How much will the policy cost? Financial cost The government would have to spend €10 billion annually on wages and other costs such as providing buildings and office space, as well as training. Opportunity cost This €10 billion could be spent on many other things.
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Who pays for the policy? Up to €10 billion in extra taxes or spending cuts elsewhere will be needed to pay for this policy. If taxes can’t be raised or services cut, then the money will have to be borrowed and repaid later with interest.
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Is the policy sustainable? Financially If the government can afford to spend €10 billion extra every year and still maintain a balanced budget or a surplus, then the proposal is financially sustainable. If the proposal will lead to a budget deficit, then it is financially unsustainable. Environmentally
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There are no obvious ecological implications to this policy, but it depends on what work all the extra civil servants would be doing.
Case Study Government Considers Increasing Corporation Tax
Compared to other countries, Ireland has a relatively low corporation tax on company profits of just 12.5%. This low rate of tax has helped Ireland to attract large multinational companies from abroad to set up businesses here and to use Ireland as a base to export into the EU market. These companies choose Ireland over other locations in the EU despite the fact that it is not connected by road to the main EU markets. These multinational companies employ thousands of staff and spend millions every year purchasing local raw materials and services. Their staff pay billions in income tax, VAT and other taxes. The government is now considering increasing the corporation tax rate. Would this be a good policy?
Who benefits from the policy? Directly The State’s tax revenues if the increase raises extra money overall. Indirectly
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Citizens of the country could benefit from having the extra money spent on public services.
