Ireland budget aims to 'Brexit-proof' economy

Ireland's government on Tuesday outlined tax breaks for the tourism and farming sectors in a bid to offset the effects of the British pound's sharp devaluation and the expected impact of Brexit on the economy.

In a speech to parliament Finance Minister Michael Noonan said that while the ultimate fallout from Britain's June 23 referendum was still unknown, Ireland would put on "economic shock-absorbers" to mitigate the inevitable damage.

"Whatever the final settlement, what we know with certainty is that Brexit has increased risk to the Irish economy," he told lawmakers.

"As well as introducing specific measures to assist particular sectors of the economy, we must also put in place safety nets to protect us against future economic shocks," he said.

Noonan said Ireland wanted to retain the current economic ties with Britain as much as possible and to avoid the necessity for a hard border with Northern Ireland which he said would disrupt the economy.

He outlined favourable tax treatment for several sectors, specifically tourism, food and agriculture, all of which are already coming under pressure because of the fall in the value of the pound of nearly 20 percent compared to the euro since the start of the year.

Ireland last week reduced its 2017 economic growth forecast to 3.5 percent after its biggest trading partner Britain voted in June to leave the EU.

Trade between the two countries is worth an estimated 1.2 billion euros ($1.3 billion) a week.

Ireland is the UK's fifth largest export market and imports more from the UK than any other country.

In its 2017 budget Ireland will have 1.3 billion euros more to play with as a result of its ongoing recovery.

Following almost a decade of austerity, the government chose to allocate one billion euros to public spending and the remainder to tax relief.

As part of its strategy to "Brexit-proof" the economy, the government is not only aiming to reduce its budget deficit over the next two years but to turn this into surplus after 2018.

It plans to then set aside up to one billion euros a year in a "rainy day fund" to offset future downturns.

- 'Urgent reform' -

While national debt has fallen from 120 percent of gross domestic product (GDP) at the height of the economic crisis, the minister announced the government's intention to reduce it from 76 percent at the end of 2016 to 45 percent over the coming decade, well below the EU requirement of 60 percent.

"We must get away forever from the boom and bust cycles that have caused such grief in this country in the past," Noonan said.

The government's budget announcement came as the OECD criticised Ireland's anti-bribery laws as being in need of "urgent reform".

"Ireland still needs to make substantial progress on key recommendations issued three times since March 2007," the Organisation for Economic Cooperation and Development said in a statement.

The international body highlighted Ireland's law on corporate criminal liability as one area in need of an overhaul, specifically "so that it can be effectively applied to cases where senior managers of companies use subordinate employees to bribe".

Dublin also needs to harmonise its two foreign bribery offences, the OECD said.

Responding to the criticism, Ireland said it had already implemented a number of recommendations and the authorities were committed to investigating any allegation of an offence of foreign bribery of a public official.

"A number of recommendations relating to suggested improvements to the existing anti-bribery legislation remain outstanding but are under consideration in the context of forthcoming Criminal Justice anti-corruption legislation," Ireland's department of justice said in a statement.

The OECD noted that since 2003, Ireland has not prosecuted any cases of foreign bribery.

While Ireland has regained its financial independence following the financial crisis, it is still subject to complaints from international organisations relating to the way Dublin deals with multinationals.