11 February 2010 Edition
Finance Bill enshrines economic apartheid in Ireland
‘Betrayal of Limerick’ – Quinlivan on abandoned regeneration plan
BY ROBBIE SMYTH
Welcome to Ireland if you are a tax exile, or seeking a tax haven for your multinational firm. Maybe you want to protect the maximum profits from your patents or R&D activity. Maybe you are a high paid executive looking for a few years of tax free income.
If you are an Irish firm or an Irish entrepreneur and you want to do some R&D or set up a business, Fianna Fáil and the Green Party can’t do that much for you right now. If you are a disadvantaged community in Limerick or Dublin, forget any help this year.
A range of economic data has shown yet again the grinding challenge of a deepening economic crisis, while the release of the 2010 Finance Bill last Thursday showed a government largely bereft of economic ideas other than more taxes and levies on households, with low- and middle-income Ireland once again carrying the extra burden. So get ready for higher road tolls, service charges and energy bills.
Fianna Fáil’s vicious cycle
The economy is in a critical vicious cycle and last week’s financial news shows not just a government complacency about the impact of the recession but a deluded unwillingness to take even the smallest measures to kick start the economy.
Two sets of economic data, about retail sales and exchequer returns, show an economy not just still in decline but now reeling from the impact of last December’s budget, which took €4 billion of spending out of the economy, creating a negative economic spiral the full impact of which has yet to be understood.
26-County tax returns for January 2010 showed a 17.7% fall on January 2009, and are 35% less than was recorded in January 2008. The difference between tax and spending in January was €780 million. Tax receipts for the month reached just €3 billion, down from €3.7 billion on the same month last year.
6,699 workers were made redundant in January, while the Live Register unemployment figure rose by 13,000, showing that the economy is still shrinking. This week Central Statistics Office figures showed that retail sales in 2009 fell 14% in 2009, the largest annual drop since 1962.
Arthur Morgan, Sinn Féin’s Enterprise, Trade and Employment spokesperson, focusing on the ongoing negative spiral into which the 26-County economy seems locked, said “The fact that retail sales fell” shows “multiple problems” with the Fianna Fáil/Green Party coalition’s economic policies.
The Louth TD said that the government had failed to “create employment that will put money in people’s pockets, stimulate consumer spending and thus aid economic growth”, and that “the measures taken in Budget 2010 to cut the social welfare, to cut the pay of low – and middle-income workers already crippled by levies shows a government indifferent to economic recovery.”
So we have a spiral of increased redundancy and unemployment, which means less consumer spending, less tax revenue, but an increased social welfare budget, more stress on government borrowing – and the cycle repeats itself.
Innovative Irish businesses
It is clear that there is a need for government intervention. Figures from Enterprise Ireland released last week show that nearly 2,600 firms have looked for support from the second phase of the coalition’s Employment Subsidy Scheme, where €65 million is available to help at so-called vulnerable businesses. 457 businesses received aid under the first phase of the scheme.
The resilience and flexibility of firms is shown in a KPMG survey published last week. It found that nearly two thirds of Irish businesses want to introduce new products or services as a method of coping with the ongoing recession. The EU average was 50%. Irish firms clearly want to up their game but there was nothing in last week’s finance bill to encourage this innovation.
There are new proposals to facilitate more R&D by multinational firms as well as more attractive features to encourage international firms to site their patents in Ireland, but there is no such flexibility when it comes to Irish firms.
O’Dea abandons Limerick
Another example of this double standard, if not a form of economic apartheid, was the disclosure this week by Defense minister and Fianna Fáil Limerick TD Willie O’Dea that the government will not deliver on its promised €1.7 billion regeneration of Limerick.
Billions of euro could be found for Irish banks but nothing for the people of Limerick, who will now be added to the six stalled regeneration projects also abandoned in Limerick.
Sinn Féin Limerick councillor Maurice Quinlivan, reacting to the announcement, said he was” not surprised” but was “angry at the blatant betrayal of thousands of Limerick citizens”.
Quinlivan said that “regeneration alone could have delivered a stimulus to the economy of Limerick and put many people to work”.
The government had reneged on its commitment and “a project that has the potential to transform large parts of our city has now been reduced to a scheme totally reliant on the private sector”.
Quinlivan said that the minister was cynically using people.
“Fianna Fáil and the Greens could find €11 billion to invest in the banks over the last 12 months, but they now tell us there is no money for the urgent needs of some of the most deprived communities in our city.”
Finance Bill punishes low income families – Morgan
Responding to the details of the Finance Bill, Sinn Féin’s Arthur Morgan said:
“The country’s finances are in an unprecedented crisis and we needed a budget last December that recognised that and started to raise the revenue to address it. Instead we got a lightweight tax budget and this is now a lightweight finance bill. The government’s decision to cut us out of recession rather than raise revenue and stimulate the economy is not working and will not work. This should have been an opportunity to bring fairness to the taxation system and address some of the anomalies that cost the state billions each year.
“For example, this Bill abolishes tax reliefs on service charges but leaves alone mortgage interest relief for landlords. It introduces a tax exile levy, but does not deal with tax exile status. There is no redrawing of the tax system to make it fairer for low-income earners and to make sure higher earners pay their proper share. Where is the wealth tax, or the abolition of the PRSI ceiling?
“This bill does not go after the heavy hitters sufficiently and in a way that reflects the seriousness of the situation we face. It is merely ticking the boxes – not actually addressing the public finance shortfall.
“The decision to abolish tax reliefs for service charges will punish low-income families disproportionately. It is clear that the government is determined to continue targeting this group to pay for its economic mess.”