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Irish Parties Promise to Aid Businesses Post-Pandemic

Posted on June 16, 2020

Three of Ireland’s largest political parties have agreed on plans to improve schemes for small and medium-size enterprises and establish a task force to ensure that Ireland remains an attractive destination for foreign investment.

Leaders of Finna Fáil, Fine Gael, and the Green Party signed off on a draft program for government on June 15, according to a statement by Finna Fáil. The program outlines the parties’ plans to implement policy changes to help Ireland’s economy recover post-COVID-19.

“We will utilize taxation measures, as well as expenditure measures, to close the deficit and fund public services, if required. In doing so, we will focus any tax rises on those taxes that tax behaviors with negative externalities, such as carbon tax, sugar tax, and plastics,” the document says.

In addition to reviewing and improving schemes for SMEs, the parties plan to establish a task force to design a growth plan that would outline ambitious long-term strategies for businesses post-COVID-19. “We will ensure that our tax system remains supportive of the SME sector,” the parties said.

The program says the parties are committed to Ireland's 12.5 percent corporation tax rate — one of the most competitive rates within the EU — and have no intention of increasing it. The parties will provide updated future projections for corporate tax revenues, according to the document.

The Irish Department of Finance’s annual taxation document, published March 11, acknowledges the risks from the inherent volatility of corporation tax receipts and says the forthcoming changes to the international tax system will negatively affect the country’s tax revenue. However, the parties said they will “engage constructively” in the OECD’s international tax reform process. “We recognize that taxation policy needs to reflect a changing digital economy. This work is best done through the OECD, as opposed to unilateral measures that could undermine trade,” the parties said.

The parties said they don't plan to increase the income tax or universal social charge (USC) rates for the 2021 budget, either. According to the program, the 3 percent USC surcharge for self-employed income is “unfair and proposals will be considered to ameliorate this over time as resources allow.” The document says that for the 2022 budget, should income earnings rise because of the country’s economic recovery, tax credits will be linked to a taxpayer’s earnings. This would prevent an increase in the income tax burden and ensure there is no increase in the number of people paying higher income tax and USC rates.

Regarding Ireland’s carbon tax, the parties announced a goal of increasing carbon pricing to €100 per metric ton by 2030. This is an increase from the government’s goal of €80 per metric ton by 2030. Recently, the Irish government announced an immediate €6 per metric ton increase in carbon pricing on auto fuels as the country’s first step toward its carbon pricing goal. The document says the parties' plans are based on the findings of an Economic and Social Research Institute study that will be published in October.

The parties also outlined plans to enact legislation for the introduction of a new €2 billion credit guarantee scheme, start-up refunds for entrepreneurs scheme, and the "warehousing" of tax liabilities. The Irish government announced the warehousing of tax liabilities on May 2, which provides liquidity support for businesses affected by COVID-19. According to the finance minister, interest will not accrue on businesses' COVID-19-related tax debts, and there will be no debt enforcement actions for 12 months after recommencement of business activities. The plans to enact legislation are part of the parties’ Recovery Fund, available for 2020, 2021, and 2022, which aims to fund investment for current and capital projects to increase domestic demand and employment.

Two of Ireland’s three largest parties, Fianna Fáil and Fine Gael, recently signed a draft joint framework document that was published April 15 proposing a new coalition to lead the country’s recovery in the aftermath of the COVID-19 pandemic, including goals for universal healthcare, a new green deal, and an economic recovery package.

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