Berkley Center

While most people in America have been focusing on the debt ceiling debate over the past few weeks, economic policy has taken center stage in Ireland as well. On Tuesday, October 15, Finance Minister Michael Noonan and Minister for Public Expenditure Brendan Howlin revealed Budget 2014 to the public. I ventured over to Leinster House, the Irish parliament building, to see the protesters gathered outside. The turnout was a far cry from any austerity protests in Spain or Greece: I probably saw just as many Gardai (police) officers surrounding the area as protesters. After I snapped a few photos, a Garda officer asked me to leave “for my own safety.” Although I didn’t feel like my safety was in danger at all, I left and decided to learn more about Budget 2014 and how it would affect the Irish economy.

A few days later, I attended a panel discussion hosted by the Trinity College Business Society and Ernst & Young (EY), featuring members of government, finance professors, and a tax expert from EY. The panel members disagreed often, but they all agreed on one major point: Budget 2014 represented a small, yet concrete, step toward Irish economic autonomy. As Aodhan O’Riordan (pronounced “Aye-on” like crayon—his words not mine), a member of the Labour Party, put it, “We need to get back in control of our own destiny, we need to get them out of here.” “Them” here refers to the troika of the European Commission, European Central Bank, and International Monetary Fund, who have imposed harsh austerity measures on Ireland in exchange for its extensive bailout program. The protesters at Leinster House echoed Aodhan’s statement: one of the most prominent images of the day was an Irish tricolour flag displaying the message “NO EU RULE IN IRELAND.” With an exit from the bailout program scheduled for December 15, Ireland is certainly close to regaining autonomy.

I’ll offer two brief takeaways on the budget, and then go into a bit more detail about one of Ireland’s most important issues: corporate tax.

1. The budget introduced €2.5 billion in new tax increases and spending cuts, the least amount of new cuts since 2008’s crisis. The government deficit is projected to fall to 4.8 percent of GDP in 2014 (from 7.3 percent this year), with the goal of less than 3 percent in 2015.

2.The tax on a bottle of wine has increased by €0.50. As a study abroad student, I had no idea that I would be so personally affected by the budget. (The increase went into effect on October 16.)

One of the most contentious moments at the panel discussion centered around Ireland’s probably deserved reputation as an international “tax haven.” Many multinational companies, like Google and Apple, base their European headquarters in Ireland because of its 12.5 percent corporate tax rate, one of the lowest in the world. And many firms pay effective rates of only 0-6 percent, as finance professor Jim Stewart noted. I’ve noticed a contradictory attitude among Irish people toward corporate tax. On the one hand, they’re eager to “play fair” and right their country’s reputation as a magnet for companies seeking tax loopholes. However, they also recognize that most major companies have only come to Ireland for tax reasons and could leave at a moment’s notice. Professor Stewart noted that Google has added 4,000 high-quality jobs to the Irish economy and warned that the country can’t risk losing them during such a fragile period of economic recovery (I couldn’t find this number online, but I did find that Apple employs 3300 people in Cork alone). He urged Irish policymakers to incentivize businesses to expand in Ireland and attract talented workers to live here permanently. Most panel members agreed that even if Ireland won’t raise the 12.5 percent rate, it should at least close the loopholes that allow companies to remain stateless and pay almost no tax at all. I can see no clear solution that would enable Ireland to achieve the conflicting goals of clearing its reputation and remaining attractive to foreign businesses. I think Ireland will do just as much as the international community requires and nothing more, allowing companies like Apple and Google to stay a few steps ahead.

Budget 2014 provided an engaging way to learn about austerity and the state of Ireland’s economy. After the bailout program ends in December, I hope there will be cause for celebration rather than protest in the coming years.