Economist urges electorate to be wary of promises to tax way out of recession
 

Political parties proposing to tax the nation’s way out of recession will only drive Ireland deeper into an economic hole, economist Jim Power warned at lunch briefing hosted by leading financial services brokerage Orca Financial Services.
 
Addressing a gathering of senior business figures in Dublin, Mr Power said that raising taxes on the wealthy will not alone make little difference on the revenue side but the policy would also stifle entrepreneurship.
 
“We cannot tax our way out of the problem and any political party that tells you otherwise is talking nonsense. Even if you were to introduce a 65% tax rate for everyone over €100,000, you would still only raise €200m in revenue,” he said.
 
“Entrepreneurs are at the risk of being demonised in this country. There is a political mood out there that they almost should be taxed off the face of the earth but if we do that we risk discouraging entrepreneurship and risk takers which would destroy our country. If we don’t foster entrepreneurship, we are going nowhere.
 
“Instead of trying to tax our way out of this mess, we need to make significant cuts on the expenditure side. I believe we have twice the amount of local authorities that we require and cutting them in half would deliver at least €2bn in annual savings alone. This is the type of reform we need.

“Monies saved should be passed back to the business sector directly in the form of lower commercial rates and local authority charges. This is the best type of stimulus that could possibly be given to the economy. The reality is that business is paying directly for the elaborate, inefficient and exorbitant local authority model that Ireland has put in place.
 
“Recessions inflict serious hardships on people but they also create an environment for much needed correction but our outgoing Government did not have the wherewithal to do this.
 
“Apart from the excess we have had in local government, policies at local level have been completely counterproductive. For example, commercial rates are one of the biggest problems facing businesses today and a reduction in rates would be a real stimulant for the SME sector in particular and job creation.”
 
The Friends First Chief Economist also said that Nama is now dysfunctional but is probably too far down the road to unwind. It must function as originally envisaged but has become part of the problem rather than part of the solution.

Mr Power also suggested that the new Government establish a Ministry with Responsibility for Competitiveness and Public Sector Reform and appoint a Minister to this department from outside the political system on a five year-term to implement proper reform.
 
The Wateford born economist said that an immediate task for the incoming Government would be, in its first 100 days, to put balance on the misconception that the Irish economy is completely defunct. “Yes, we have serious problems with our banks but there are many reasons to be positive, not least with our export performance. Unfortunately, the perception internationally of Ireland is far worse than the reality.

“I have had friends from the US ask me before coming here if they should bring Euro with them because they had concerns that the ATMs wouldn’t be working. That is the extent of how misrepresented our problems are internationally and we need to correct that immediately. Ireland's international reputation has been badly damaged and needs to be repaired immediately in a fact based and honest manner.”