Irish Economy was on a High Growth Trajectory for more than a Decade now. But the Property Burst in the Wake of the 2008 Financial Crisis sent Ireland into its Worst Sovereign Debt Crisis. Kenneth Thompson, The Irish Ambassador to India, In an Exclusive Interview, Shares the Larger Picture of the Ireland Economy
B&E: Do you believe that the Irish government can face the kind of backlash from government employees and unions as seen in Greece and Spain?
KT: The public servants in Ireland have had pay cuts since 2008 between 5 to 15%. Despite that, there have been no major protests as the people understand that we had a property bubble that burst and the second biggest problem is the deflation that Ireland is facing right now. Unemployment has risen sharply as many people have been laid off in the construction sector. The prices have sharply come down with electricity prices falling by 25% and gas prices by 23%. Housing prices have come down by 35-40% while office rents have fallen by 50%. So the positive side to all this has been that the average expenditures on an individual level have also come down.
B&E: Ireland has one of the lowest tax rates in the world with the corporate tax rate at just 12.5%. How do you justify such low tax rates in the current situation of such high public debt?
KT: Ireland not just has a very low corporate tax rate but one of the lowest personal tax rates as well. Our basic personal tax rate is 20% while it is 41% at the higher end which is paid by a very small number of people. Such low tax rates give the government the flexibility to raise the tax rates in times of crisis. In terms of justifying such rates, the tax rate is uniform for every business be it your corner shop or for every individual. It is the same for foreign investors as well. So, it has helped in bringing huge foreign investment in Ireland over the years. In fact, according to a latest research, Ireland had the highest per capita investment in 2008 in the world. MNCs account for a huge proportion of jobs in Ireland and they also contribute to 80% of our exports. Hence, the people realize that the low corporate tax rates result in job creation and high overall tax revenues which the government then spends on welfare programs.
B&E: Do you believe that the Irish government can face the kind of backlash from government employees and unions as seen in Greece and Spain?
KT: The public servants in Ireland have had pay cuts since 2008 between 5 to 15%. Despite that, there have been no major protests as the people understand that we had a property bubble that burst and the second biggest problem is the deflation that Ireland is facing right now. Unemployment has risen sharply as many people have been laid off in the construction sector. The prices have sharply come down with electricity prices falling by 25% and gas prices by 23%. Housing prices have come down by 35-40% while office rents have fallen by 50%. So the positive side to all this has been that the average expenditures on an individual level have also come down.
B&E: Ireland has one of the lowest tax rates in the world with the corporate tax rate at just 12.5%. How do you justify such low tax rates in the current situation of such high public debt?
KT: Ireland not just has a very low corporate tax rate but one of the lowest personal tax rates as well. Our basic personal tax rate is 20% while it is 41% at the higher end which is paid by a very small number of people. Such low tax rates give the government the flexibility to raise the tax rates in times of crisis. In terms of justifying such rates, the tax rate is uniform for every business be it your corner shop or for every individual. It is the same for foreign investors as well. So, it has helped in bringing huge foreign investment in Ireland over the years. In fact, according to a latest research, Ireland had the highest per capita investment in 2008 in the world. MNCs account for a huge proportion of jobs in Ireland and they also contribute to 80% of our exports. Hence, the people realize that the low corporate tax rates result in job creation and high overall tax revenues which the government then spends on welfare programs.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles
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