Tax cuts plan in line with EU policy


The Government's plans for significant tax cuts are in line with new EU guidelines to tackle unemployment, according to the EU Social Affairs Commissioner, Mr Padraig Flynn.

The tax cuts "will increase demand and thereby maintain the wage moderation which has applied here for the past 10 years and which has contributed to the economic recovery", he said.

Mr Flynn was speaking on Friday at the opening of the Harbour Mill, a £10 million tourism project in Westport.

He said the European Commission had unanimously approved new guidelines he had drawn up to tackle unemployment. They would be considered at a special summit on unemployment in Luxembourg next month.

The guidelines include tax reform, social welfare changes, and measures designed to encourage entrepreneurs and stimulate employment, he said.

"The tax on labour has been increasing over the past 10 years, whereas the tax on capital has been reducing. "We want to reverse that trend so there is a lesser burden on workers and thereby make it easier on employers to employ people, create easier and more flexible working patterns and take away all these disincentives that have been built up over the years in the taxation system.

"We also want to see the social protection systems viewed in a very special way so that in effect the dole and unemployment benefit is the last resort."

The guidelines identified two other areas where action was needed, apart from tax and social welfare, Mr Flynn said. One was the creation of a new market for venture capital.

"We want to build a new culture of entrepreneurship which would make it easier to start up and develop businesses." Another aim was "to strengthen employability, which really means plugging the skills gap". Apart from the need to provide training for the 20 per cent of the population who left formal education without suitable skills, there was an urgent need to provide in-service training, as 80 per cent of the technology now in use would be obsolete in 10 years' time.

Earlier, Mr Flynn said the strong growth in the Irish economy presented opportunities which should be grasped now rather than postponed.

"The European Commission will be issuing its economic forecast shortly and they will confirm the recovery, not just in Ireland but right across the Community.

"At last, the painful structural reforms are beginning to pay off. That is a message that is well understood and familiar to an Irish audience because we have already carried out a lot of those reforms.

"I have never hidden my view that Ireland should participate in EMU and that it should participate in the first round. Our entire economic performance over the past 10 years has been tied to stable fiscal and monetary policy centred on exchange-rate stability.

"We have seen wonderful results . . . I think it would be a great risk if we were to break with that policy now. There is a huge opportunity to be seized and we can shape that to settle our own particular needs - unemployment and exclusion, the demographic change and environmental and climate change.

"We should use the recovery to achieve the fundamental reforms that I have been advocating. Fortune favours the brave."