29 November 2008

Only dimly aware of a certain unease in the air

The Winter of Discontent marches on, as evidenced by a small but perfectly formed protest by sheep farmers outside the Department of Agriculture yesterday, which managed both to startle and delight* passers-by with the sudden presence of a pen full of sheep on a busy Dublin street.

The large scale post-budget protests have died down in recent weeks as winter sees temperatures and (somewhat unexpectedly) fuel prices plummeting. Murmurings about the possibility of a new Lisbon Referendum gathered some steam in the wake of the Czech Supreme Court approval of the Treaty, leaving Ireland alone amongst the dissenters. However the Irish government knows full well that while a sudden cold snap and the nascent orgy of festive shopping may have distracted the unhappy electorate momentarily, any new Lisbon vote would be treated as a referendum on the Government's performance and with numbers currently polling lower than George W's, that's not a battle Brain Cowen can hope to win.

It is interesting to contrast our efforts to combat the recession with last week's mini-budget in the UK in which Alistair Darling seems to have taken an approach that is the polar opposite to our own, with VAT being cut by 2.5%, and a new higher tax bracket of 45% being introduced in 2011 for those earning over £150K. This is in stark contrast to our own raising of VAT and introducing a wealth levy that hits the most disadvantaged the hardest. Our government has now realised** that it has made a huge mistake with almost every aspect of the budget and faced with the prospect of record numbers of shoppers heading North for bargains has lashed out and labelled such behaviour "unpatriotic".

While the UK changes highlight the differences in our economies, the concept of a "Paddy Tax" is not new. Everything here seems to be more expensive than it should be for no apparent reason. I have been looking at getting a new iMac; in the Apple Ireland Online store*** the 24" 3.06Ghz iMac starts at €1,919. In the Apple store in Belfast the same machine is available for £1,389, which works out at €1,680 at today's exchange rate. That's a difference of €240 that is not accounted for purely by the differences in UK and Irish VAT. With a difference that great in price you can be sure that when time comes to upgrade I will be on the train to Belfast without a single tear shed for patriotism.

If the government wants to stimulate the economy, especially given the service and retail based economy that they have created over the last 15 years, the only way to do so is to put more money in the pockets of the majority of its citizens. The government should drop VAT on staple items, increase VAT or introduce a "luxury tax" on other non-essential items (the €200 tax on second homes is a token measure, but shows the government is willing consider such moves), and replace the 1% income levy with a new higher tax band on everyone earning over €100K. Corporations should also be made to pay their fair share. Even with the lowest corporate tax rate in Europe the many loopholes that exist allow major corporations to pay little or no tax. The government could tighten up and enforce the tax laws while retaining the low rate they believe is the single biggest driver of the economy. The corporate class is the sacred cow of Irish politics, and given the money made during the tiger years it is immoral that in tougher times the budget has been shaped to give it the most protection.

Tax the rich, ease the burden on the poor, it really is that simple.

*and confuse a few French tourists, who could not grasp the concept of a farmers' protest that did not involve setting the sheep on fire. "Les Amatures!" they cried.

**Admittedly they are a bit late to the game with this revelation. The Financial Times already saw fit to rate the Minister for Finance Brian Lenihan as the second worst in Europe. While the FT can never be accused of being positive about anything to do with Ireland, they're not far off the mark this time.

***Apple have no retail presence in Ireland, and the only way to get any high-spec gear is to buy it directly from them online, even though Apple's European service centre and distribution point is in Cork.


Post a Comment

<< Home

Older Posts... ...Newer Posts