Centre is shifting, warns Donohoe

Finance minister Paschal Donohoe has warned that the centre ground in Irish politics is shifting, and must be protected, as he outlined significant tax and economic challenges ahead.

Centre is shifting, warns Donohoe

Finance minister Paschal Donohoe has warned that the centre ground in Irish politics is shifting, and must be protected, as he outlined significant tax and economic challenges ahead.

Addressing the Irish Tax Institute at its annual dinner last night, he said the next Government would have to face a hugely different economic landscape compared to a decade ago.

Mr Donohoe’s speech included veiled criticism of the employers’ body Ibec who this week claimed the coalition was underestimating potential corporation tax losses ahead.

Speaking about the general election — in which Fine Gael lost 12 seats, and Sinn Fein and left-leaning parties performed well — Mr Donohoe said: “It will take some time for the political system to work through the many signals sent to it by the electorate.

“It is challenging to rally people behind a message of pragmatism, compromise, and incremental change when other voices are offering simpler solutions in an increasingly complex world.

“Clearly, the centre is shifting, and it is incumbent on those of us who want to protect and maintain it to be in a position to adapt to the new challenges that present themselves today.

“The centre cannot be the same as the status quo. For too many, it is. The centre must respond. We will.”

The remarks come as Fine Gael contemplates whether to go into opposition or to stay in office and form a coalition with Fianna Fáil.

Mr Donohoe said that any new Government would “inherit an economic landscape very different from a decade ago”.

Negotiations on the post Brexit EU-UK trade deal begin next week, but have already been overshadowed by suggestions from London that the British government wants a ‘regulatory freedom’ in any agreement.

British prime minister Boris Johnson’s stance could collapse talks and trigger a no-deal Brexit.

Mr Donohoe insisted that Ireland wanted “an ambitious and fair partnership” that works for all and which minimised barriers to trade between Ireland and Britain. This would be in keeping with the Irish protocol, which prevents a new border.

But Mr Johnson’s move “comes with consequences”, warned Mr Donohoe, adding: “Divergent regulatory regimes create implicit barriers to trade. These can include quotas, embargoes, sanctions, licences, trade documents, standards, or any criteria required for entry to a given market.

“They are enforced by border checks, customs procedures, and documentary compliance.”

In a response to warnings from Ibec about future corporation tax losses, Mr Donohoe said there was a buffer in place, but it was also a challenge to assess reforms ahead.

Current levels of such tax could not be relied on, with projected losses of €2bn under the OECD-BEPS reforms. Nonetheless, these were not guaranteed, the institute was told.

To counter it, a €4bn buffer will come from a 1% rise in GDP surplus, he added, saying he had been “struck by influential voices” suggesting what he should to do.

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