Sir, – Financial markets did not approve of the Truss/Kwarteng fiscal plan to explode the UK budget deficit with an energy price cap combined with multiple tax cuts. Markets demanded a return to the sane centre ground of economics and politics.
Investors do not like the fantasy economics of the far right, nor of the far left. Markets like to see sustainable tax plans based on a broad base of taxpayers. International investors react decisively when a country narrows its tax base and/or plans unsustainable spending. The Irish economy is heavily dependent for tax revenue on two related segments of our society – higher-paid employees and multinational companies. The leftist populist party Sinn Féin intends to narrow the tax base by removing the local property tax and further reducing USC on lower-paid employees who already pay very little tax in Ireland compared to all OECD peer countries. For example, around 1.2 million Irish income-earners are fully exempt from income tax while around 1.4 million pay tax at the lower rate. Only around 650,000 income-earners will be liable for higher rate tax in 2023. Sinn Féin intends to target higher-paid employees, hundreds of thousands of whom are employed in multinational companies, with a plethora of higher taxation plans. Sinn Féin says it will impose more employment taxes, income tax, wealth tax and inheritance tax. Most of these taxes will hit a small segment of people – higher earners – many of whom are internationally mobile. Sinn Féin’s economic plans represent a significant shift from the present government’s policies, particularly if that party leads a leftist coalition with People Before Profit and perhaps Labour and/or the Social Democrats. Financial markets will foresee the impact that the populist left’s economic policies will have on the Irish economy. The risk premium charged by foreign creditors – investors in Irish government debt – will increase and so borrowing on behalf of our State will cost more than it otherwise would. The mobility of international capital, investment, wealth and employment will become very clear shortly after a leftist government’s first budget, should it come to pass. – Yours, etc,
MARK MOHAN,
Dublin 15.