The State faces a "severe threat" from the international tax reform process, economic commentator Chris Johns has warned as he reiterated that a no-deal Brexit amounts to "economic insanity" for the UK.
He said given the high stakes involved there is still some hope of a Brexit deal, although he stressed he wasn’t overly optimistic. Johns is a former Bank of Ireland Asset Management chief executive and an Irish Times columnist.
He made his comments during a PwC-hosted webcast and added that Minister for Finance Paschal Donohoe was right to frame the forthcoming budget in the expectation that a no-deal is the most likely outcome.
He said the budget must focus on supports that will help keep people in work during the Covid-19 crisis.
“The Irish economy has actually displayed great strength in fighting through this crisis . . . nevertheless the budget is happening against a very difficult backdrop,” he said.
“We know it is hospitality and tourism in particular that has been hardest hit. And that is where the supports are going to be needed,” added Johns.
A new age
He said we are now living in a new age for fiscal and monetary policy in which for the first time in 30 years management of the economy has returned to finance ministers “because central banks are almost out of ammunition”.
Mr Johns warned the State must "meet the challenges of OECD [Organisation for Economic Co-operation and Development] reform on taxes", with added pressure likely from the US, should Donald Trump be re-elected as president in November.
He also forecast a more difficult global trading environment, with the slowdown in trade and investment likely to continue.
Mr Donohoe mentioned a capital expenditure figure of €9 billion for 2021. However, Johns suggested that given the State’s ability to borrow at low cost, that money should be spent on infrastructure such as roads, hospitals and the education system.
