Irish Economy
Irish Budget 2015: Ibec back in boomtime mode; McKinsey warns of FDI challenges
By Michael Hennigan, Finfacts founder and editor
Sep 8, 2014 - 7:35 AM

Irish Budget 2015: Ibec, the principal business lobby group, which a decade ago was among the believers that the free lunch has been invented, is back in boomtime mode with another cheerleading report today pleading with the Government for tax cuts, to avoid its members having to raise pay, while McKinsey the US consultancy, provides a real-world perspective in a report which says beyond the corporation tax rate, Ireland has not standout attractiveness for FDI (foreign direct investment).

In respect of Ibec, it's appropriate today that Turlough O'Sullivan the retired boomtime director general of the organisation, is featured in today's piece in the Irish Independent, on the latest demand that the Government cut taxes.

Apart from tax demands, the organisation also appears to welcome rising house prices, noting: "Research has shown that a 10% rise in Irish house prices leads to a 1.1% rise in household consumption. This is very high by international standards" - -  lots of features about the Irish property market are indeed odd!!

It has nothing to say on rising pay and while changes in the income tax system are merited, the demand for "self-financing" cuts is a re-launch of the boomtime mantra and cutting taxes is always much easier than raising them.

Today's 'Consumer Monitor' [pdf] report is also a reminder of the cheerleading of boomtimes with no focus on negatives unless it supports the case for tax cuts.

Finfacts: The idiot/ eejit's guide to distorted Irish national economic data

Since March 2011 when the current coalition took power, 60,000 jobs have been added:

24,000 are in 1-person self employment (some are not real jobs); 15,000 are in public schemes and 21,000 are as employees (both full-time and part-time).

The Government’s July 2014 target for FDI jobs is a net 7,000 per year, with retail, distribution, tourism and construction providing the most of the rest.

There is no sector today that could be realistically be called a jobs engine.

Ibec says in today's report:

One of the major positive indicators of a consumer recovery in the past year has been the spectacular rise in employment, with 65,000 more people employed than two years ago. "

The 1-person operations employ themselves and the public scheme members are employed who are unemployed!

Fergal O'Brien, chief economist, commented:

We now need to introduce policies that encourage greater numbers of recent emigrants to come home. This should involve tax cuts, further institutional reform and increased investment in infrastructure and education,"

McKinsey & Company in a report published last week says the low corporate tax rate will not be sufficient for Ireland to retain its current position in FDI (foreign direct investment) while the failure of indigenous firms to scale up and develop export markets will continue to be a drag on the economy.

The challenges are:

• Perspectives beyond toxic local political spin should be welcome - - Irish insider camels don't see their own humps and bitter truths are unwelcome;
• Excluding corporate tax rates, Ireland is in the middle of the pack when set against FDI rivals analysed in respect of location attractiveness factors;
• Policy makers need to double down on efforts to raise Ireland’s profile in the business communities of the emerging world;
• What worked in US may not elsewhere. Chinese investors prefer to buy existing European companies with a customer base;
• Ireland ranks world’s 14th-most-connected country - - skewed by services @ No 1 thanks to Dutch double sandwich tax dodges;
• Create environment for homegrown companies and encourage them to go global - - 60 years of State supports, low taxes hasn't worked;
• Ireland must rapidly address the erosion of its education system. Irish universities do not place atop international rankings.

Last July Richard Bruton, enterprise minister, published a brochure rather than a strategy on FDI and again, it's is similar to today's Ibec document - - avoiding negatives that should be addressed.

Finfacts: Irish Economy: Bruton publishes new FDI policy; Avoids inconvenient facts

Google 'Irish reform' and head of the listing is the Irish Reform Act of 1832 - British parliamentary Act!

Irish Budget 2015 Page