Varadkar eyes business tax cuts in job stimulus plan

Leo Varadkar. Picture: Julien Behal

Tánaiste Leo Varadkar has promised a “radical” and “far-reaching” set of initiatives – including the prospect of reduced business taxes and commercial rates - as part of the Government’s job stimulus package, which is expected to be unveiled the week after next.

His comments coincided with the IDA warning that foreign multinational companies will likely create fewer jobs in Ireland this year, while also seeing more job losses than normal.

“The stimulus will be radical and far-reaching. It will be of scale to meet the challenge. It has to be,” Mr Varadkar said.

“We must take the right decisions now to set us on the right course for the next five years and beyond,” he said.

The Tánaiste said while final stimulus package decisions have not yet been made, a number of measures are being considered. Among them are improved and enhanced restart grants to help businesses that are reopening; reductions in business taxes and commercial rates; improved access to low cost loans; an extension of the wage subsidy scheme; and export guarantees.

Mr Varadkar said the July package – which will be followed in October by the wider national economic plan, which will coincide with Budget 2021’s presentation – will save jobs and create new ones.

Last week Finance Minister Paschal Donohoe said the Government is looking at options to better meet the credit and working capital needs of Irish companies and that it is looking at a number of different options in relation to how VAT can continue supporting the economy, without suggesting rate cuts are pending.

Jointly presenting the IDA’s performance figures for the first half of 2020 with the Tánaiste, the agency’s chief executive Martin Shanahan said foreign direct investment levels had held up so far, but the second half of the year will be more uncertain.

A total of 132 investments were made in Ireland by overseas multinational companies in the first half of 2020, with 53 being investments by companies with no existing business here. Overall, the investments carry with them the potential for 9,600 jobs, the IDA said.

However, it warned that Covid-19 is likely to “significantly reduce” global flows of foreign direct investment over the remainder of this year and into 2021.

Mr Shanahan said the IDA is still aiming for full-year growth in net job creation numbers for 2020, but such gains may not be achieved depending on Covid developments. He said it remains too early to predict what Ireland’s full-year 2020 multinational investment and job figures will be and that the IDA will have a better understanding by October.

He said if the 245,000 figure for total employment in IDA client companies, as of the end of 2019, is more or less maintained then 2020 will be seen as having been a strong year.

The UN Conference on Trade and Development has warned that foreign multinational investment levels could fall by as much as 40% this year and next, on a global basis, while the OECD has predicted a 35%-45% drop this year alone.

While it may be too early to predict Ireland’s multinational performance this year, Mr Shanahan said the ultimate effect will be downward pressure on job creation and increased job losses.

“There is absolutely no room for complacency. The global climate within which we are now all operating remains extremely challenging, with international forecasting bodies predicting significant impacts of the Covid-19 pandemic on global growth, trade and on foreign direct investment flows,” he said.

“The speed of Ireland’s recovery will be partly influenced by global factors, which are very negative in the near-term and uncertain in the medium-term,” he said, while also warning that in addition to the struggles caused by Covid-19, other challenges like the risk of a no-deal/hard Brexit, increased trade tensions, achieving global consensus on tax, and the digitisation of sectors “have not gone away”.

Mr Shanahan said global competition for foreign direct investment (FDI) from multinationals is intensifying and Ireland must maintain its competitiveness levels. 

Both he and the Tánaiste said investment from companies within the pharmaceutical, medical technology and life sciences sectors will remain key. 

Mr Shanahan said attracting regional investment will remain central to the IDA’s future strategy. Just under 50% of foreign direct investment in the first six months of this year was made in regional locations.

The American Chamber of Commerce in Ireland welcomed the IDA’s first half performance but said maintaining Ireland’s attractiveness hinges on the delivery of key infrastructure investment in the areas of broadband, transport and housing. 

Feargal De Freine, head of FDI at EY Ireland, said "a clear approach" from Government towards dealing with Covid-19 "will go a long way towards reassuring investors and maintaining this country’s position as a leading location for FDI."