Fifteen years after the collapse of the housing bubble forced Ireland to borrow tens of billions of dollars or risk bankruptcy, the country is discovering that having too much money can also be a problem.
Inflated by rising corporate tax revenues, mainly from American technology and pharmaceutical corporations, the government anticipates running a record budget surplus of 10 billion euros ($10.9 billion) this year. Next year, extraordinary income is expected to reach €16 billion.
For years, Ireland’s low corporate tax rate has attracted multinational organizations to establish overseas subsidiaries here. Their tax payments have created a financial cushion for the Government, while irritating other countries.
Although efforts to create a global corporate tax rate are moving slowly — a change that could undermine Dublin’s position as a low-tax haven — payments to Ireland have skyrocketed.
That leaves Irish lawmakers in a dilemma. As the Government prepares its annual budget statement, it must resolve the difficult question of what to do with this pile of money.
Among the main options: save it for the future; pay off debts; invest in much-needed housing or other infrastructure, such as hospitals, schools and a subway system for Dublin; or give it away in tax cuts and support payments.
However, for peculiarly Irish reasons, none of these apparent advantages would, in themselves, be an easy option.
“Whatever they do, it will leave some people very grumpy,” said Cliff Taylor, a columnist for The Irish Times.
Looming over the debate are warnings that this annual windfall is unpredictable and that the Country must not become dependent on it. Ireland’s infrastructure, particularly its housing, is, by common agreement, in terrible condition. New construction, which produced a glut of housing during a housing boom in the late 1990s and early 2000s, collapsed when the bubble burst in 2008, and the government was forced to borrow $77 billion. to foreign lenders to stay afloat.
Ireland, with one of the fastest growing populations in Europe, now has a serious housing shortage. High rents have left many young people struggling to find a place to live. And the number of homeless people, including working families, has steadily increased.
Lack of housing and other infrastructure is becoming a serious obstacle to economic growth, says the Irish Employers’ and Business Confederation, a lobby group.
A popular proposal would be to set aside some or all of the excess money for long-term spending projects.
A recent Irish Times poll found that 40 per cent of the public preferred the extra money to be spent on “public transport, housing, hospitals and schools”, while another 25 per cent favored spending on public services such as health and education. Only 9 percent chose tax cuts as their first option. 5 percent or less preferred to pay off the national debt or save for future pension costs.
Busy Dublin is one of the few capitals in Europe without a metro, but plans for a line to its busy airport, with an estimated price tag in 2000 of €3.5 billion, have been postponed or modified. The most recent plan would take about 10 years to build, at a cost of between €7 billion and €12 billion.
A final conundrum for Irish authorities is that no one knows how long these good times will last.
Much of the excess corporate tax rate comes from US-based companies such as Meta, Apple, Google and Pfizer, which channel some or all of their non-US business and intellectual property through Irish subsidiaries.
These subsidiaries pay taxes at a rate of 11.5 percent, but the Organization for Economic Co-operation and Development is leading an effort to create a global minimum corporate tax rate of 15 percent, which could erode Ireland’s tax advantage.
What flows in so easily could easily flow back out, said Taylor of The Irish Times. “American tax laws could change very quickly,” she said. “The taxes could go elsewhere.”
By: ED O’LOUGHLIN
BBC-NEWS-SRC: http://www.nytsyn.com/subscribed/stories/6907284, IMPORTING DATE: 2023-09-25 20:30:08
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