“In the States, Henry Kissinger, at no cost to us,
had determined that financial circles in New York
expected us to run up a deficit of IR£900 million, so
we decided that the figure that we aspired to reduce
the deficit to (IR£750 million), was not in fact
expected of us.”
“I remember at around that time, asking the Central
Bank for an overdraft, to which they replied ‘no’. It
just goes to show that at that time the Central Bank
was very independent.”
“By 1989, our financial situation had been sorted
out, but it had taken eight, nearly nine years for that
to happen. I think that a similar amount of time will
be required this time around as well. One important
difference however is that I do not think that we
will come out of it in as good a situation as we did in
1989 – as growth prospects post-2011 are not quite
as good as they turned out to be in the 1990s”.
One of the key cornerstones of Ireland’s economic
policy is its low 12.5% rate of corporation tax.
As a crucial component of Ireland’s foreign
direct investment strategy, it has been made clear
that this rate is not to be changed. In times of
economic turmoil, taxes are often raised to provide
governments with more working capital and Garret
FitzGerald, in a recent article in the Irish Times,
outlined the fact that Ireland can no longer afford to
maintain its previously low rates of income tax.”
“Yes, for the higher tax bracket, I think the level is
about right. You cannot raise it too much because
this section of people might leave the country and
take their money with them. It is the middle income
that are currently paying only a quarter or a half of
what they might pay elsewhere, that must bear the
burden unfortunately.”
Budget 2011 intoduced the rate of 41% as the
highest rate of income tax.
FitzGerald makes an interesting point about
Ireland’s finances that must be recognised by
international markets.
“The markets do not have dedicated experts on
Ireland because we are too small a country. But we
are a complex economy and they do not understand
the dynamics that operate here.”
“There are large outflows of profits and royalties
from international businesses based here. In many
situations, rather than focusing on GDP (Gross
Domestic Product), as is normally appropriate
elsewhere - GNP (Gross National Product) is the
figure at which they should really be looking.”
“Moreover, there is a margin of error of up to 3% in
our quarterly GDP figures. Markets can have a quite
irrational reaction when they see a 1% change in a
GDP figure that could be incorrect by up to 3%!”
“What we pay to the EU is based on our GDP, when
in fact it should be based on our GNP – we are
paying more than we should. I don’t think that the
Department of Finance has done as good a job as it
could have done in communicating all of this. This
is a crucial point”, asserts the former Taoiseach.
Throughout his career, FitzGerald has always been
a champion of European integration. His role as
Minister of Foreign Affairs from 1973 – 1977 came
at the dawn of Ireland’s entry into the European
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