Tuesday 23 October 2018

Brexit 'is a reason to cut taxes' - Donohoe

Minister says economic buffering has started but growing gaps in infrastructure must be key focus

Finance Minister Paschal Donohoe speaks at the INM Budget Breakfast briefing with KPMG at the Westbury Hotel. Photo: Mark Condren
Finance Minister Paschal Donohoe speaks at the INM Budget Breakfast briefing with KPMG at the Westbury Hotel. Photo: Mark Condren
Aoibhin Lennon of Spark Foundry and Karen Preston, group advertising director at INM Photo: Mark Condren
Budget Breakfast: Below: Finance Minister Paschal Donohoe with, from left, Reece Smyth, Charge d’affaires at the US Embassy in Ireland; Conor O’Brien, head of tax and legal services at KPMG; Robin Barnett, British Ambassador to Ireland; INM CEO Michael Doorly; Stephane Crouzat, French Ambassador to Ireland; Michael D’Arcy, Minister of State; and INM Group Business Editor Dearbhail McDonald. Photo: Mark Condren
Brid O’Connell, CEO of Guaranteed Irish, Brian Brennan, Partner at KPMG and Joanne Geary of Sherry Fitzgerald. Photo: Mark Condren
Finance Minister Paschal Donohoe with INM CEO Michael Doorly and Irish Independent Editor Fionnán Sheahan. Picture: Mark Condren
Laura Larkin

Laura Larkin

Finance Minister Paschal Donohoe believes Brexit is a reason to cut taxes further in order to stay competitive.

Speaking at the Irish Independent Budget Breakfast, Mr Donohoe said the country's competitiveness in a post-Brexit era will depend on his ability to reduce income tax.

He said "economic buffering" had started but the growing gaps in our infrastructure must be the key focus in the years ahead.

Looking back at the two budgets he has introduced during his time in the ministry, he said he had done what he said he would do in relation to income tax. "I've continued to stand by my view that it's not sustainable and increasingly won't be competitive to say that you can be on a normal, average wage here in Ireland and already be on a higher rate of income tax," he said.

"I believe this is an issue that is going to be exacerbated in a post-Brexit European Union."

In the UK, the higher rate of income tax is paid by workers earning more than £45,000 (€51,300). Under changes announced by Mr Donohoe on Tuesday, a worker here will begin paying the higher rate of tax on income earned after €35,300.

The minister said in the past two budgets he had raised the point at which people began paying the higher rate of income tax by €1,500 and signalled that he would continue this trend in future budgets.

"I have done that because we have to address this issue over time," he said.

Mr Donohoe rejected the charges that the tax changes were a sign that he had done too much or too little.

An orderly transition would see Ireland moving into an environment of "lower growth rates" compared with recent years, he said.

Mr Donohoe spoke about the dual challenges of international trade relations and Brexit facing Ireland, but said that it was his judgment things would remain "favourable", but warned circumstances "are changing".

The minister said that he had to balance issues facing the country, such as the housing crisis, and the risks posed externally.

The "key" Budget choice was the decision to ramp up capital spending to invest in the country's infrastructure, which was important to Brexit-proof the economy.

"What I've looked to do is add to the buffering of the domestic economy [that it] may need if external circumstances begin to change in a particular way, particularly in light of Brexit," he said.

Lots of other finance ministers had promised to end the cycle of boom and boost, he said, but he acknowledged that there was likely to be another downturn.

"There will be another change in global economic circumstances. It will have an effect on Ireland. It's up to all of you to contend if I've done enough," he said.

Mr Donohoe also spoke about the housing crisis facing the country.

"A roadmap will become clearer when it becomes clearer where we are in relation to Brexit," he said.

He also faced questions from the French Ambassador to Ireland, Stéphane Crouzat, on his position on digital tax - which he noted had not changed but was starting to be shared among a growing list of EU countries - and on carbon tax.

The Government has faced significant criticism for a rollback on hiking the carbon tax in this year's Budget - something that had long been mooted by Taoiseach Leo Varadkar.

However, Mr Donohoe said he did not believe such a move would work in the absence of a long-term consensus in the Dáil.

"At a time in which we are facing an acute period of uncertainty, the call I made is that I don't believe that consensus is there," he said.

Irish Independent

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