With strong momentum in the economy, competitiveness is fast becoming a key focus for Minister for Finance Paschal Donohoe as he juggles options for Budget 2019.
How can we attract financial firms fleeing the UK? How can we entice overseas talent to set up shop in Ireland? How can we grow upon the previous successes in enticing high-quality employment to these shores? Very often the answers throw up conflicting issues.
The Minister is considering whether to cut a 1 per cent stamp duty on share-trading in Irish companies. The tax – which generates close to €400 million a year for the exchequer – “cannot be justified”, according to the Irish Stock Exchange, now known as Euronext Dublin following a change of ownership, and makes other EU jurisdictions more attractive for business relocating from the UK.
On the other hand, Ireland’s housing crisis is an increasingly pressing issue for the Government. In response to a parliamentary question, Mr Donohoe noted that reducing the rate of VAT on construction of new homes from 13.5 per cent to 9 per cent would cost the exchequer around €270 million in a full year.
He also worried that lowering VAT on new homes would lead to a twin track system as non-residential construction services cannot by taxed at less than 12 per cent under EU directives. “This would be very difficult to administer, and could lead to accidental or fraudulent underpayments of VAT,” the Minister said.
All of which sounds as much like a way of finding a reason to fit the answer rather than an answer to meet the problem.
Being Minister for Finance is never easy as myriad interests seek a slice of a budgetary cake that is never big enough to address all the competing calls upon it. Cutting both stamp duty on share-dealing and VAT on new homes would consume most of the fiscal space remaining to the Minister and that’s without any increased spending commitments.
And, of course, it’s unclear whether tax cuts as a stimulus are the right answer to the deepening housing crisis. What is perfectly clear is that without decent housing stock we’ll struggle to attract high quality employment and workers down the line.
The question for the Minister, politically as much as anything else, is, in a world of scarce resources, should housing trump share-trading as a priority for Budget 2019? It’s his call.
