US Congress, said Prof McHale.
Meanwhile, Sinn Féin TD Pearse Doherty warned that the Government’s summer economic statement “fails to meet the needs of a recovery economy” and “will not solve the housing crisis”.
No breakdown has been given on how the extra €800 million capital budget would be spent, and greater clarity is needed on how 18,000 homes per year can be delivered.
“The Government have clearly failed to understand the scale of the crisis in housing,” said Mr Doherty. “They just don’t get it; this is insufficient and underwhelming.
Tánaiste Leo Varadkar’s plans for €500 million worth of tax cuts “is the wrong decision at the wrong time” given the scale of investment required in public service, said the party’s finance spokesperson.
The scale of extra public spending set out in the statement will not meet the demands of a recovering economy in areas such as health, education and childcare. “Now is the time to invest,” Mr Doherty said.
Austerity relics
Social Democrats finance spokeswoman Róisín Shortall said the latest statement had been informed by the belief that the EU fiscal rules, which were suspended during the pandemic, would apply from 2023.
“These rules are an anachronistic relic from an austerity-era and will constrain the ability of EU member states, including Ireland, to respond adequately to the once-in-a-century economic shock caused by the pandemic,” Ms Shortall said. Rather than “being resigned to defeat”, the Minister for Finance should use his position as Eurogroup president to advocate for the reform of the fiscal rules, she said.
“ Instead of a myopic focus on deficit reduction, the Government must ensure that our significant and long-standing deficits in infrastructure – particularly housing – and public services are closed.”
Minister for Public Expenditure Michael McGrath defended the summer statement, saying it was “the right approach”.
Speaking on Newstalk Breakfast, Mr McGrath said the statement was balanced and would support economic recovery.
“We believe in overall terms what we are setting out here is the right approach,” he said. “It is balanced, it will support economic recovery, it is prioritising investment in our economy and it does bring about sustainability of the public finances by focusing on the deficit reduction.”
