DUBLIN: The model of relying on low corporation taxes as Ireland’s core offering to attract foreign direct investment has had its day, according to the former Governor of the Central Bank Patrick Honohan.
Speaking at the launch of a new book that looks at Ireland’s experience of austerity in the aftermath of the financial crisis, Prof Honohan told the Irish Independent that policy makers here have made too much of tax competitiveness and should shift focus to Ireland’s other strengths.
“If you’re just trying to get an advantage on a percentage of the tax rate – this is going to run out of steam and it looks like it’s running out of steam,” he said. “We have overemphasised the tax advantages. There are other advantages.
“We’ve pushed the tax advantages and they’ve given a huge inflow of particular types of foreign direct investment.”
Ireland’s ability to use taxation policy to attract industry is already waning, under pressure from the European Union, where there is a push to standardise policies and potentially from Donald Trump’s plans to slash corporation tax and lure businesses back to the US.
Prof Honohan was Central Bank governor between 2009 and 2015. Since leaving the bank last year he has been a senior fellow at the Peterson Institute for International Economics in the US. Last night he launched ‘Austerity and Recovery in Ireland: Europe’s Poster Child and the Great Recession’, at the UCD Michael Smurfit Graduate Business School.
The book is edited by Professors William K Roche, Andrea Prothero (UCD Michael Smurfit Graduate Business School) and Professor Philip J O’Connell (Geary Institute for Public Policy, UCD). Among the conclusions from the book is that recovery here cannot simply be attributed to austerity policies.
Speaking after the event, Prof Honohan said Ireland needed to highlight more enduring strengths, rather than rely on competing on tax.
