Martin Mansergh (Tipperary South, Fianna Fail)

Leaving aside the automatic stabilisers, such as higher welfare payments in a recession, which mean that, despite cutbacks, overall Government expenditure is flat rather than actually declining, the most stimulating action Government can take is to succeed in stabilising, then rectifying, the public finances. While, of course, this cannot be achieved or attempted to be achieved in one full swoop, there is no benefit in unnecessary delay or in the image of a softly, softly, drawn-out approach which would allow us largely to continue business as usual, except that it would not because of the rapid impact of the negative confidence effects of such intentions. However, limited tax changes relating to business that are not costly in net terms can assist in improving Ireland's competitiveness. It is primarily improvements in competitiveness and a lowering of the high cost structures in our economy, including wage costs, public and private, that will enable us to recover more quickly. In times like these, we have to ask ourselves which matters most in case of conflict, the maintenance of jobs or of pay and conditions.

The international recession has seen a markedly reduced tolerance for tax havens and for countries whose bank secrecy rules provide a tax shelter for large incomes of citizens resident in neighbouring countries. I have attended on behalf of this country several European and OECD meetings, the object of which has been to intensify pressure on countries not compliant with accepted international codes. One of the results has been the extension of double taxation and tax information exchange agreements, which have been brought before the Joint Committee on Finance and the Public Service. The attractiveness of Ireland as the headquarters of firms previously based on small islands has improved - Ireland, incidentally, despite what is often said, is a large island, the third largest in Europe.

A greater level of tax compliance worldwide is also of benefit to this country. As a relatively low tax country from a business point of view, our reputation must be carefully guarded. This is the reason for the provision tightening up on transfer pricing. At the same time, it is important to make it attractive for leading foreign executives to base themselves here for a few years; hence, the changes to the remittance system. An innovative provision in the Finance Bill is the accommodation of Islamic finance, in recognition of our increased links with the Middle East. There are also measures to improve the attractiveness of Ireland with regard to basing UCITS funds here.

The North-South relationship in Ireland is a mixture of complementarity and competition. The Finance Bill reduces our standard VAT rate by 0.5% while, in another move, the British Government has put its VAT rate back up again by 2.5%, thus virtually halving the gap. There is certainly the possibility that a new British Government will narrow the gap further as a means of dealing with a deficit at least as large as ours. Deputy Seymour Crawford referred to the British stimulus. The British are only three months in advance of a general election and I suggest the Deputy observes their policy following the general election.

See this speech in context