We need to talk about ‘Singapore on Thames’

We need to talk about ‘Singapore on Thames’

For obvious and very justifiable reasons, the budget was not exactly an event that will live long in the memory.

It was dominated by Brexit, which is exactly where it should be, given that that we are now facing down the barrel of a gun.

Perhaps there is more going on in the background than us ordinary mortals are exposed to, but all of the mood music this week suggests that it will be very difficult, albeit not impossible, to reach agreement by October 19, in which case Boris would presumably obey the law of the land and seek an extension.

The EU would obviously grant such an extension.

I have got the distinct impression from many in the UK that they believe Ireland would eventually blink first and accede to UK demands on the backstop.

The Irish Government clearly has no interest in doing that, and for reasons that appear sound.

Thankfully, the EU is still fully behind the Irish stance on this issue, because it fully recognises the threats to the Good Friday Agreement from a border on the island of Ireland.

Mind you, if a deal is not reached and the UK eventually crashes out, that could well deliver that border that most are trying to avoid.

There is still a lot to play for and there will be many twists and turns in this sorry mess of a journey.

However, I think the Brexit-driven stance of the budget is totally appropriate and sends out a strong message to the UK side that Ireland is now a mature developed economy and country, and is prepared to live with and deal with the consequences of the UK leaving the EU without a deal.

The Brexit emergency fund put in place sends out a strong message of intent.

Looking a little bit down the road, Irish policymakers need to consider the possibility that if the UK does crash out without a deal, it might then pursue a very independent and aggressive policy on taxation and other policies in order to create a so-called ‘Singapore on the Thames’, as some avid Brexiteers have threatened.

It is worth remembering, that a few months back, the North had the opportunity to become the Singapore of Europe.

But the new London government and some unionist politicians spurned the chance for dubious ideological reasons.

The UK might have ambitions to eventually assume that status.

I am far from convinced that the UK would have the political and social structures and cohesion to achieve such an aspiration.

Singapore is a very dynamic place and a very successful entity.

However, it is a type of benign dictatorship, which is something that cannot be said for the UK.

Furthermore, if the UK does pursue the Singapore on the Thames approach, it would seriously annoy the EU.

I am not convinced that anybody in the UK, regardless of how ideologically twisted they are, could argue that annoying a market of over 420 million people on its doorstop could possibly be in the long- term interests of the UK economy.

It would probably not be a great basis for trying to negotiate a future trade deal.

I still believe that the UK needs the EU a lot more than the EU needs the UK.

Despite these reservations, it is probably sensible for Irish policymakers to plan for the possibility that the UK post-Brexit, could become an aggressive and major source of competition.

Singapore has a very aggressive and a very progressive tax system, which is key to Singapore’s success.

The UK could well decide to go the same route.

However, as things stand, the UK tax system is well ahead of Ireland’s in many respects.

Figures from PwC this week show that an individual earning €60,000 in Ireland faces an effective tax rate is 30%, compared with 26% in the UK.

For a salary of €100,000, the effective tax rate in Ireland is 39%, compared with 33% in the UK.

It gets worse as salaries go higher.

In other areas such as capital gains tax, inheritance tax, and entrepreneurial relief, Ireland is lagging well behind the UK.

Perhaps that is the sort of tax system we desire as a country, but if the UK does decide to pursue the goal of becoming a Singapore on the Thames, Ireland is currently not in a strong place to counter that competitive challenge.

It is probably something we need to think about.

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