(Bloomberg) -- Ireland and the UK have a shared determination to secure an agreement on post-Brexit trading arrangements, Irish Finance Minister Michael McGrath said following his first meeting with Chancellor of the Exchequer Jeremy Hunt on Thursday.
Talks on trading for Northern Ireland have reached a new level and there’s a very good atmosphere, though there are still issues that need to be resolved, he said in an interview with Bloomberg.
“We discussed at a high level our objective of what we’d like to see by way of an outcome and a need for an agreement,” McGrath said. European Commissioner Maros Sefcovic and his team are “very anxious to secure agreement to bring a final settlement to this issue,” he added.
Expectations of a deal have been building in recent weeks, since the European Union agreed to use a real-time UK database tracking goods moving over the Irish sea border — a development that lays the groundwork for a broader customs accord.
An agreement on the Northern Ireland Protocol - which avoids a land border on the island of Ireland, effectively placing a frontier in the Irish Sea and allowing Northern Ireland to remain in the EU single market — would resolve a drawn-out dispute between the UK and the bloc.
Dublin’s focus regarding the protocol is to ensure an all-Ireland economy, so that trade can flow freely across the land border “in the interests of the economies north and south,” McGrath said. He added that there’s no timeline in place for an announcement.
Other ongoing discussions among EU member states include how to respond to a $369 billion US plan to subsidize green technologies for industry. McGrath said Ireland will consider very carefully the EU’s suggestions of how to counter President Joe Biden’s clean tech act, which are to be published next week.
“We will be cautious about any proposals that would result in very significant relaxation of state aid rules because it could have an impact on the balance within the single market,” he said.
With regard to additional funds to support countries with less fiscal space in the green transition, he said the bloc is in the early stages of the discussion as member states are still implementing the €800 billion ($870 billion) pandemic recovery fund. But he said the government would be prudent about a new fund, because it comes with a significant cost for net contributors to the EU budget such as Ireland.
“We need to understand very clearly what is the purpose of such a fund, who the beneficiaries of that fund would be, what impact it would have on the application of state aid within the EU” and the ability of Ireland and other smaller countries to benefit from those changes, he said.
Tech Layoffs
Domestic challenges for Ireland include a recent slew of layoffs in the multinational technology sector. Although the impact of job cuts is likely to be in proportion with other jurisdictions, several large firms contribute a substantial amount to the state’s finances in the form of corporate tax receipts.
While Ireland reported a fiscal surplus in 2022 and anticipates doing so for “the next number of years,” it has identified about €10.5 billion of tax receipts from corporations that could be at risk.
Commercial real estate is also seeing an impact from a retrenchment in the tech industry as some firms have sought to sublet their office space in the country’s capital. However, it comes at a time of extremely tight supply in the residential property market, which is starting to impact Ireland’s appeal to international companies.
While there’s still significant demand for commercial real estate, there may be “a diversion of resources from new commercial real estate construction to residential construction over the period ahead,” McGrath said.
“That is something that we would welcome because of course we are looking to increase the supply of residential accommodation, both houses and apartments, in Ireland,” he added.
An overhaul of international corporate tax rules will also impact Ireland’s revenues. A minimum rate of 15% will come into effect at the start of 2024, McGrath confirmed.
A national reserve fund of €6 billion, established to ward against the risk of reduced corporate taxes, is being reviewed in terms of “the scope, the amount of money that should be put into it, and also what those funds ultimately will be used for,” he said. “We are looking at different options.”
--With assistance from Lucy White and Peter O'Dwyer.
©2023 Bloomberg L.P.
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