End to dependence on low corporation tax, says FitzGerald

Ireland must end its dependence on low corporation tax to support its economy, according to a leading economist at the Economic and Social Research Institute (ESRI).

Prof John FitzGerald, senior researcher at the ESRI, told a conference in Galway yesterday that a different economic model was required, which would rely more on indigenous companies being successful. He was speaking at the 11th Irish Society of New Economists (ISNE) conference at NUI, Galway.

“We need to wean ourselves off our dependence on our corporation tax. It’s not that we want to change it, but we need much more in order to make this economy successful,” he said. “Currently, we have a model where we bring in multinationals because of our low corporation tax and we’re coming under a lot of pressure for our rate to be increased.

“We need a different model that relies more on Irish firms being successful,” he said.

Prof FitzGerald said there were encouraging signs that Irish companies are playing a more significant role in this economic recovery than they did in the 1990s. However, he said that if steps are not taken to reduce our economic dependence on low corporation tax, it will be considered to have been a mistake in 15 years’ time.

Decision-makers

Separately, the

Irish Tax Institute

has urged the Government to do more in next month’s Budget to attract senior decision-makers and investment to Ireland.

Speaking at the organisation's annual general meeting in Dublin yesterday, its new president Andrew Gallagher called on the coalition to take measures to ensure that Ireland continues to be an attractive location for foreign investment. "Ireland needs to be not only a good location for companies to carry out their business but a good location in which their senior decision makers can be based. Without them we will not attract the investment that is necessary for future employment and economic growth," said Mr Gallagher.

“In this context, we need to continue to improve the attractiveness of the Irish corporation tax regime, and also focus on areas within the income tax regime that may impact on decisions to employ senior personnel in Ireland”.

Mr Gallagher said while the Government had introduced a Special Assignment Relief Programme, known as SARP in 2012, only nine employees had availed of the relief that year, which he said was insufficient. In addition, a Foreign Earnings Deduction (FED) relief programme was also introduced that year, for which only 83 employees claimed relief.

“Other countries have more attractive reliefs with less onerous conditions. The UK, France, Switzerland, the Netherlands and Singapore all have attractive offerings so we need to up our game in this area,” he said.