For years, the Tax Strategy Group papers were quietly published on the Department of Finance website without any great fuss or fanfare months after the Budget had been announced. The documents contained some useful nuggets around government thinking, but they were generally historic. After all, the decisions had already been made, announced, and implemented.
However, with the troika demanding more transparency around Ireland’s budgetary process following the country’s economic calamity, the documents are now published a few months in advance. The papers, prepared by senior civil servants, are designed to offer a menu of options for the minister. At times, if you are streetwise in reading the language of the civil service, you can have a reasonable guess about what changes are genuinely being considered and those that will never happen.
Last week, Paschal Donohoe took the transparency agenda to a new level by holding a press conference to discuss the papers. Given a Minister for Finance never comments definitively on the nuances of a Budget before delivering it, it was an unusual move. But it gave Donohoe the platform to talk through where the economy is right now, and what he sees as the key dangers to it.
The press briefing started in the usual manner. The minister ran through the headline economic numbers – unemployment is at an historic low of 4.2 per cent, with a booming tax take driving the half-year Exchequer surplus to €5 billion. Of that, some €3 billion of the surplus came from multinationals through corporation tax. Donohoe talked about the corporation tax concentration risk, admitting the government would have to decide how to allocate the one-off corporate tax windfall in advance of the Budget.
Donohoe then batted any questions about the specifics of the upcoming budget, other than to reiterate the package will be €6.7 million and admit there may be some logistical issues in implementing Leo Varadkar’s proposed new 30 per cent income take rate.
But what I found fascinating was when the minister went slightly off-piste and turned his attention to Sinn Féin. In fact, at two different intervals, he had a significant cut at the opposition party’s economic platform.
First, unprompted, he referred to a story in The Irish Independent a few days earlier which reported how Sinn Féin was proposing an increase of around €50-a-week in the Jobseeker’s Allowance to address the cost-of-living crisis. The story was based on the party’s submission to the Government’s Commission on Taxation and Welfare.
Donohoe took issue with the proposal, arguing it made little sense to increase the Jobseeker’s Allowance at a time when unemployment is so low and when employers are struggling to fill vacancies across the country.
Later in the briefing, he pointed to Sinn Féin’s proposal to end the Special Assignee Relief Programme (Sarp), which provides tax incentives to multinational workers coming to Ireland. In reality, the scheme is largely dominated by executives in the aviation leasing sector, but it is seen in industry as a sign of intent and a signal that Ireland is willing to compete for top-tier talent. Donohoe knows this and linked the surging corporation tax receipts with the various inducements for multinationals – and their workers.
Overall, he argued that Sinn Féin was effectively gambling with Ireland’s “economic security”.
Both the Taoiseach and Tánaiste have been trenchant critics of Sinn Féin in recent times. But their interventions have been more personal and have centred on the party’s past. Donohoe, it seemed to me, was trying to open up a new front by raising questions about whether the party’s pledges are suitable or sensible when Ireland is facing such significant global headwinds.
The message was clear. The coalition had led the country through the uncertainty of Brexit and Covid. Now, it is dealing with a war in Ukraine, a supply chain crisis, and mounting inflation. Donohoe was effectively setting it up as a choice between stability and risk.
And that is why it is so important to analyse in detail Sinn Féin’s actual economic policies – as opposed to some of the rhetoric that often engulfs them. Both Stephen and Ed have written extensively about Sinn Féin’s slow move to the middle, while Pearse Doherty has spoken in very moderate terms in an interview with The Currency.
The trouble for Sinn Féin is now managing the expectation of radical change with the realisation that so much of the tax take comes from so few companies. Sinn Féin wants to enhance public services and improve the welfare system. This is all admirable but increasing the size of the state comes with a cost. And this will inevitably lead to tax hikes on certain sectors of the economy.
Sinn Féin needs to appeal to its base, while also appearing as a realistic party of government to middle Ireland. It is a delicate balancing act, and it will become more difficult to manage as more attention focuses on its policies.
By and large it has focused on housing and finance. Pearse Doherty and Eoin Ó Broin are on top of their briefs. However, it has displayed little willingness to realistically engage on topics outside of those. Its climate and environmental policy is confused at best and non existent at worst, something that was crystallised during recent debate on carbon emissions.
I am still unclear on what its vision for healthcare or education actually is (and I have read all of the literature).
Donohoe is trying to debate Sinn Féin on economic ground, and not on populism or on anger. It could be his party’s best strategy.
Elsewhere last week, we had significant coverage of the Tax Strategy Group papers. Sean delved through what the civil servants said about property taxes, ultimately deciding there was a lack of innovation in the proposals. I explained why the much sought-after reduction in the top rate of CGT will not happen, while Thomas looked at Vat, writing that the Vat paper explored potentially transformational changes for both consumers and businesses.
Speaking of the civil service, Rosanna looked at the data about women in senior roles in government departments. Despite overall progress, two departments in particular stand out for an almost total lack of women in positions of influence.
New data from Ronan Lyons last week showed a catastrophic shortage of new rental accommodation. Adding a few thousand rental homes – in Dublin only – couldn’t possibly be the cure for the rental market. He diagnosed the problem, and offered some solutions.
A combination of Brexit, the war in Ukraine and a supply crisis means Irish craft businesses are struggling with spiralling costs that change by the day. Ruth spoke to three owners about how they are dealing with the constant uncertainty and tight margins.
Jeanne Kelly’s specialism in technology, IP and data law once placed her in a small niche – until multinationals made Dublin a global tech centre. Now a founding partner of Browne Jacobson in Ireland, she talked to Tom about competition among law firms, GDPR and challenging the legal white boys’ club.