All of these are positive initiatives that should help in our economic recovery, as well as provide relief to consumers looking to improve their homes. The retention of the VAT rate reduction for the hospitality sector should make socialising over the Christmas period that bit more affordable.
These measures are a good start, but we need to do more to encourage investment and growth in our multinational and indigenous export sectors. As Minister for European Affairs, I travelled to each of the 27 EU countries as part of Ireland’s hosting of the EU Presidency, and our export led FDI sector remains the envy of Europe.
While we now cringe at the idea of Ireland’s Celtic Tiger being a model to follow, there are fundamental elements that we did get right over the last decade or so, most notably creating a vibrant export sector. It is this sector which dragged us from the economic abyss when the tiger collapsed and our competitiveness improved. Spain, Portugal and Greece are all following the same model of trying to trade their way to recovery and while global markets may be improving, competition will remain extremely tough.
There is a real danger that if tax reliefs are not directed more towards export sectors, capital will just flow into Dublin commercial office space and housing where reliefs are directed for in the Finance Bill. The exorbitant rise in Dublin house prices over the last 12 months, combined with huge international interest in Dublin commercial real estate should be enough to encourage investment in this sector. Maintaining such low tax reliefs for commercial real estate, at the expense of other more important sectors to our growth story that are flat lining does not stand up to scrutiny.
Further growth of multinational or indigenous export businesses, and all the demand for office space that comes with it would do far more for commercial property prices and the Irish economy alike than any tax incentive. The IFSC is case and example of this fact.
The International Financial Services Industry employs 33,000 people and in the past 10 years employment in the industry has risen by 400 per cent. Growth of this industry has been a remarkable success story that was driven by government policy and tax incentives encouraging investment into the sector. Bank levies, increases in Dirt tax and taxing people’s private pensions do nothing to enhance this hugely important sector.
The Bank Levy in the Finance Bill sounds good in practice, but in reality it is just robbing Peter to pay Paul. Every euro that is taxed on the banks is a euro less that the banks can lend to small businesses, new homeowners or use for tackling the mortgage crisis. Taxpayers' investments in the Irish banking sector represent the equivalent of 15 per cent of our GDP or close to €30 billion. Taxing something that we want to return to profitability and attract foreign investors to makes little sense.
I continue to support the Government in their efforts to reduce the deficit and restore sustainable economic growth. That support does not silence me from being a strong advocate for ensuring our economic recovery is sustainable, and we do not return to the mistakes of the past.