Good News on Corporate Tax Avoidance

Paul Sweeney: The public anger at the low levels of corporation tax paid by multinationals has forced action by states and may be beginning to bring in some extra taxation to hard pressed governments. Public anger also forced governments to curb their ambiguous relationships with the corporate multinational world. 

Previously, governments have increasingly vied with each other in the zero sum game of Tax Wars (“tax competition”) for foreign direct investment. The G20 asked the OECD to work on avoidance and they came up with BEPS or Base Erosion and Profit Shifting. It seems to be working. 

Apple and Ireland

A Challenge to Ireland’s Wealthy

Paul Sweeney: “We can well afford to pay our current taxes, and we can afford to pay even more. Our state needs to invest this revenue in our struggling schools, in antipoverty measures and in infrastructure improvements.” So say a group of 40 New York millionaires.

Retreat on Comprehensive Reform on Pension Taxation in Ireland and the U.K.

Prof Gerry Hughes: In the last fifteen years the cost of pension tax relief has doubled in Ireland and the U.K. and most of the tax relief accrues to higher taxpayers. In both countries there has been official concern about the sustainability of the cost of government subsidies for private pensions and some steps have been taken to make the system more equitable by, for example, introducing limits on the lifetime size of a pension fund and on an annual contribution to a pension.

Good News on Climate Change

Paul Sweeney: It is not often that we get good news on climate change, but a report from the International Energy Agency is positive and interesting. It found that Global energy-related carbon dioxide emissions (CO₂) – the largest source of man-made greenhouse gas emissions – has remained flat for the two years in a row.

Lifetime Community Rating and Inequality

Nat O'Connor: We are coming up to the first anniversary of Lifetime Community Rating (LCR) in private health insurance and it is timely to consider how this policy reinforces Ireland’s multi-tier health system and entrenches income inequality.

The previous government introduced LCR in May 2015, affecting everyone aged 34 or older. For every year a person does not hold health insurance, he or she must pay an additional 2 per cent per annum on the cost of an annual health insurance premium.

For example, someone who first takes out health insurance aged 39, five years beyond the age threshold, will pay a 10 per cent additional cost for life; so a €2,000/year premium* will cost that person €2,200/year instead. This adds up, and with the added unknown of health insurance price inflation, the crude percentage increase caused by LCR could have an even greater effect.

(* An average premium of €1,925 in 2015 was cited by a survey carried out for the Health Insurance Authority/HIA, although most people goaded into taking up insurance by LCR appear to be paying around €1,000 for the cheapest policies; schemes that come with so few benefits that serious questions could be asked about them).

But wait, wasn't LCR motivated by equality, or at least solidarity between the generations? LCR pushes younger people to sign up to insurance, which keeps the system funded (and the majority of insurance beneficiaries are older people or people with long-term illnesses). In theory yes, but if someone has a poor start in life or has many demands on their income (from children, disability, elderly relatives, siblings, or whatever) he or she may simply not be able to afford to buy health insurance until later in life – and he or she will be punished by the LCR system for this.

Wealth rising at the top

Rory Hearne: The increasing concentration of wealth at the top of society has become a major economic, social and political issue.  It is surprising, therefore that last week’s Knight Frank Wealth Report 2016, which suggests that the number of ultra-wealthy individuals in Ireland is set to increase by 28% over the coming decade, did not garner more attention.

The price of car dependency

James Wickham: Three almost random stories about Dublin’s transport disaster.  The first two show what happens if there is little investment in public transport; the third shows one consequence of stop-go investment, governed by short-term expediencies…

An EU Mirror Held Up To Ireland’s Economic Policies

Paul Sweeney: In this final blog on the recent EU report on Ireland, a few more issues will be examined. 

We Irish are fascinated with how other perceive us, particularly as our economy is recovering after the self-inflicted Crash of 2008. This report is like a mirror allowing us to see ourselves our policies and actions.

The EU on Ireland's Lack of Investment and the Improving Irish Labour Market

Paul Sweeney: I continue my examination of the recent EU report on Ireland EU Country Specific Recs. Ireland. It recommends three priorities for EU economic and social policy in 2016: re-launching investment; pursuing structural reforms to modernise Member Statesʼ economies; and what they call “responsible” fiscal policies. It is a staff working paper and while not necessarily reflecting the views of the Commission, it is close, in my view.

Why the EU Commission is right to call for increased public investment in infrastructure

Paul Sweeney: The new EU report on the Irish Economy EU Ireland report 2016 makes for interesting reading, if only to see how Brussels views our recovery. There is probably something in its 85 pages of analysis and data for everyone, depending on your perspective. 

Open government mid-term report shows need for sustained momentum behind reforms

Nuala Haughey: An independent report charting progress (and lack of progress) on Ireland’s open government reforms will be published in Dublin this week. The report is a mid-term assessment of the extent to which Ireland has fulfilled the goals set in its first Open Government Partnership National Action Plan 2014-2016.

Political accountability needs written record of government decisions

Nuala Haughey: The Oireachtas Inquiry into the Banking Crisis reviewed about 500,000 pages of documents from various bodies including banks, government departments and State agencies.

Yet not a single official document was provided to it relating to the marathon overnight meetings in Government Buildings that led to the blanket bank guarantee. Hamstrung, the inquiry had to rely on the recollections and scribbled notes of those who attended some or all of the meetings on 29th to 30th September 2008.

The Collapse of Ireland’s Finances (again): A Reinterpretation

Robert Sweeney: As the election season reaches full swing, the inevitable claims of who did what and when, and what this means in the future intensifies. One oft-repeated tale beginning to reemerge is that an expansion in public spending during the 2000s is a, or perhaps the, leading cause of the subsequent financial and debt crisis. After all, as seen below, the crisis manifested itself in an explosion of the public deficit and overall debt, which eventually culminated in an inability of the government to borrow from financial markets in 2010.

Children and Food Insecurity – a crisis for Ireland’s future

Dr Mary Flynn: The devastating economic crash in Ireland during 2008 threw the personal finances of large numbers of people into crisis.  Work opportunities all but vanished, businesses closed, people lost their jobs and many lost their homes; relationships suffered. Food poverty became a real issue for many families. Ireland is recovering from the economic crash but it will take time for this to reach all families.  Children don’t have time. From the moment of birth, they grow and develop relentlessly every day until they are roughly 18 years of age.

Debunking myths: why austerity and structural reforms have had little to do with Ireland's economic recovery

Aidan Regan: It has been a truly remarkable few years for Ireland and the European Union. In the space of five years Ireland has gone from being the basket case of the European Monetary Union to its number one success story. Economic growth is now the strongest in the Euro area, and according to the most recent data, this growth is having a real impact on employment. The dominant narrative among policymakers in the EU is that other peripheral states of the Eurozone should follow the Irish adjustment back to the market.

Housing Crisis & the Right to Housing should be a key issue in the election debate

So its election fever time! The current housing crisis should be a key topic for discussion in the election debate. Despite the economic recovery the housing crisis is in fact getting worse. Having a home (and particularly fair rent and home ownership) are issues that have defined this country from colonial times and the famine evictions to the Celtic Tiger property boom and crash that wreaked havoc to Ireland’s economy from 2008 and which continues today.

Guest Blog by Robert Watt: How Does Ireland's Public Service Compare?

Robert Watt: What evidence is there that the programme of Public Service Reform that has been pursued since 2011 is having an impact? The IPA’s annual Public Sector Trends Report provides many useful insights into this question, and the 2015 report, written by Dr Richard Boyle, is no exception.

The truth about taxes that you won’t hear during the election: Our taxes aren’t ‘stolen’ from us - they pay for nurses, guards and building schools

Rory Hearne: As part of a debate I took part in on Renua’s ‘Flat Tax’ on the Pat Kenny show on Newstalk, both Pat Kenny and Eddie Hobbs (who made the case for Renua) referred to the situation where “if you are paying over 50% of your income on tax then you are working 6 months for Michael Noonan and the next 6 months you are working for yourself”.  This once more highlights the need for a reshaping of the discussion around tax. Tax is not ‘taken away’ from you, ‘stolen’ or a ‘burden’ – we get our taxes back through the schools our children go to, the roads we drive on, the buses we use, the hospital we go to.

Will the radical cuts in public spending planned by 2021 be abandoned?

Paul Sweeney: Will the plan to greatly cut public spending by 2021 set out in Budget 2016 now be revised?

The question that all political parties should be asked on the doorstep in the election early this year is what kind of society they want to create.  We need to have a clearer vision of what kind of society we want and if it is cohesive, gives a level of security on health, education and minimum income with fair opportunities for all it will have to be paid for in taxes. 

Wrong recovery, wrong investment

James Wickham: According to the Taoiseach before COP21, Ireland needed special consideration because: "We have lost a decade of investment in our country because of what happened”.  Yet in terms of climate change, such talk of Ireland’s lost decade is nonsense.  Given that in Ireland the level of CO2 emissions has been closely tied to economic activity, the crisis reduced Ireland’s own contribution to global warming.  Going back to the earlier form of growth would therefore ensure that Ireland made its own significant contribution to global disaster.  It’s not just a question of more or less investment, it’s a question of what investment.

Moving towards a low carbon economy requires that carbon emissions stop increasing in line with economic growth – that they are decoupled.  During the boom there was absolutely no sign of this happening.  For all the current talk of emissions from agriculture, in the early stages of the boom between 1990 and 2003 these rose by 3.2 percent.  By contrast, as I showed ten years ago, during that period CO2 emissions from transport in Ireland rose by an astonishing 129.4 percent (Wickham 2006). As Figure 1 shows, up until the crisis the number of cars continued to rise faster than the growth in population.  

Figure 1 Cars and population, Ireland 1990-20012

 

The rise in transport emissions was largely because of the continued expansion of private car ownership and private car usage.  It’s highly unlikely that there was a concerted plan to increase car usage – and so greenhouse gases – in Ireland, but what actually happened with investment was as good as if there had been such a plan.

Firstly, public investment in transport infrastructure was disproportionately in roads.  In particular the motorway building programme ensured the final motorisation of Ireland. Building motorways doesn’t just mean that existing car-based journeys are quicker, safer and more convenient, it encourages more such journeys.  Although most research on such ‘infrastructure induced mobility’ (e.g. Cervero 2009) has focused on urban motorways (think the M50)), the motorway network has made it much easier to reach all parts of Ireland by car – so more people make such journeys.  Because car drivers can travel door to door a motorway network also facilitates suburbanisation – there is no need for those who wish to travel to live near a transport hub.

The motorway programme has made Irish inter-urban rail less competitive and many Irish trains still travel at speeds close to those of the 19^th century.  Compared to twenty years ago the public investment plans certainly show some increased investment in public transport, especially of course rail.  Yet the plans and the reality are somewhat different: planned new roads get built, planned new rail systems often don’t.   Political dithering and planning delays hold up rail far more than roads.  The classic example of this is the failure to build DART Underground – the investment that would potentially tie together Dublin’s fragmented public transport ‘system’.   Initial decisions are biased in favour of roads because there is virtually no consideration of the environmental externalities, while there also appears to be a great if usually unspoken reluctance to fund anything that would be operated by the public sector.  So Luas Cross-City gets built, Dart Underground (which would have to be operated by Iarnród Éireann) does not.

The other major investment contribution to Ireland’s greenhouse gases is the particular form of private housing.  The boom showed how ‘urban planning’ in Ireland is really an oxymoron.  Essentially houses were built where developers wanted to build them – this was ‘developer-led development’.  Most new building was on prime agricultural land adjacent to existing towns and cities – especially in the Greater Dublin Area suburban sprawl accelerated.  In particular the new housing areas out beyond the M50 have virtually no public transport and are utterly car dependent (Caulfield and Aherne 2014).  And across the country, as we are now realising, an as yet uncounted number of houses were built on flood plains.

Certainly there has been some investment in public transport.  The Dublin Bus fleet has been modernised and there has been some upgrading of Irish Rail.  Indeed, improvements in the DART and Dublin Suburban services have probably been especially significant, since national and international research shows that such ‘heavy rail’ services are most likely to persuade commuters to leave the car at home (e.g. Commins and Nolan 2010).  There have been infrastructure projects such as the Dublin Port Tunnel - an imaginative and massive investment which has enabled HGVs to be largely excluded from the city centre.  And despite the almost interminable delays, in Dublin the Luas did finally get built and is now being extended. 

All of this has made some difference.  In Dublin, unlike in other Irish cities, the apparently inexorable rise of the private motor car has slowed.  Whereas in cities such as Cork and Galway, travel to work by car increased between 2006 and 2011, in Dublin the modal share is not only lower but constant.

Within the Dublin area there has also been a significant increase in cycling, facilitated by the limited but real investment in cycle lanes and cycle tracks.   Young workers in the internet companies in ‘Silicon Docks’ (Google etc.) seem more likely to cycle to work than travel by car.  Here we can see Ireland’s (or at least Dublin’s) version of ‘peak car’ – the point at which car ownership and car usage starts to decline (Goodwin and Van Dender 2013).

Yet such change is very limited and very localised.  Cycling may even be increasingly concentrated in the central area of the city – in the outer suburbs cycling to work is almost non-existent.  Cycling is also still largely limited to a particular demographic – managers and professionals aged between 35-54; cyclists are also more likely to have switched from another sustainable mobility mode (walking, public transport) than from the private car (Caulfield 214).   Equally, the new growth of apartments could be seen as a counter-balance to suburban sprawl, except that many new apartments are so small that they are hardly an adequate basis for urban living.

Curbing the emissions of the Irish transport sector will require more and different public and private investment.  Within the Dublin area it will require investment in transport that ties the city together rather simply facilitates movement along existing corridors; it will require effective land-use planning to ensure good housing is built in areas that are not only reachable by private car.  In other words, it will involve the opposite of what would have happened if the lost decade hadn’t been lost.

Caulfield, Brian (2014) Recycling a city: examining the growth of cycling in Dublin. Transportation Research A: Policy and Practice 61: 216-226.

Caulfield, Brian and Aoife Aherne (2014) The green fields of Ireland: The legacy of Dublin's housing boom and the impact on commuting.  Case Studies on Transport Policy 2: 20-27

Cervero, Robert (2009) Transport infrastructure and global competitiveness: balancing mobility and livability Annals of the American Academy of Political and Social Science 626.1: 210-225.

Commins,  Nicola and Anne Nolan (2010) Car ownership and mode of transport to work in Ireland.  Economic and Social Review 41.1: 43-75.

Goodwin, Phil and Kurt Van Dender (2013) ‘Peak Car’ – Themes and issues. Transport Reviews 33.3: 243-254.

Wickham, James (2006) Gridlock: Dublin’s transport crisis and the future of the city. TASC at New Island.