CNBC Interview with Irish Finance Minister Paschal Donohoe from the 2018 World Economic Forum
Here are excerpts from a CNBC interview with Pierre Moscovici, European Commissioner for Economic and Financial Affairs and CNBC’s Steve Sedgwick and Geoff Cutmore from the 2018 World Economic Forum.
SS: Wouldn’t it be nice if we could find someone, who’s in a leadership position, who’s never done Davos before, who can just say what they really think about it?
SS: Paschal Donohoe is that person!
SS: Irish Finance Minister. Your first Davos?
PD: That is indeed the case.
SS: Well, congratulations.
PD: Yes, so-, having a very good, very positive week.
SS: Well, that’s-, that was my question. Are you cynical about Davos? Or does that really mean something?
PD: No, I think, well, what it offers governments and companies is the opportunity to meet many investors and colleagues, in a very productive and very fast way.
PD: So just for that, I think it’s been a very, very useful week. I am struck by the tone that is here, there is a tone that is generally optimistic, there is a tone that believes that many of the political difficulties, in particular, of the last year, may have subsided in within Europe, and which affects the tone that people have as they look to the future.
SS: Mm. For me, Ireland sums up a lot of the theme here. Because you were called, from the outside, a recovery poster boy. You reduced your debt to GDD aggressively, you also reduced your unemployment aggressively. Your NTMA is just a bunch of stuff, to get, you know, 1% out of the money, rather than 14% ten-year return at the height of the crisis. But-, but-, from the outside it all looked good, but then the Taoiseach, Mr. Kenny, lost an election, or so, or lost his majority, because Ireland didn’t did not feel. Because there were water taxes. The Irish people simply did not feel the recovery. So, you know, your government, and Mr. Varadkar’s government as well, have a different job, don’t they?
PD: Yes, I think that’s a very, very fair analysis of what really happened in our own country, and I think it reflects a lot of the challenges that Europe is currently facing, in that sense that there has been a revival of Numbers. You know, we could talk about what was happening with the deficit, we could talk about what was happening with the debt. But, of course, we all know that a crisis can affect people’s daily lives with appalling speed, but any kind of recovery or change takes much longer. And what we are seeing happening now in Ireland is that we are gradually seeing an improvement, in terms of growth, which is now being spread across our country, into more sectors of our economy. But, that being said, we still have so much to do. We have to make sure that the evolution of the economy makes a big difference in people’s lives, we have to make sure that we have a stable foundation for the future, and then the politicians at the centre, like me, have to really understand that a recovery in the economy is not the same as a healed society, and we need to understand the gap and rise to that challenge. And, you know, Professor Stiglitz, who I debated with yesterday on a number of different topics, you know, wrote a book called Globalization and its Discontents-,
SS: I read it myself.
PD: And maybe, you know, discontent, we need to think a lot more about-,
SS: Mm. Yes.
PD: And see how we respond to that, what we try to do.
SS: The only problem for Joe is that he wrote it 20 years before Piketty, and I think he’s a little irritated that Piketty gets all the credit.
PD: I-, I said to him, I said, ‘Are you more or less happy that a lot of your prophecies have come true?’
GC: Can I quickly talk to you about Brexit and the benefits, or whatever, for Ireland here? Because the -, the Chancellor, I think yesterday, made it clear that they are on their game, when it comes to regulating financial services, and without an agreement on this, there is no broader agreement with Brussels. And I think Brussels is also starting to realize the potential risks. But that all means, doesn’t it, that Ireland doesn’t get that Brexit bump, the bonanza of bankers moving their jobs to Dublin?
PD: Well, we have already received and seen an increase in investment and employment in financial services in Ireland. We have seen, for example, very significant additions,
GC: Mm. But not in the numbers you were hoping for.
PD: We’ve always been very clear that any benefit from this would be incremental. I think it was unrealistic and inaccurate to claim that we were going to see banks closing, leaving the city of London, we saw companies like JP Morgan, like Bank of America, making very important and positive decisions about Dublin . So we are seeing a positive change, as a result of that, but all of this in the wider context of Brexit which will be a challenge for Ireland. You know, we’ve already made the decision to change our growth forecast for the future, so we’re now looking and aiming for around 3% growth over the next few years, and we’ve scaled back to account for the fact of what we think Brexit might create, so that we can plan a more sustainable political basis for our country for years to come.
SS: I was just going to say, on Brexit, how do you think it’s going? I think from a British perspective, and let’s say I’m politically agnostic on this one, I think it’s going pretty badly too. I don’t think we’ve solved the border issue, even though people say we have, because I don’t think EU jurisdiction in Northern Ireland, and so what’s going on across the Irish Sea, has been successfully resolved…,
PD: We-, I believe, and I would argue very differently, that the progress that has been made in the first phase of the negotiations, in terms of an agreement on how to prevent the development of a hard border, in particular in the light of different contingencies and events-,
PD: It was a really important agreement. We know, and we expect the UK to honor that, I believe they approach this in very good faith, in terms of how to-,
SS: Pascal, I don’t see how it works. Either you have EU rules, which work across the border, and, again, no one wants to see a return to the hard border, we all remember the bad times too-,
SS: Either they stop at the Irish Sea, or the Brits say, ‘Actually, no, we don’t have European legislation or regulations within the UK. I don’t understand that this has been resolved-,
PD: Indeed, and this kind of complexity will be at the heart of the negotiation, as we go forward,
SS: So it’s not agreed yet, is it, Pascal.
PD: In the second phase, and the key principle that was recognized in this text was the principle of regulatory alignment, if a number of different developments were to take place. So what we’ve said is that when and if the EU and the UK come to an agreement, in terms of the future of trade, that could provide a framework to deal with a lot of difficulties that you are right to raise. But we also said that, if that doesn’t happen, the UK has recognized the role of standards alignment on the customs union and the single market, to ensure that we can have the kind of movement on our island which is essential, to ensure that a hard border does not return.
GC: Just very briefly, before you let go, we have to address the issue of taxation. We’ve seen the Taoiseach in the European Parliament push back a bit on the criticism you’ve received from the French, and others, about your current tax rate. Given that Mr Macron came here and actually started talking a lot about cutting taxes in France, do you think the mood music could actually change here, and, God forbid, it might even be possible to further reduce taxes in Ireland?
PD: Well, competitiveness is not just the prerogative of large countries. Small open economies have the right to take
choices to make sure we’re competitive and create jobs, we have 2 million people working in Ireland, and corporate tax certainty is part of our competitive proposition, but not everything, but it’s a very, very important.
PD: In terms of future changes to Irish corporation tax policy, there will be no rate change. It’s 12.5%, it’s not going to go up or down. We have a fixed, stable rate, which is low on a very broad base of economic activity, and we will continue to protect and maintain it while making the changes that we know we know need to be made.
GC: Sounds like a prepared statement, if you don’t mind me saying it. Do you think Donald Trump has changed the discourse on taxation in Europe?
PD: Well, that has the merit of being a prepared statement, because I believe that, and that’s at the heart of how we manage and create a positive international environment in Ireland with investors and employers. To answer your second question directly, do I believe the mood is changing when it comes to corporate tax globally? The answer to this question is yes. You have to look at what President Trump has done. We have to look at the declared intentions of the United Kingdom. We have to look at what President Macron said earlier in the week. But, in the midst of this kind of change, what we’re very clear about is that certainty about our rate is central to our proposal, and we’re now phasing out Double-Irish, and we’ve phased out stateless companies from our tax code in 2013, and we introduced mandatory disclosure of information regarding tax planning in our jurisdiction, and we are one of the first countries to have an exchange of information between the tax authorities of the ‘European Union-,
PD: So we’re going to make those changes, while maintaining the rhythm.
GC: Minister, thank you very much for being with us.
PD: Thank you for inviting me.
SS: Pascal, nice to meet you, sir.
PD: You too. Thanks very much.
GC: Paschal Donohoe, Finance Minister of Ireland, and we look forward to seeing each other next time.
PD: I can’t wait to be there too.