Ireland should take from pandemic’s winners to give to its losers

Why shouldn’t web companies or supermarkets pay a little extra?

Minister for Finance Paschal Donohoe. Photograph: Julien Behal

Minister for Finance Paschal Donohoe. Photograph: Julien Behal

 

The pandemic has exacerbated inequality in the economy, opening up a fissure between workers and businesses that have coped or prospered, such as web-based operators, and those that have suffered disproportionately, including hospitality and much non-grocery retailing.

The trend is particularly apparent in Ireland, which has relied on the socially and economically divisive lockdown tactic more than any other European nation.

The International Monetary Fund proposed on Wednesday that to combat this inequality, countries should consider raising taxes on those businesses and workers that fared well to show “solidarity” with those who suffered. In its twice-yearly fiscal monitor, it said this should be done to strengthen social cohesion even if national finances are not overly strained.

It is an interesting idea and one that this country should not immediately dismiss, at least not for businesses. The IMF suggested increasing the top rate of income tax, but in Ireland the entry level for this rate is below €40,000 – lower than other European nations and too low to hike the rate. But there is scope to tap up certain types of companies.

Once the distorting effects of multinationals are stripped out, Ireland’s national debt as a proportion of its domestic economy is about 108 per cent, one of the highest in Europe. In delivering the State’s quarterly exchequer figures this week, Minister for Finance Paschal Donohoe said he would choose the “right moment” to begin fiscal consolidation once the threat of the pandemic began to fade.

If he adopted the IMF’s idea, he could get in a handy little headstart while also creating political cover to protect his Government’s left flank.

Ireland is home to the European operations of most of the world’s largest web companies, such as Amazon, Facebook and Google, which have benefited disproportionately from the pandemic. They could have little complaint if Donohoe hit them with a temporary windfall tax, and he would have the perfect excuse.

Grocery sales are also 20 per cent above normal levels, which is a direct result of the State’s lockdown measures, which have shut the hospitality industry. It is a classic windfall. Aldi, Lidl, Dunnes Stores and Tesco could hardly complain if they were asked to contribute more for a while. Every little helps, as one of those retailers constantly reminds us.

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