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THE GERMAN ECONOMIST Peter Bofinger has said that countries like Ireland, the United States and Japan should follow Germany’s lead in order to make their way out of the debt crisis.
Writing in Der Spiegel he said that the problem in our country is that taxes are too low, that taxes should be slowly raised, and that the rich should pay more.
Bofinger identified Ireland as one of the OECD countries with the largest deficits, and said that the problems in balancing the books lie squarely in revenue. He said that government revenues only amount to about one third of GDP, which puts them at the bottom of the OECD scale, when countries with higher taxes have the lowest budget deficits.
Germany’s public revenues account for about 43 per cent of GDP, and Bofinger – who is a member of the government appointed economic panel known as the ‘Five Wise Men’ – said that Ireland should at least strive to reach this level.
According to the economist Ireland’s budget deficit (as a percentage of GDP) would go from a current level of -10.1 to -2.3 if revenue levels were the same as Germany’s.
Bofinger said that those who “benefited most from the – in retrospect undesirable – developments of the boom years” should now be made to pay higher taxes. He said that both income tax and capital gains tax changes could help to boost the government coffers.
Last month, a proposal to raise taxes in Germany for those earning more than €100,000 was shot down by coalition partners FDP. A spokesperson for FDP said:
Tax rises for the aspiring middle class of our country are nothing but a brake on social advancement by means of tax law.
Bloomberg reports that the German government has agreed in principle to grant tax relief for low and middle-income earners from 2013. The Free Democratic Party won 14.6 per cent of the vote in the election in 2009 on the back of campaign promises of lower taxes.
Ireland’s low corporate tax rate has attracted criticism from Germany and France in recent months, however a lowering of the rate is now off the agenda.
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Those German bullies can f..k off.
F**k off bofinger. If you want to compare Germany and Ireland dont forget doctors fees, dentists fees, cost of education, vrt, car tax, fuel, insurance, etc etc.
What’s wrong? Worried your banks won’t get the money they foolishly lent to Irish banks?
Time to leave the euro.
I totally agree
4 thumbs down? Gunther, hans, fritz and frauline hildeber must read the journal
Yes let’s get out of the euro, sounds easy right. No more excuses to avoid real austerity then. We need a reset.
Why the hell should Germans pay for Irish profligacy – they went through a decade of austerity, that’s why the cost of living there is so reasonable. It’s hardly their fault the elite here was too greedy and stupid to manage the economy when interest rates were being set by the ECB to suit Germany and France. Time to take your medicine.
Get bollo*ed Germany!!
In regards to corporation tax there are some myths. Foreign companies amount to less than 10% of total employment in the country plus low corporation tax is only one reason for FDI in Ireland, with highly educated workforce being also very important. Now not suggesting a huge increase in corporation tax but maybe a 0.5-1% increase would generate significant revenue earnings, instead of hitting the most vulnerable again and again.
But how many indigenous companies rely on the FDI sector for their existence e.g. catering, logistics, components? And how many retail jobs rely on all of these being in place and spending the wages in the local economy|? FDI sector is still really vital to keep everything else going.
I agree to an extent but a small increase wouldnt lead to a mass exodus of FDI
Bollo! Talk to any company involved with fdi and it’s clear low corpo tax is keeping em ere. French USA asian!
13 or 13.5% is still very low, its erroneous to say corporation tax is the only factor. Highly educated workforce and developed infrastructure are also very important. Plus considering plants and other assets companies would be reluctant to pull out.
I know we’re a great little country and all, but it’s the low corporate tax rate that attracts FDI in the form of ‘multinationals’. That’s it, nothing else. Highly educated workforce my foot, talk to some of those companies especially in the tech sector! I think all that other stuff is generated by the PR consultants of the IDA, who want to appear to be adding Alpha to protect their nice salaries.
But on the assumption the multinationals pulled out could the state not take over Whats left behind seen as we have the talent
Not a chance – can you see Intel’s fabs being run by the state? Never mind IP issues.
I’m no cheerleader for multinationals, in fact I despise the poverty of ideas that is behind dependence on FDI.
I believe at the moment the multi nationals have us by the ba@@s, we will have to be well out of the current crisis before we can tax them properly. However I believe the real problem, is our over reliance on foreign firms, something will have to be done to develop indigenous industries. Now is the time to be planning the future and I think the place to start is for the state( the people) to have a 51% controlling interest in all aspects of our natural resources, oil and gas, wind and wave power, retain a similar interest in one or all of the Banks, keep a 51% stake in all our semi-states, and invest heavily in education. This country will get over the present difficulties, it will be tough, but now is the time to hold our nerve, say no to the full scale profit seeking privateers( remember we listened and done what they wanted and look where it got us) , by adopting measures like the above , we can assure that this debacle will never happen again!!
Gerard, you really need to wake up. Snap out of the union loving rant and think about what you just said. You want government to be meddling in everything, have you seen how bge and esb is run? Have you seen what they pay themselves? Have you noticed what a balls the hse makes of the health service on a daily basis? Did you ever hear of the leech that was fas or notice the impact the monopoly of the daa actually has on tourism and the coffers, or what about rte? Will I even get into them. And this rubbish about "profiteering" is just bull. Every single one of the above semi states and state services head honchos pay themselves more than micko who runs europes most successful airline. State involvement is the last thing we need. Profit in a regulated environment is a necessary thing for business to grow etc. I wish people of your persuasion would realise than and stop with the blinkered populism!
And please stop blaming the whole private sector for the mugs at the top of the banks. It’s a weak and ill informed populist argument which has no basis in fact. I think you’d agree that the below list were the responsible people for the crisis (please note that there are more state bodies than "privateers"). Banks / the regulator / developers / government / local planning authorities.
@ Twomey, assuming you have rid yourself of your right wing induced rant, maybe you should check your facts before you get lost in ill-informed Homer Simpson like moments. I did nt advocate government meddling, I said state(people) “meddling”. Of course the only type of meddling you like is for the government to rescue the casino gambling elite of Ireland, they all love capitalism and blame everone else when it fails
Ha ha, check out what I have written here before. What we have done, ie: socialising private debts is totally and utterly wrong and actually contradicts the whole point of capitalism. But I am sure you’d prefer to just broad stroke people like me who have differing opinions to your Anne and Barry style logic.
OMG, the German Heretic said tax the Rich. Kill Him.
Plus "tax relief for low to middle-income earners". Down with this sort of thing!!
Careful now!!
Only problem is the Germans have a vibrant economy, far superior standards of living, fantastic public services, top of the range infra structure, would really like some of the nay sayers to answer me something? How come we are in the shi@????????? the truth hurts! Boston or Berlin the well pensioned Harney “person” said, we chose the Boston way! Even a blind man would see where we went wrong. Sometimes the first step in recovery involves swallowing foolish nationalistic pride, admit our mistakes and move on…
In fairness a highly educated and respected economist is offering advice which we are under no obligation to even consider. It’s perfectly reasonable to suggest that other economies should learn from the German model, it’s one of the biggest and most stable economies in the western world. He’s hardly announcing Blitzkreig, in fact there is absolutely nothing invasive or imperial about what he said. He said the same to the USA and no one is suggesting bullying there. It’s in German interests that the world economy recovers. This rage against him is totally unfounded. Typical “Here come the Germans” conspiracy theory. Lighten up!
Completely agree, what he is saying is get the rich to pay more tax… Really mature responses by the way – maybe people should actually read the article before making such infantile comments. A little bit of self control never hurts, both individually and as a nation…Are we that sensitive that we can’t listen to some pretty good advice? He’s saying those who benefitted from the boom should pay more. What a nut!
I see your point Daniel and I agree with you somewhat. The irony I see with this though is that we are being accused of being “bold boys” who lectured Europe on how to run an economy when we were supposedly flying it. Now Europe are punishing us as a result of that arrogance (arrogance on behalf of the government mind you, not the Irish people) but in turn now, they are being somewhat arrogant back, that being France and Germany. Now we find out that France has no reason at all to be arrogant, and then this? I am just sick to death of supposed leaders and economists playing “told you so” with wider societies lives. I wish they would all grow up, cop on, come together once and for all, and solve the problem TOGETHER, and stop with the petty pot shots. It’s a disgrace how arrogant and smug these guys are with the people they are truly supposed to represent!
Seriously whos economy is in better shape? Why shouldn’t we take few lessons. We have proved we can’t run a piss up in a brewery time and again
You’d think after starting 2 world wars they would have learned a lesson and butt out of other peoples business ………………………
We all want public services & know one wants to pay for them, the German is right if you want good services you have to pay. I prefer to do without them & have lower taxes
Gareth Fitzgerald said pretty much the same thing. The plus point of higher taxes in the past would have been better public services (assuming public service wages could have been kept in line with European norms), and we would never have experienced the property bubble which has essentially bankrupt all the banks and too many households.
The Germans and the French have a better standard of living than we do. We have messed it up doing things our way. Maybe we should learn some lessons from them.
as a Society we have to decide largely to go american level of shitty public services but low taxes or central/north european good services and high taxes. i vote good/high but people here have to realise you pay for what ya get.
change your name you massive twat
He’s called Bowfinger for fucks sake , he’s a bond villain trying to take over the world, trouble is (and i know i am going to be told off for saying this ) but park your economic tiger tanks in your own front yard or i will dig up winston churchill to give you another hiding.
We got serious money from the eu that helped kick start this third world country we live in. And I’m grateful for it, my only concern is what we gave away for it. Reminds me off the story of doctor Faustus, he sold his soul to the devil for great riches and success, then came the day of reckoning when the devil came for him.
I think the rich and powerful sold all our souls and the the French and Germans are looking for pay back.
I don’t know about going back to the punt or leaving Europe, but what I do no if their are not serious changes in the world economic system we are heading down a scary place. All yea have to do is look in the news. The world is gone potty.
Oh yea and FDI is money laundering on a grand scale. All the company’s are here to cook the books, avoid paying tax in there own country. They call it creative accountancy and transfer pricing. They actually sell products to themselves to write of taxes. They also 99% build products abroad and send them to Ireland to be completed so they can pay their tax here at a lower rate. I’m sorry it has f-all to do with a well educated workforce sure american multinationals couldn’t fill 2000 jobs because there wasn’t the skilled workers here.
Then theirs the financial service centre that is full of companies that are not actually there. They may have a secretary or just a post box. My cousin works there Shes accountant she manages a couple of acounts of companies that are there for the tax breaks. That’s why the French and Germans are up in arms because a lot of there companies are avoiding paying tax at home by being here.
Germany trying to take over Europe again feck off
Like I said before, I’m really sick of the Germans barking at us. European integration is far from the exciting democratic journey we all thought it would be. We’re seeing a lot more ordering around from them
Lately and it gets worse with every passed treaty. Im really wondering if this EU is such a good thing now. Enough. I’ve really had enough.
Remember where Germany got its wealth from in the first place. After WW2 Marshall aid was pumped in by the USA to rebuild Europe in it’s own image, especially west Germany. We on the other hand being neutral, got enough to reclaim shiity farmland in the west of Ireland for agriculture. On top of that we had Dev and the Catholic Church ensuring we didn’t rise above ourselves. The Germans now loaded with US money and the constant reminder that they were are shower of genocidal perverts put their nose to the grindstone to dig themselves out of the shit. Now they’re back where they started, triumphantly reunited. It’s only a matter of time before they start using their muscle once again… Be it economically.
The article would benefit from telling is what the German tax rate is.
If German’s ‘aspiring’ middle class are earning in excess of 100,000, then unlike here, they can afford higher taxes.
I can’t.
Wages pretty much similar to Ireland, if not a little lower. Worth noting the Free Democrats (Liberals) are desperatly unpopular in Germany at the moment. Got 15% in the last election, went into a coalition and now down to 4% in the polls.
Get your facts right Mr Bofinger.
Germans pay 42 cent in the Euro only after they earn 52,000
Ireland pays 41 cent in the Euro after earning 45,000 Euro, add on the social charges and PRSI and it’s almost 53%
German minimum tax rate 15% Irish minimum tax rate 20%
German VAT 19% Irish VAT 21%
Let me go on…
Vehicle Registration Tax, Germany 0% Ireland 16-36%
The reason Irelands tax to GDP ratio is lower than Germany’s is because so many people here earn less than 45,000 a year.
Now if we matched Germany’s rates those people would pay even less tax.
Where Germany does go one better is income over 250,000 is taxed at 45%… Hardly a penalty.
How many people in Ireland earn that much…not alot,last time I checked I think less than 5% earn over 100,000 and a majority who do set them selves up as a company and only pay 12% corporation tax on profit. German corporation tax is 33%.
So if Mr Bofinger can convince our dept of finance to mirror German tax rates I’m all for it.
I’ve worked out that on my current salary I’d be considerably better off.
This guy is probably working for Gaybo; with statements like this Gaybo’s “mad people ” in Brussels attack doesn’t seem so bad after all
Take heed or take a hike out of the euro.
This is the rhetoric we have to look forward to with slippery slope of increased European integration/domination.
Perhaps Herr Bofinger has a sneaky bet on Gaybo and and is playing up the looney Eurocrat role.
I don’t understand how a budget surplus can be a negative figure.
It means it’s actually a deficit, but it is a silly way of putting it.
The linked article has a table with a heading “Current budget surplus/deficit”. -10.1 is clearly a deficit.
@Pen Name thanks for your correction.
In regards to corporation tax there are some myths. Foreign companies only accounts for less than 10% of the
Free democrats seem to be more sensible than the bond villian.
1. We don’t have the same export market as Germany has, or at least we wouldn’t with their tax rates.
2. Sadly we don’t have control of the Euro. The currency always acts in favour of Germany.
The Boston or Berlin debate is one of the most stupid debates we’ve ever had in Ireland, and it seems no one wants to stop it anytime soon!
So we just forget about how Mary Harney et al launched the ship of doom, the same people who now tell us “we are where we are” , fact is “we are where certain people led us” , maybe if you google a few names of our “celebrity economists” and see what they were advising in 2001! remarkably the same people that now advise us again, forget at our peril!!
@Daniel & Donnacha. Educated and respected he may be lads but his facts and figures are grossly incorrect.
Almost similar to S&P last week getting a $2trillion discretionary spend wrong as part of a downgrade statement. Appalling.
As you suggest gents, the good doctor has every right to share his knowledge and opinion but I respectfully suggest he do the research before the lecture.
My point being that it’s neither Boston or Berlin. Both are incomparable to Ireland.
I certainly don’t forget Mary Harney but a solution involves a mixed approach, not a jump in a single ideological direction.
In the middle of a raging property boom we had interest rates of 1 percent. Why? Because Germany was in the doldrums. This completely inflated the property bubble incentivising bank lending, spending and borrowing rather than saving. Now they have the audacity to lecture us. Ireland joining the euro was an economic disaster for us.
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