"The golden goose may be killed" - Former IMF official warns Ireland to prepare for end to tax regime

Ashoka Mody says Ireland is "viewed with a considerable amount of suspicion in the international community"

"The golden goose may be killed" - Former IMF official warns Ireland to prepare for end to tax regime

Ashoka Mody. Photo: RollingNews.ie

A former senior International Monetary Fund official has said Ireland should prepare before the 'golden goose' that is the current tax regime is 'killed by external forces'.

Ashoka Mody - who was the IMF's chief representative to Ireland during the Troika period - has also described the 2008 bank guarantee as a mistake.

Mr Mody was speaking to Ivan Yates on The Hard Shoulder, ahead of the publication of his new book EuroTragedy: A Drama in Nine Acts.

He told Ivan that Ireland should have had a programme in place to deal with the banking crisis before it became as severe as it ultimately did.

He observed: "I was surprised mainly by the fact that the Irish authorities took so long to ask for a rescue."

He suggested that Irish authorities misjudged the scale of the problem when issuing the bank guarantee.

Mr Mody - who is currently a Visiting Professor in International Economic Policy at Princeton University - argued: "The guarantee is a very beautiful instrument: if people believe you'll be able to honour the guarantee, than it's cheap, it's costless.

"If it turns out that people test that guarantee, test the credibility of your promise... at that point you have to have the money to support the promise you have made. I think the Irish authorities completely misjudged their own credibility in supporting a banking system that was so large."

He also suggested that the crisis could have been minimised if the 'problem of Anglo Irish had been dealt with in a very forcible way' at an earlier stage.

'The golden goose'

Looking at both the current situation and the future possibilities, Mr Mody said the Irish recovery has been a 'real recovery'.

He explained: "Even if we discount these outrageously large GDP growth numbers, which are completely mysteriously large... there has been a real recovery. Employment has grown, consumption has grown, and there's a sense of confidence that has returned to the country.

"That said, my reading of the data is, that even that recovery is part of the broader process of the various corporate taxation and special deals that the Irish authorities make with multinationals."

He added: "The international community at this point is concerned about the nature of tax havens, and Ireland in particular is viewed with a considerable amount of suspicion in the international community for doing what is considered - at the very least - on the boundaries of acceptable practices.

"I don't think that Ireland has to kill the golden goose - I think what Ireland has to do is prepare for a moment when the golden goose may be killed by external forces."

He called for Ireland to address the issue in the next few years, claiming that at some point it may no longer be 'plausible' for Ireland to maintain the current tax regime.

You can listen back to the full interview below: