|Enda Kenny, taoiseach, arriving for EU summit, Brussels, Oct 23, 2014|
Irish Economy: As the country's annual budget deficit falls below the European Union's 3% limit, the Government's band-aid measures in response to serious issues reveal a growing strategic deficit.
The creation of Irish Water to replace 34 authorities of various sizes and levels of expertise, was an example of strategic policy-making but its shambolic implementation and lack of public transparency, has seriously undermined public confidence in the venture.
This week was an interesting one for a country that is currently recovering from one of the world's worst property busts.
Average annual residential price rises in Dublin were reported to have fallen slightly to 23.4% in September while Irish commercial property returns in the year to September jumped to 36.6% with the income return at 8.0% per annum - the highest of 30 key world property markets.
NAMA, the toxic property loans agency, said that on its closure in coming years, it will have achieved a return of a maximum 1.6% or €500m on the property loans it acquired up to end 2011 from Irish lenders.
The surplus is not a profit.
By the end of 2011, a total of €74bn in loans had been transferred to NAMA by the five participating banks and building societies, and €31.8bn was paid as consideration to the institutions - an overall discount of 57%.
The Irish State bailed-out Irish financial institutions at a cost of €64bn and the value of the NAMA surplus + funds raised from selling the public stakes will eventually indicate the extent of the losses.
NAMA also announced the sale of 588 apartments in Dublin and it said US investors, sometimes known as vulture funds, had acquired 88% of its sold assets. It also said that it was eager to "take full advantage of current strong conditions in the Irish market to de-risk the remaining €17bn NAMA portfolio expeditiously."
In Budget 2015 on October 14, Michael Noonan, finance minister, announced that the post-bust 80% tax on windfall profits from rezoned land would be cut to 33% and he also announced special measures to help young farmers to lease more land.
However, both issues are linked - and leasing land is not a remedy to a problem addressed by the French in the 1960s.
Agricultural land in Ireland is the most expensive in the world as land sales have fallen from a peak of 2.1% of utilised land in 1978 to as low as 0.2% in the past decade.
Selling house sites tops up EU CAP income while about 30% of farmers work elsewhere.
Today the Irish Independent reports that Enda Kenny, taoiseach, is pushing for a guarantee via insurance or more likely issued by the State, that would cover 10% of the deposit of a first-time homebuyer mortgage, to offset the Central Bank rule that means most mortgages issued from January 01, 2015, will require a 20% deposit.
Average Dublin house prices at 10 times average income; prime office rents heading to the top of the EMEA (Europe, Middle East, Africa) rankings, and agricultural land prices highest in the world at uneconomic levels, benefits some but not the economy.
Development land is scarce in a country that has the lowest population density in Europe, Dublin's social housing list is about 20,000 and the Government's responses have been ad hoc with the traditional reliance on tax breaks.
Last Sunday a New York Times editorial was titled Ireland, Still Addicted to Tax Breaks.
Today, an Irish Times editorial is titled Taxing the self-employed: Government punishes riskers in Budget 2015.
The lack of a credible enterprise strategy is very evident in the continuing priority that is given to the demands of the foreign-owned sector compared with indigenous business.
Enda Kenny made it clear in Washington DC last March who he wished to hear from if they had any "anxiety."
In Finance Bill 2014 published Thursday, Michael Noonan removed restrictions on the Special Assignee Relief Programme (SARP), which was introduced in 2012 to give foreign workers moving to Ireland the relief of cutting taxable income by up to 30%. To be eligible for it, employees had to earn a minimum salary of €75,000, and 30% of earnings + car benefit-in-kind, school fees and travel home costs, in the range €75,000- €500,000 would be excluded from Irish tax.
The Finance Bill removes the upper limit, which means that the scheme will inevitably be abused.
SARP can also be used by an indigenous firm but it is mainly of benefit to the foreign-owned sector.
Meanwhile, the typical self-employed person is not a Blackrock Clinic medical consultant but a van delivery man scratching to make a living.
The Irish Times says today:
A self -employed worker on annual earnings of €15,000 – less than half the average industrial wage – next year will pay 14.9 % of gross income in tax. His or her civil service counterpart will pay 1.9 % on that same sum. The self-employed person will pay €2,235 – almost eight times the €285 tax bill of the civil service employee.
Why should two people receiving the same gross income pay a different tax rate on their earnings? No Government Minister has yet offered a credible explanation for the unfair tax treatment of the self-employed, as against employees in the PAYE sector. The tax inequity, which discriminates against the self-employed, starts at low-income levels and continues at higher levels."
This week also, five new "world class" (this tag is used before a sod is even turned!) were announced and the Richard Bruton, enterprise minister, has continued with the same science policy that was put in place in 2006 by Micheál Martin, a predecessor.
The policy is based on aspirations rather than a strategy that can be tied to results.
Some decisions of course have to be made on the hoof while politics is expected to always be a factor.
Nevertheless, in areas such as enterprise, agriculture/food, education, health and housing, there should be some approximation to evidence, experience, knowledge, a realistic assessment of the challenges and time horizons.
Irish commercial property annual return to September 2014 at 36.6% - income at global high
NAMA expects surplus of less than €500m - it's not a profit; 88.5% sales to US investors
Dysfunctional development land systems in UK and Ireland - Part 1
Dysfunctional development land systems in UK and Ireland - Part 2
Irish House Prices 20i4: Dublin rise eased to 23.4% in 12 months to September
Dublin prime office rents set to return to most expensive in Europe ranks
Rising rents pushing startups out of tech hubs
Irish commercial property sales set to top 2006 bubble peak
Focus on Irish food industry's bigger potential than chemicals or high tech - in France it's not strange for a young person without a family background in farming, to become a farmer.
Double Irish tax scheme axed; Conventional wisdom wrong again - Part 1
Replacing the Double Irish with Knowledge Development / Patent Box - Part 2