July 20th Afternoon: The Recession Diaries
What better way to spend a lazy afternoon than reading National Competitiveness Council reports, in particular its submission to the Commission on Taxation? The NCC is full of information but they do have a particular agenda and damn the facts. For instance, Ireland’s low tax rate has driven
‘ . . . . entrepreneurship, enterprise development and participation in the labour force.’
What simplistic nonsense. What about all those countries (that is, all other EU countries in our peer group - the ten wealthiest countries) that have much higher tax levels - on personal income and businesses? According to the Global Competitiveness Index (which is based on comments from CEOs so we know this isn’t some statist policy body), all those other countries rank higher than us. Indeed, those over-spent, over-taxed Scandinavians are all in the top five most competitive economies. If there is a relationship between tax and ‘entrepreneurship’ then we should be driving up taxes, not cutting them as the NCC proposes.
Or what about our own past. In the mid-1990s our GNP grew by 41 per cent, exports increased by 62 per cent, while job creation grew by nearly 50,000 per year. Was this quantum jump in our economic fortunes due to low taxes? In the mid-1990s the standard tax rate was 26 per cent while the top rate was 48 per cent (today they are 20 and 41 respectively); capital gains and inheritances were taxed at 40 per cent (today they are 20 per cent). And in 1996 the Government announced that taxes on multi-nationals would actually increase - from 10 per cent to 12.5 per cent. Oh, those were the salad days.
The fact is that the massive tax cuts came on the back of economic growth, they did not cause it. The only thing they managed to cause was a property bubble and an export of over €50 billion to invest in overseas property (how productive).
Oddly enough, the day the NCC submission was reported in the media, the Irish Venture Capital Association had some thoughts (yes, I know - vulture capitalists; but let’s hear them out). Their complaint wasn’t taxes. 55 per cent of members stated that the most serious ‘internal issue’ facing firms was a lack of experienced international sales executives, while two-fifths pointed out the shortage of qualified senior managers. In other words - skills and capability, something Irish firms are sorely lacking.
The Enterprise Strategy Group had a number of proposals to transform Irish enterprise. One of them was to place experienced marketing and sale executives in Irish firms - to upgrade their skills. Good proposal. Irish firms need this.
But who would pay for this? The Irish taxpayer. Guess we’ll have to raise taxes to pay for this and all the other measures to bring Irish enterprise up to speed. Because we sure as hell know that it has nothing to do with cutting taxes.
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