EU COMMISSIONER Charlie McCreevy has warned the Government against raising taxes on work and capital to a damaging level in response to the economic crisis.
The internal market commissioner warned that the maintenance of international confidence in Ireland must be the top priority through a detailed and credible plan to reduce the country’s debt.
“Muddled thinking, short-term expediency, sticking plaster, quick fixes can easily take hold.
“Without strong nerves and broad backs these pressures can become irresistible. There is no democracy in which that doesn’t hold true,” Mr McCreevy told the Institute of Taxation in Dublin last night.
He said that Ireland could take one of two paths in the period ahead. The first path was to prioritise the maintenance of international confidence in Ireland. “That will require a detailed and credible plan for reducing our indebtedness by laying out how over a three- to four-year period we intend to close the formidable gap between government income and spending.
“Above all, because people and capital are mobile, it is about keeping our taxes on capital and work competitive. These truths should be self-evident.”
He said following this path will lead to renewed investment which in turn would create employment opportunities and economic growth as the global recession receded. Mr McCreevy said the gap that had opened up between government income and expenditure could not be filled “by some fairy godmother stalking the capital markets, in pursuit of a shamrock”.
He added that availability of capital to governments was not limitless. “The reality is this. Never before has there been so much competition from so many governments to attract capital to close the gap in their public finances.
“At the same time, never before has such capital been so scarce in the world’s capital markets. So it stands to reason that governments that bring forward the best-laid, the most detailed, and most credible plans for getting their budgets back to balance will be the governments that attract the capital at a sensible price. Others will pay a hefty premium, if indeed the capital is available at all,” he said.