The Irish austerity package (confusingly dubbed a ‘recovery plan‘ by the BBC) can only be described as eye watering. But the focus on the poor while omitting any contribution from corporation tax indicates the ideological nature of this latest set of measures.
The Irish government had already announced planned savings of €14.6bn in five separate packages over the last two and a half years but added to this today to the tune of €15bn – around 4% of GDP.
The hardest hit will primarily be those on low and median incomes:
– VAT – a regressive form of taxation – rises by 2%
– the minimum wage is cut by over 10% to €7.65 per hour
– the level at which income tax kicks in will fall from €18,300 to €15,300 a year – dragging 10% of low earners into the tax system
– close to 25,000 public sector jobs will be cut
– there will be €10bn in total of spending cuts including 30% from growth-encouraging investment
It seems hard to comprehend how the Irish government thinks that these measures are consistent with their prediction that GDP will rise by an average of 2.75% from 2011 to 2014. As BBC Newsnight’s Paul Mason points out:
“the markets clearly believe there is little chance of the growth story coming true. Since 2pm the cost of borrowing for Ireland has crept upwards.”
Putting all this aside, Ireland’s 12.5% corporation tax rate will stay exactly where it is in the blind hope that their recovery will be export-led. Don’t forget this is the tax rate – praised as a “shining example” by George Osborne – which helped lure businesses like Shire Pharmaceutical among others across the Irish Sea. Despite being handed an €85bn loan, creditor countries have got no concessions at all on corporation tax. The race to the bottom – which Britain has joined by cutting corporation tax from 28% to 25% in the coming years – will only continue.
Perhaps the only positive from today’s package is the introduction of a “site value tax” on land. Economist Philippe Legrain tweets today that it’s, “a reform the UK and others should emulate”.
33 Responses to “Ireland’s austerity: poor pay to keep corporation tax low”
Chris
@janie_s
“Ireland is just an extreme example of the UK.”
No it isn’t.
“Govt overspending”
Ireland were running surpluses for past 5 years! And their national debt was lower even than ours before the crisis.
“They had to cut spending because no-one would lend them anymore.”
If they’d put their corporation tax up they wouldn’t have had to cut so much. The Irish people suffer while the corporate fatcats pick up their pay, pensions and dividends.
Mike Guillaume
As a progressive liberal I am not shocked at having lower corporation tax rates.
The main problems of Ireland do not originate in that but in the excesses of financial and purely speculative capitalism mixed with careless government laissez-faire regarding (public and private) debt.
The poor will pay for irresponsible financiers and politicians, as well as, lest we forget, for a currencyy that was imposed by the eurocracy.
These home truths may sound harsh to some ears, especially on the left, but they have to be acknowledged.
Anon E Mouse
Chris – It’s those “corporate fatcats” as you call them who pay taxes into the economy and provide employment in public service by doing so.
Remember it was the useless Gordon Brown, along with Little Ed Miliband at the Treasury, who gave Fred Goodwin a knighthood to go along with his £703K pension. Labour wanted to take 1% extra in a jobs tax on the poor to help pay towards the Lord’s allowances.
People who become rich from real estate dealing and tax avoidance, (like Little Ed, the union stooge – property millionaire and darling of posh boy eco toffs like Joss Garman and that bunch of middle class wusses) contribute nothing to our economy. Nothing.
The only government to double Inheritance Tax in this country was the Labour Party – the party of big business that hates the poor.
Your grasp of economics shows you really don’t understand how things work and until you do I think you really ought to stop making your pointless posts.