McCreevy warns against increased tax rates for high earners

 

IRELAND'S EUROPEAN commissioner and former minister for finance Charlie McCreevy yesterday warned against increasing taxes on high earners, but said he was not criticising the Government's budgetary policy.

In a speech in Dublin yesterday to the Leinster Society of Chartered Accounts, Mr McCreevy said raising taxes for high earners could produce "diminishing returns. There is now, I believe, a recognition that increased tax rates on high earners can very quickly produce diminishing returns. All governments face the pressures to make the rich pay more.

"But it is essential that we remain focused on the dynamic and human nature that drives risk-taking, economic activity and tax revenues forward and that we guard against policies and tax-rates that drive risk-taking, economic activity and tax revenues backwards.

"Put simply, it's not higher tax rates that generate higher tax revenues, it is higher economic activity that generates them. We can sink or swim, but if we lose sight of these simple facts, we will certainly sink," he said.

But he told The Irish Times last night: "I'm not challenging anyone, it's only a stated fact." Asked if he was criticising current budgetary policy, he replied: "I didn't mention budgetary policy."

He added: "I've said this on many occasions."

Speaking at another event last night, in Athlone, Co Westmeath, Mr McCreevy said he would defend the record he had when he was in government, but "I don't defend the record of what has happened since".

He told guests at the Midlands Gateway Chamber Ambassador's Ball that there was a huge degree of negativity in Ireland "as if we should apologise for our success".

Now that we had a downturn, it was a case of "we told you so. It was going to happen like this".

However, he said, even the current state of the public finances, the Republic's debt as a percentage of output was less than that of Germany.

"We will never get out of this economic crisis unless we start looking on the brighter side of things and get on with it."

In his earlier speech in Dublin, Mr McCreevy criticised the state of party politics in Ireland.

"There is too much at stake for the normal business as usual 'Punch and Judy' politics to continue to hold sway," he said.

He could think of no time in our history as an independent State when setting aside party political differences would make more sense than it did today.

"There is no government here - or anywhere else - that could conduct the necessary fiscal retrenchment without becoming politically very unpopular."

He continued: "It is readily obvious that there is broad consensus on the direction in which our economy should go.

"In these extraordinary and quite dangerous times, do we want to emerge from this crisis quickly and strongly through a tough, difficult, but more consensus approach that would lift the confidence of capital markets and reduce the cost of the significant levels of debt that we now have to raise?" He concluded with an appeal for politicians to "set aside petty, historic differences and do what is necessary to make it happen".

Responding later in a statement, Fine Gael spokesman Denis Naughten TD said he presumed Mr McCreevy was talking about Brian Cowen and Mary Coughlan when he referred to "Punch and Judy" politics.

"I can think of no time in our history when the Fianna Fáil Government needed to be more forensically held to account and politically prosecuted for their failures and lack of vision. There is no consensus between Fianna Fáil and Fine Gael on the way forward."