We can look forward to another year of solid growth in 2018
By Brian Hayes, Dublin MEP
WHEN final figures for 2017 are produced they will show that the Irish economy grew by more than 4 per cent last year.
There was strong momentum in the Irish economy and as 2018 begins we can look forward to another year of solid growth.
It should be our collective ambition to maintain the conditions which will contribute to an annual growth rate in the 4 per cent range. It's ambitious and possible.
A decade of growth in the range 3 per cent to 4 per cent every year would transform this country. Growing the country by close to 50 per cent.
A decade of steady sustained growth will provide the resources for public services, for investment, for social welfare, for pensions – all of which will require extra resources in the decades ahead.
Ireland’s population is projected to increase by more than one million by 2050 – which is just 32 years away.
Places like South County Dublin will be key drivers in that growth in population.
Low inflation, moderate wage increases, moderate tax reductions, increased productivity are a recipe for continued sustainable growth.
An annual growth rate of around 4 per cent will allow the government to run a balanced budget and put some money aside as a rainy day fund. It will also reduce the burden of national debt both as a percentage of GDP and in real terms.
A growth rate of 4 per cent will also provide for steady increased investment in physical and human capital.
A clear focus on increasing housing supply both public and private, particularly in the greater Dublin region is an absolute must.
Rapidly rising house prices and escalating rents put enormous pressure on young families looking to buy and single people looking to rent. Rising housing costs also increase wage pressure and make Dublin a less attractive place to live and work.
There is no single solution to the current pressures in the housing market; all options both local and national, small infill developments and larger schemes have a role to play. We must not be afraid to build higher in selected city locations.
Even within the two Dublin canals there are still many vacant sites waiting to be developed.
There is one area of taxation however, where Ireland is an extreme outlier compared to its competitors.
A single person working here will pay the higher rate of tax on earnings over €34,500. In the UK, it is around €180,000. In Germany, it is around €250,000, while in the US, it is around the equivalent to €300,000.
Raising the level at which people enter the higher rate of tax should be a priority.
I believe we should set out a clear plan to raise the entry rate to the higher rate of tax to €50,000 for single earners.
A significant step should be taken in the 2019 Budget and in each of the following years until the target is achieved.
The evidence is clear that tax on work has increased very significantly over the last decade. In 2007 there were 2.24 million people employed.
According to the latest figures from the CSO employment in the third quarter 2017 reached 2.2 million – roughly the same number of people. However in 2007 the income tax take was around €11 billion on the income tax side, but by 2017 the income tax take was €20 billion.
Over that ten-year period tax on work has increased dramatically.
In addition to looking at the entry rate to the higher take for low earners the total take from income tax needs careful consideration.
Income tax take is a huge factor in retaining and attracting well-educated professional people. High taxation levels drive wage demands and reduce competitiveness.
We need to make steady but incremental progress in making sure that more and more people take home more of that which they earn. It can only be done in a step-by-step approach and has to be affordable – but we need to set clear targets.
We should not be afraid to be ambitious for ourselves, for our businesses, for our country and for our region.
Looking at how we tax our workers is one way to realise this.
TAGS Business
