There has been much discussion of the potential role of a common euro area bond – Bruegel have released a paper analysing such ‘blue bonds’; you can download it here.
Ken Rogoff reflects on the European sovereign debt crisis in this FT article.
TASC have produced a report on the Finance Act: you can download it here. It covers a mix of: (i) economic efficiency issues – is the tax system efficient?; (ii) process issues – can the process by which the Finance Act is formed and legislated be improved?; and (iii) value issues – the design of the tax system has a fundamental influence on the distribution of income and wealth, with TASC advocating a shift towards a tax system that supports greater equality of outcomes.
Some good news. The exchequer returns for the end of April are essentially in line with the targets set out in the budget: The Exchequer Statement is here and the analysis of tax returns is here.
I wonder, however, whether evidence of sticking with our plan is quite enough right now to convince skeptical international markets that we can stabilise our fiscal situation. The yield on ten-year Irish government bonds moved out to almost 5.6% today, with the spread over Bunds reaching a new high of 2.7 percentage points. I think the next few weeks would be a good time to start to provide more clarity about the likely composition of this year’s budget, with indications about whether a property tax is likely, about the nature of the “universal social contribution” as well as the nature of further spending cuts.
Minister Ryan will shortly introduce a carbon windfall levy.
Generally, windfall taxes should be avoided as they are arbitrary expropriation of private property. In this case, however, I fully agree with the minister. Property rights on carbon dioxide emissions were created a few years ago. Although these rights used to belong to we the people, the European Union decided to give the permits, for free, to selected companies. This is tantamount to a subsidy worth billions of euros per year. Minister Ryan has now decided, rightly, to claw back this subsidy.
Obviously, it is a bit silly to tax a subsidy. However, the subsidy is cast in stone (an EU directive). So, I even forgive the minister the administrative inefficiency.
Note that a windfall levy on grandparented permits would also remove the legal objections that were raised against the carbon tax in France. Recall that the proposed carbon tax in France was very similar to the actual carbon tax in the Republic of Ireland.
UPDATE:
An attentive reader pointed me to the final sentence: “This levy is essential, if we are to reduce Ireland’s overall energy bill. Having discussed it with those in the industry, I am satisfied that it will function effectively.”
Ireland’s overall energy bill will increase because of this tax, because one of its key inputs (capital) has become more expensive.