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Ireland Publishes Medium Term Economic Strategy

by Jason Gorringe,, London

26 December 2013

The Irish Government has said that it will preserve the competitiveness of the country's tax regime while efficiently delivering the public services and infrastructure required for strong economic growth.

The pledge is made in the Finance Department's medium-term "Strategy for Growth" paper, which covers the period from 2014 to 2020. The document's purpose is to "point the way to a stable and prosperous future, and away from the failed policies of boom and bust that have cost us so dearly."

It makes clear that, within "strict overall budgetary constraints, taxation and expenditure policy must be oriented to continue to support economic growth and job creation." Significantly, it also hints that the Government may be able to achieve a combination of tax cuts and increased spending if revenue growth is reasonable.

The Department admits that the economic crisis "exposed considerable shortcomings in the structure of Ireland's tax system." It has, nevertheless, made "significant progress" in tackling these issues, introducing measures worth EUR11bn (USD15.1bn) across the whole system.

Tax rates (with the key exception of corporation tax) have increased, and efforts have focused on broadening the tax base and curtailing tax reliefs. The result has been that "those at the top of the income distribution made the greatest contribution to the fiscal adjustment."

Crucially, the Statement makes clear the Government's "100 percent commitment to the 12.5 percent corporation tax rate," stressing that "it is settled policy and will not change." It will continue to fund tax increases through the review and elimination or restriction of "overly-generous, poorly targeted or otherwise unaffordable tax reliefs," and income tax hikes will be avoided. Non-compliance and aggressive tax avoidance will be tackled, "so as to support fairness."

More broadly, the Government will "maintain an economically rational and sustainable approach to tax policy consistent with the dual mandate of funding public services and supporting economic growth." It also intends to "continue to be a key influencer of developing international tax policy on tax competition and transparency."

TAGS: compliance | Finance | tax | tax compliance | Ireland | tax avoidance | revenue guidance | budget | corporation tax | ministry of finance | tax rates | revenue statistics | tax reform | individual income tax | services | Tax | Tax Evasion

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