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Tax cuts will limit Irish resilience to future economic shocks warns NERI

Written by Robert McHugh, on 19th Sep 2017. Posted in Economy

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The latest Quarterly Economic Observer (QEO) from the Nevin Economic Research Institute (NERI) has been released today.

The purpose of the QEO is to provide regular, accessible and timely commentary so as to equip trade unions and others in articulating and advancing a new economic paradigm where the old has failed. 

The latest NERI report focuses on potential tax reforms in the Republic of Ireland. NERI compare government revenue in Ireland to that of similar high-income EU countries across a range of areas. On a per person, basis the report finds that combined taxes and social contributions in Ireland are significantly lower than in comparator high-income EU countries. Indeed, with the exception of taxes on consumption NERI find no evidence that the Irish taxation system is onerous in comparison to other high-income European states. In fact, they say the evidence is clear that Ireland is a low revenue state.

The most substantial revenue deficit is in the area of labour taxation – specifically employer social contributions. There is also a deficit in relation to taxes on capital stocks, for example, property taxes and inheritance taxes.

The report is contained within the latest QEO which also assesses economic trends and outlook for the economies of the Republic of Ireland and Northern Ireland. Brexit and the potential for a UK exit from the single market and the customs union is a major concern. However, the short-term outlook remains positive with the unemployment rate set to fall below 6% in early 2018 and strong growth set to persist over the next 12 to 18 months. Even so, NERI find very little evidence, so far, of overheating in the Irish economy.
Commenting on the launch of the report, NERI Senior Economist, Dr Tom McDonnell said, "In light of our ongoing revenue deficits, and given limited fiscal space and significant under-spends in crucial areas of spending like education, childcare, housing and infrastructure, the case for cutting taxes is extremely weak."

NERI Director, Dr Tom Healy added, "Tax cuts will limit our ability to pursue social objectives and will reduce our resilience to future economic shocks. We must learn from the mistakes of the past."

Source: www.businessworld.ie

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