Reading the small print on promises
AT the start of the New Year, the economy is in a good state of health. With the Brexit impasse to be finally broken at month’s end, the Government last week published its economic forecast for the year ahead. It predicts that Gross Domestic Product will grow by 3.9pc this year and average 3pc per annum in the first half of this decade.
This is welcome news. These predictions are better than had there been a no-deal Brexit. There will still be a hard Brexit, however, the full implications of which are not entirely known.
Predicted economic growth is just that, a prediction which is uncertain. What we can be sure of, though, is that changes to international taxation are on the way, which will result in a decline in corporation taxation receipts here. It is assumed that these changes, by 2022, will reduce Ireland’s corporation tax receipts by an incremental €500m per annum, with the Government’s best assessment that the overall risk from these changes is in the range of €800m to €2bn. In an economy the size of Ireland’s, such a reduction will have a significant impact.
What we can also be sure of is that there will be a general election in the year ahead, perhaps sooner rather than later, possibly in a matter of weeks, certainly before summer. Already, all political parties, including the main two, Fine Gael and Fianna Fail, are making election promises which at headline glance may sound favourable and welcome. As always, however, we would advise that caution be exercised, both by the political parties who make such promises and by the public who will cast their votes.
Read the small print.
Several of the promises already made are devoid of credibility, and all are predicated on continued economic growth. After the last election here, who could have predicted Brexit and the impact it could still have on our economy?
Ireland has a small open economy, more susceptible than most others to external shocks. We can be certain that corporation tax receipts will significantly fall within the lifetime of the next government.
Each of the main parties, one of which will lead the next government, both of whom like to accuse the other of auction politics, must be held to account on this issue during the election campaign and in the years ahead.