David Chance: 'Ibec's Budget vision goes beyond Brexit and the multinationals'
Brexit is coming and if it is hard the Government will likely have to run a budget deficit to lean against the economic ill winds. But we need to look beyond the immediate shock and focus on creating sustainable jobs for the future.
The biggest task is to narrow the productivity gap between indigenous companies and the high-flying multinationals who account for 56pc of the value added in the entire economy, and who have been enticed here over the past 50 years by a rich vein of tax incentives that now look to have run their course.
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Ibec's suggestions obviously sound like those of the business lobby group that it is: cut capital gains taxes, allow greater tax-free share options, and tax credits. But they do make sense and, at a total cost of €135m, would not have much impact on the deficit.
Ireland will need to generate new sources of economic growth and employment, and while the multinationals grab all the headlines, they employ just 230,000 people versus more than two million in the indigenous sector.
In a more competitive world, the presence of a strong domestic base that multinationals can plug into may well be a deciding factor in choosing Ireland. More importantly, however, a rise in productivity in the indigenous sector would help raise wages and begin to address the gaping income inequality here.
On a pre-tax basis, Ireland has the largest income disparity among the rich nations of the OECD. This is something that is then 'fixed' by the Government, which taxes the rich at much higher shares of their income than elsewhere, and distributes the proceeds to the less well-off in the form of tax credits, so that we end up with one of the most equal post-tax distributions of income.
If the private sector started pulling in the same direction, that would leave less lifting for the State, and that would be a positive thing.