Think-tank says case for tax cuts 'very weak'

NERI urges increased spending on infrastructure and childcare

27th September, 2016
NERI argues tax levels below OECD average. Picture:iStock

The Nevin Economic Research Institute (NERI) has argued that the case for tax cuts in Budget 2017 is "very weak". Its senior economist Tom McDonnell said the budget should focus on measures to boost productivity and labour force participation, prioritising spending on infrastructure, education, research and childcare.

In its latest report on the economy, it forecasts GDP (gross domestic product) growth of 4.1 per cent this year and 3.7 per cent next year. It says employment growth, though moderating, should remain healthy, with the unemployment rate falling below seven per cent by the end of 2018.

The NERI report says Brexit remains a major risk to the Irish economy. It forecasts a negotiated settlement that minimises change to the existing trading relationship between Britain and the EU. Other risks to its forecasts include rising energy prices, weaker-than-expected productivity growth and greater-than-assumed damage to the labour force arising from the recession and prolonged stagnation.

On tax, the report says average rates of combined income tax and employee social security contributions in Ireland are significantly below OECD averages for both low and middle income earners.

NERI says state provision of subsidised childcare, the gradual tapering of family supports along with income and the introduction of refundable tax credits as a form of in-work benefit are examples of policies that could support higher labour force participation.

The think-tank calls for increased taxes on net wealth, intergenerational wealth transfers and property, and moves to reduce the scale and scope of tax reliefs.

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