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FINANCE Minister Paschal Donohoe should raise taxes to help to prepare Ireland for the next economic downturn, warned the Central Bank.
Governor Philip Lane said that the lack of balance between the books during the economic recovery has made Ireland less able to handle difficult times, risking a new austerity
M. Lane specifically identified taxes on expenses and investments. on saving – as a way to cool the economy
While supporting larger public investment projects, Mr. Lane said that tax increases should be used to finance them and to prevent the overheating of the economy.
He said financial buffers were needed to better deal with recessions and that other countries were already building them.
In a speech that will be seen as a shot through the bows of Mr Donohoe Before the 2019 budget, the governor of the Central Bank told MacGill Summer School: "The government should really release a surplus at this point."
Despite a stronger recovery than most of our European peers, Ireland has less evidence of state finances, he has severely warned.
Higher taxes in some areas would also prevent overheating of the economy as public sector investment increases, Lane said. "Thanks to taxation, if you slow down the level of spending in the economy, you make room in an orderly way."
Policy makers must now plan to be better positioned to handle a slowdown when it comes. "The history of the Ireland is in a crisis, we are meeting, debating and finding solutions, "he said.
But he warned that in good years, there is a lack of risk management – "a lack of
He questioned the prudence of Mr. Donohoe's fiscal policies – which have delayed balancing the budget in recent years, as public spending has increased faster than tax revenues.
"At the moment, the financial plan is essentially to have a deficit in 2019, albeit a relatively modest one," Lane said.
"But being deficient in these conditions probably does not correspond to the best principles of risk management."
"Other (countries) are already recording large budget surpluses. We do not seem to be doing the same tax preparations as these others. "
This directly contradicts the message of Taoiseach's Leo Varadkar in particular, who promised earlier this month tax cuts for middle-income households in the October budget. public investment program.
"This is not a choice between public spending and fiscal prudence, because there are other levers such as the overall amount of taxes that can reconcile this. balance, "said Philip Lane
. be appropriate," you must also accumulate surpluses. "
This includes not spending any taxes collected in a given year.
" The reason for this is not to suppress social goals, but to recognize that the only way to avoid austerity during the next recession we experienced during the last downturn is to build up budgetary cushions during the good years. "
Around the world, it is often the governments that have big ambitions for their public sector that are generating surpluses in good years, because they really do not want to impose austerity in good times. recession, "he said." It's really important to know, "he said.
" If the political decision is to 'get people working on projects', "Public investment" means that something else in the economy has to slow down. "
He warned that Ireland has benefited from a number of factors. Regarding long-term planning, Dr. Lane said that all periods of prosperity were not followed by a collapse, or vice versa.
A number of potential factors – including a difficult Brexit, a possible shift towards protectionism in the global economy, or a shift in market sentiment – could all tip the current recovery.
Editors Online
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