Harney claims growth due to tax strategy

Recognition of the power of taxation to act as an incentive has been central to the success of the Irish economy, the Tanaiste and Minister for Enterprise, Trade and Employment Ms Harney has said.

Addressing a European Banking Conference in Frankfurt, Ms Harney said Irish tax revenues had doubled in the last 10 years despite sharp reductions in rates of taxation. "Lower tax rates have generated additional economic activity," Ms Harney said. "That economic activity leads to the creation of new companies and new employment opportunities for workers. In turn, those companies and those workers produce the tax revenues needed to fund additional government expenditure on essential social services."

The Tanaiste also said that Ireland's low corporate regime for manufacturing industry was a significant boost to foreign direct investment. She pointed out that in Ireland, the tax take from corporations is 12 per cent of total tax income compared with five per cent in Europe where corporate tax levels are three times higher on average.

Ireland also has one of the lightest regulated labour markets in Europe, she said, and this has provided the flexibility to respond to changing circumstances.

She told the conference that Europe could only maintain its strong position in certain industries through investment in innovation, through flexibility and through an overall lean approach to the entire value chain.

"We must not bind ourselves with ever more regulation. Flexibility will not be facilitated by more legislation," Ms Harney said, warning against a "fortress Europe" attitude.

She said European legislators had to constantly look at domestic and European laws to see if they met the needs of the modern global marketplace.