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Were the accountants and auditors naïve when they announced last June they would oppose all government plans to raise the Corporation Tax by 1 percentage point? Should we all have swallowed our pride in order to let the Finance Minister introduce the temporary measure for two years, simply to save the economy?
Members of the ICPAC finally got they way and persuaded parliament to throw out the short-term tax hike, for which they were accused of looking after their own capitalist interests and not the sacrifices that one group of professionals was asked to make in order to benefit society as a whole.
In fact, the nearly 70 mln euros the state coffers would benefit from this action is just a drop in the ocean compared to the huge public sector payroll that this or any other administration refuses to cut back, especially with the parliamentary elections coming up next May. With nearly 80,000 people employed in the wider public sector (of whom only 18,000 have jobs in core government offices), who would risk messing with the might of the powerful civil servants unions and their satellites in the semi-government organisations, teachers, etc?
Instead, the Ministry of Finance has fro some time now resorted to cutbacks in the form cutting corners from spending, while keeping the taxpayer-funded public payroll intact. We have not seen a cent reduced from any civil servant’s salary, apart from the 50-or-so Cabinet members and department heads. On the contrary, wages continue to rise, thanks to the dreaded cost-of-living-allowance (COLA) that even the IMF wants us to scrap, while more people continue to be hired, allegedly to replace vacant positions.
As there is no other way to cut back on public spending, the only other alternative is to increase state revenues. What better way than to temporarily increase the VAT rate from 15% to 16% as had been suggested nearly six months earlier, which, had it been introduced as a 24-month measure, would have found us a quarter of the way.
It is unfortunate that the accountants and auditors made all the fuss about the 1% Corporate Tax and forgot all about the rest as soon as they got what they wanted.
Ironically, the biggest defenders of Ireland’s right to maintain its competitive 12.5% corporate tax rate have been Britain and France, who have rightly argued that if Dublin loses the competitive edge, then it’s economy will plunge into much dire straits than today.
Perhaps we should celebrate the fact that the Finance Minister’s demand was rejected, but we should be wary of other troubles ahead if we do not proceed with other measures immediately.
