At the press briefing announcing the latest exchequer returns on Wednesday, the Department of Finance\u2019s chief economist, John McCarthy, said his department estimated that about 50 per cent of the State\u2019s \u20ac24 billion annual corporate tax take could be classified as \u201cwindfall\u201d and potentially \u201cnon-recurring\u201d.That means we\u2019re accruing \u20ac12 billion in business tax receipts that are effectively divorced from the underlying performance of the Irish economy and which could, just as easily as they arrived, disappear. How this unexpected windfall is spent could be crucial to the future development of the State. It is also a once-in-a-generation opportunity to make a lasting difference to some of the country\u2019s nagging problems. Here are six possible ways Minister for Finance Jack Chambers could deploy this largesse.<\/p>\n
Brought in as an emergency measure in 2011 in the wake of the financial crisis, the universal social charge (USC) was meant to be a temporary expediency in the face of a financial meltdown. Like many other so-called temporary measures though, it has become a permanent feature of the tax landscape here. The charge nets the Government about \u20ac5 billion in tax a year, a level of revenue the current corporate tax windfall could easily cover. Such a move would give hard-pressed workers and middle-income earners a major bounce in income.[\u00a0<\/span>Buoyant tax returns likely to fuel political demands for giveaway budget\u00a0]<\/span>While some of the increased earnings would find their way back into Government coffers as workers pay higher rates of income tax, the Government has been repeatedly warned not to use potentially temporary receipts to cover day-to-day spending, which presumably USC revenue now furnishes. Another worry would be the surge in consumer spending that might accrue from such a jump in income. That could overheat an economy already running close to full capacity. A more modest proposal might be to abolish the charge for those earning less than \u20ac70,000 a year, at a cost of \u20ac2 billion, but without offsetting measures elsewhere the same overheating risk applies. That said, we\u2019re no longer in a fiscal emergency, the principal justification for the USC in the first place.<\/p>\n Something that wouldn\u2019t come with an overheating risk and could perhaps cool the economy would be the establishment of a wealth fund along the lines of Norway\u2019s. The latter, generated from the country\u2019s huge oil and gas revenue, is the largest in the world, worth about $1.6 trillion (\u20ac1.5 trillion). The Minister will point to the Government\u2019s existing plan to divert \u20ac4 billion of excess corporate tax receipts each year into the new Future Ireland Fund, which will support State spending after 2041.But is it enough? The Government\u2019s fund aims to deal with the pensions time bomb looming at the heart of the exchequer here. Norway\u2019s fund, while on a different scale, has been more transformative, making the country one of Europe\u2019s richest. The fund generated an income of $109 billion in the first quarter of this year and owns 1.5 per cent of all globally listed shares. Amassing the entirety of our windfall taxes in a similar way to Norway would create an income-generating pot for generations.<\/p>\n Perhaps the most politically popular way to use the windfall would be to embark on a major public housebuilding programme, one that would lance the boil of our housing crisis once and for all. Ireland missed the era of the great big European social housing programmes, the ones that sustain city life in Austria, Germany and the Netherlands. Now we have a chance to play catch-up. Under its Housing for All strategy, the Government has pledged to spend \u20ac20 billion on housing over five years.The strategy targets the building of 9,100 new-build social homes and 5,500 affordable-purchase and cost-rental homes each year. However, as the supply of new homes ramps up, estimates of demand keep widening. The Economic and Social Research Institute (ESRI) estimates the annual demand for housing at between 35,000 and 53,000, while Davy stockbrokers believes it could be as high as 85,000. Either way, we don\u2019t seem to be solving either the supply or affordability issue quickly enough. Many believe this is because the Government\u2019s plans aren\u2019t ambitious enough.<\/p>\n Another obvious infrastructural deficit here relates to transport. Of all the projects earmarked in the Government\u2019s National Planning Framework, a high-speed shuttle or rail link to Dublin Airport, one of the busiest hubs in Europe, would deliver a significant economic shot in the arm as well as eradicating a myriad of increasingly arduous routes to the State\u2019s main airport. The MetroLink project \u2013 the planned rail line from central Dublin to the airport and Malahide in the north of the county \u2013 has been on the State\u2019s planning to-do list for almost three decades having been postponed several times.The current estimate is \u20ac9.5 billion for the proposed 18.8km line, equating to roughly \u20ac500 million per kilometre. Costly, yes, but undoubtedly a game-changer. Would it be economically savvy to carve such a strategic piece of State infrastructure from the Government\u2019s wider development plan and fund it directly with corporate tax receipts, finally getting the project over the line after so many false starts?<\/p>\n Standing at \u20ac223 billion last year, Ireland\u2019s national debt is one of the biggest in the world on a per-capita basis. It works out at about \u20ac42,000 for every man, woman and child in the country. Using bumper tax receipts to pay this down would perhaps be the most boring, least transformative of all the options. It would generate a collective sigh on the part of the wider population and perhaps be welcomed only by a handful of fiscal hawks in the Department of Finance and the Irish Fiscal Advisory Council. Our debt is also going down nominally and as a percentage of national income, which is the ratio creditors focus on, anyway on the back big budgetary surpluses.<\/p>\n Amid the debacle over RT\u00c9 and how the State broadcaster should be funded, the Government could, in theory, fund it and other media, directly from central government with the help of corporate tax revenue. This would stanch the bleeding from the RT\u00c9 payments scandal in terms of falling TV licence revenue while ensuring public broadcasting is maintained at a certain level and insulated from the vagaries of the market. It would also be something of a crowd pleaser, one for everyone in the audience as it were. There is, however, a snowball\u2019s chance in hell of this coming to pass given recent comments from Ministers, which reflect a lack of political appetite for such a move.<\/p>\n","protected":false},"excerpt":{"rendered":"Establish a Norwegian-style wealth fund<\/h5>\n
Transform the housing crisis with a giant public-sector housing build<\/h5>\n
Deliver a high-speed shuttle to Dublin Airport<\/h5>\n
Pay down the national debt<\/h5>\n
Pay everyone\u2019s TV licence<\/h5>\n