Ciarán Galway sits down with Sinn Féin Spokesperson on Finance and Public Expenditure and Reform, Pearse Doherty TD, to discuss his party’s fiscal policy, the Covid crisis and recovery, and Irish unity.
Having delivered his party’s response to government budgets for 12 consecutive years, Sinn Féin’s TD for Donegal South West Pearse Doherty is intent on becoming the next Minister for Finance. Asserting that “for too long, it is the vested interests which have had the ear of government”, he is determined to “make real change for a lot of people whose voices, in my view, have never been heard in the corridors of power”. For Doherty, it is a matter of placing “ordinary people” above landlords, speculators, and high financiers.
Eschewing the charge of naïveté, he acknowledges that change comes dropping slow, but suggests that the opposite is also true. In the words of Lenin: “There are decades where nothing happens; and there are weeks where decades happen.”
“Change can happen fast if the political will and determination is there. That’s why I want to be Finance Minister because I know I can do a lot of good in that role,” Doherty insists.
To illustrate his point, the Sinn Féin Ard Comhairle member refers to erstwhile Fianna Fáil Education Minister Donogh O’Malley’s surprise proposal for free secondary education in September 1966. While he had consulted neither his department nor his cabinet, he had tacit approval from Taoiseach Seán Lemass and the public greeted the announcement with widespread support, effectively precluding O’Malley’s cabinet colleagues from opposing the policy.
While Sinn Féin is frequently characterised as a “high-tax, anti-business party” by its political opponents, the finance spokesperson argues that it is in fact a “fair tax party”. “The reality is we are pro-business; we want to see more support for small and medium enterprises. However, we do believe that there needs to be increases on employers’ PSRI at higher earner level,” he retorts.
Doherty highlights advocacy for the inclusion of increased research and development supports in Finance Bill 2020 as one indicator of his party’s support for SMEs. “I think we need to go a lot further because when you pare back what is happening in Ireland, particularly with SMEs, we are not as productive or as profitable as we should be in relation to our European competitors. There is a lot of focus on FDI which creates high value jobs and a good return to the taxpayer, but we believe that focus cannot come to the detriment of SMEs,” he argues.
On its proposed increase of employers’ PRSI on salaries over €100,000 to a rate of 15.75 per cent, Sinn Féin’s finance spokesperson references the substantial supports provided to businesses, employers and employees throughout the pandemic. The reality, he indicates, is that “we cannot have those type of safety nets if we’re not willing to contribute to them” and as such he believes that the proposed increase has been vindicated.
Interestingly, for a party of the left, Sinn Féin’s 2020 manifesto committed to “retaining the 12.5 per cent corporation tax rate that has been key in attracting many multinational corporations to locate in Ireland”.
“Change can happen fast if the political will and determination is there. That’s why I want to be Finance Minister.”
“The 12.5 per cent rate has served us well,” Doherty says, adding: “I think we have moved on and the discussion is not about the tax rate anymore. The discussion is about what is happening around the edges of that and the way that profits can be shifted or be written down to sub-degrees or to zero by very aggressive tax planning.”
While not advocating for a change to the corporate tax rate, Sinn Féin does propose that associated loopholes are “damaging Ireland’s reputation at home and abroad” and should be closed.
“We have seen it in terms of the onshoring of intangible assets, where all the costs can be written off against future profits,” he details. This loophole was identified by Séamus Coffey, former chair of the Irish Fiscal Advisory Council, in the Review of Ireland’s Corporation Tax Code commissioned by the Department of Finance.
“The biggest tax change that Sinn Féin advocates and the one which would bring in the most amount of money – close to €750 million each year – is a tax recommendation put forward by [Séamus Coffey]. That was his proposal. Therefore, the type of proposals we are putting forward are far from reckless,” Doherty asserts.
Regardless, a recurring criticism of Sinn Féin’s tax policy, and one strongly refuted by Doherty, is its potential unsustainability beyond year one. “Those that make that charge are our political opponents who are unwilling to, for example, tax the banks. The banks aren’t going to be paying corporation tax, not just for one year, but for 20 years,” he replies.
Emphasising Sinn Féin’s annual costed alternative budget, published “within the parameters set down by the Department of Finance and within the fiscal rules, despite the fact that we believe they are too restrictive”, Doherty argues that it offers a “clear choice”.
“We believe that we should be bringing in a third rate of income tax. This is something that the IMF called for just a fortnight ago; that countries should look into taxing higher income earners. That’s a tax that would continue to generate income, year-on-year.
“That’s not the type of approach that Fianna Fáil and Fine Gael want to take. They would rather hit us with carbon taxes, consumption taxes and allow loopholes to exist which allow for companies to write down their taxable profits to close to zero.”
Global tax challenges
Reiterating his belief that corporate tax loopholes are damaging Ireland’s reputation in Europe and beyond, Doherty suggests that these “allow the impression to exist that Ireland is a type of rogue entity in relation to taxation”. Conversely, the Sinn Féin frontbencher asserts that as a small and open island economy, Ireland “should have the right and has a legitimate right to use taxation to give us a competitive advantage”.
However, he qualifies this by asserting that this competitive advantage “cannot be on the back of developing nations or as part of a race to the bottom”. “There has to be flexibility in terms of steering taxation policy to allow Ireland to compete with nations that are far bigger and may have competitive advantages that we do not have. Ireland has a lot more than taxation to offer and that is why it has been so successful up until this point,” he observes.
In the US, the Biden administration’s global tax plans could have significant repercussions for Ireland. However, as yet, these plans have yet to navigate the US Congress or Senate. While Doherty does not believe that Ireland will
necessarily lose economic advantage in terms of FDI, he is cognisant of the wider macroeconomics “beyond our control”.
“The big challenge for Ireland is not from Biden’s proposed increase in the rate [of corporate tax], it is more in terms of what his administration is doing in relation to the Global Intangible Low-Taxed Income [GILTI] which he is increasing from 10.5 per cent to 21 per cent. That will apply to profits which are moved from a company that is based in Ireland and is repatriating profits to the US; they will be hit by double the tax rate after the Irish taxes are made.
“The impact here is not that Ireland will receive less tax, it is that the US will receive more. The question is whether that will dissuade future companies from locating in Ireland as their centre, or whether it will dissuade companies that are here from making a new investment,” he explains.
Ireland has already factored a €2 billion reduction in corporation tax receipts into its fiscal parameters as a result of potential changes produced by the OECD Base Erosion and Profit Shifting (BEPS) negotiations and the Biden proposals. However, Doherty also emphasises that Ireland has much more to offer than an advantageous tax rate. Factors contributing to Ireland’s economic competitiveness include access to Europe; a highly educated and English-speaking workforce; and relative government stability.
Simultaneously, the Sinn Féin TD identifies two conspicuous challenges. The first is a requirement for “proper and substantial” investment in education and the second relates to infrastructure and cost of living. “Many companies will tell you that one of the biggest challenges they face in terms of locating in Dublin is that they cannot find accommodation for their employees. That’s why major companies are buying up apartment blocks and buying houses from plans. Much of the development that is happening now in our capital and surrounding areas is not being sold on the open market. That is a problem. Reducing the cost of housing through the type of capital investment programme that we are proposing supports our competitiveness and retains that into the future in terms of FDI,” he says.
While recognising the opportunity of the Covid crisis as a prospective economic gamechanger, Doherty is acerbic in his criticism of government deputies applauding frontline workers in the Dáil little over one year after facing down the striking nurses and midwives.
“It’s very easy to say the right thing at the right time, but a year on, the question is: Have we treated those on the frontline properly? The answer is no. That was exposed last year when the Government opposed paying student nurses working on the frontline,” Doherty maintains.
“I’m sceptical, not that change is going to come, but rather that this government will deliver that change. I genuinely believe that change is coming and that Sinn Féin will be at the heart of that change. This is what the Government really does not want, because its trick is to always pretend that change cannot happen. That was blown apart in the last election; people saw that it does not have to be this way, that Sinn Féin, along with others, can offer real change. That genie is not going back into the bottle and that is why we have seen our support continue to grow.”
Reflecting on the social and economic recovery, Doherty re-emphasises his party’s assertion that the any recovery must be rooted in fairness. “I take a lot of hope out of this [crisis]. When government is forced to move, it can move,” he says, referencing the legislature’s consensus on the public health response at the outset of the pandemic.
Elaborating on the principles informing Sinn Féin’s vision for the recovery, the finance spokesperson contends: “The principle is that the State must be there to support you when you are in need. The principle is that certain services need to be public services as a right, not because of how deep your pockets are or who you know. Childcare should be a right, like education. Healthcare should be free at the point of delivery. There should be a right to a home. That’s the type of change that we would bring.”
Sinn Féin’s primary policy objective remains the pursuit of Irish reunification. A persistent theme of the Irish unity debate is cost. In November 2020, the party published Economic Benefits of a United Ireland. The discussion document makes two assertions: firstly, that partition is unaffordable; and secondly, that Irish unity will deliver economic benefits to island of Ireland as a whole.
“Ireland cannot afford partition,” Doherty states, adding: “What our document shows very clearly is that partition has negatively impacted both sides of the border, but particularly the North. In the North, as a result of having no fiscal powers, or very few fiscal powers, decisions are being made in Westminster which really only serve the City of London and the south-east of England and do not serve the regions of Britain and definitely do not serve the North.”
“A referendum on Irish unity is part of the Good Friday Agreement. It is outside the control of the Irish Government when this takes place. Given that people recognise that a referendum will take place within the next number of years… the failure to plan is a very serious failure of leadership by this government.”
Doherty’s document also emphasises the relative economic neglect which prevails in the border counties. “There is reason why Donegal, which I represent, has the highest levels of poverty, unemployment and medical card usage in the State, alongside the lowest levels of disposable income in the State. Economically, we know Donegal has been forgotten, but partition has had a major impact in cutting off the natural hinterland of the county along with its natural trading partners in Derry, Tyrone and Fermanagh.
“Can we afford partition? No, we cannot. Can we afford Irish unity? Of course, we can. How can I say that? I rely on a peer reviewed international report which modelled Irish unity in a post Brexit scenario and indicated that in the first eight years post-unity, the benefits to the economy would be €23.5 billion, north and south.”
Addressing the challenges in terms of planning for Irish unity, Doherty advocates for the creation of an all-party committee on Irish unity; a civic forum where all communities on the island of Ireland can discuss what a new Ireland would look like; and an Irish Government green paper on Irish unity.
“In the absence of doing that, the Irish Government could be walking into a Brexit scenario. A referendum on Irish unity is part of the Good Friday Agreement. It is outside the control of the Irish Government when this takes place. Given that people recognise that a referendum will take place within the next number of years, whether in five or 10 years – we would like to see it in five – the failure to plan is a very serious failure of leadership by this government.
“Change can happen. I believe that it can, and I know that we have the team to deliver it,” he concludes.