An economist has called for a maximum 20% flat rate of income tax, saying the current tax system does not create any incentives to invest in employing highly-skilled people.
Dr Constantin Gurdgiev of Trinity College was speaking at the annual conference of the Institute of Certified Public Accountants (CPA) in Maynooth.
Dr Gurdgiev dismissed optimistic reports of an imminent recovery, saying that since May 2009, we had 'turning corners to a recovery more often than Michael Schumacher on a World Grand Prix circuit'.
The economist said Ireland's combined Government and economy-wide debt was the worst of any of the other so-called PIIGS states (Portugal, Ireland, Italy, Greece and Spain). He also said Ireland was only ten quarters into twin crises of house price falls and shrinking credit, warning that he expected 33 quarters of falls unless radical action were taken.
Dr Gurdgiev said there were some grounds for optimism on competitiveness, but exporters alone could not 'carry the economy out of a hole'.
He warned that competition for foreign investment would heat up in future, and Ireland best prospects lay in expanding the knowledge economy. He said the knowledge economy was 'human capital intensive', but there were no incentives to invest in this.
To address this, the economist called for a flat 20% income tax rate, a shift of the tax base to property and a closing of what he called 'the welfare trap'.