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The Issue of Tax Fairness
Read more about: Economy, Government, Green Party, Taxation 
The Green Party yesterday welcomed and fretted over the exchequor numbers released yesterday, and in doing so I think they have hit on a major issue that needs airing at this election.
The issue of tax fairness is always around. Since Charlie McCreevy slashed income tax and began to replace it with the old ‘stealth taxes’ that saw him sent to Brussels for being a Grinch, the opposition has slated the make-up of the tax take.
[From the Greens] Income Tax is up close to €300 million over the same period last year, Corporation Tax is up in region of a quarter of a billion. Capital Gains Tax has increased by €350 million, while Excise Duties have increased by some €300 million. The taxes that have shown the largest increases from the year have been the €700 million increase in Stamp Duty and a €1 billion increase in Value Added Tax – VAT being the tax that is most imbalanced as regards its effects between the wealthy and poorer members of our society.
Government tax receipts have been most fuelled by property speculation and by taxes on spending. This in turn is fuelling inflation. The Minister for Finance Brian Cowen and the Government must be taken to task for the policies that have brought this about with reckless long term consequences for the economy.
The issue raised its head this afternoon on Liveline where it emerged that the provision of nursing home care is a service subject to VAT and that families must pay 13.5% to the government if they have someone in a home. Joe lost no time in labelling it another stealth tax.
And this is my issue, low taxes have been the order of the day for ten years, yet in that time there has been no attempt to keep the policy coherent by asking people to accept cuts in services that are necessary. So the gap is plugged by increases in VAT and others.
If we expect service provision, which we certainly still do, then the parties must address the balance between expectation and ability to pay. It’s the flipside of the low-tax coin and its less easy to sell to an electorate. Equally if one suggests a higher tax rate to take the pressure of VAT and thus take away the government’s vested interest in consumer spending while ensuring service provision, it’s condemned as electoral suicide.
I think that might be one of my questions for polticians.
On a related note, I wondered if Cowen was using the figures to maintain Bertie’s claimed credentials as one of Ireland’s remaining socialists:
Mr Cowen said that the growing importance of capital taxation reflected a desire by the Government to change the structure of taxation away from dependence on income tax.
“I’m proud of the fact that I’m getting three times more from capital taxes than the Labour Party minister who was there 10 years ago,” he said yesterday.
The definition of capital taxation though is not the one that Marx would have used, as Brian is referring to revenue from housing and not profits. Anyway, the problem of dependence of revenue on the housing boom will get worse if housing really does downturn, and then the question of how to replace the revenue — VAT, income tax, or, God forbid, profits, will be even more to the fore.
Also is anyone else worried that the dept of finance seems congenitally incapable of accurately predicting how much they will get in tax each year? Its an old chestnut but surely its bad for government practice to undershoot so often? even though it has spinmasters rubbing hands in glee.
Bertie must still be looking over his shoulder for the third socialist and have cowen keeping guard ; )
VAT is not on many basic items such as food child clothes. So I don’t think it hits the poor as much as some people think it does. Also I never heard of the government increasing the VAT on many things. The increase has come from increased spending not increased tax. Also it should be cut. I think I wrote that before.
VAT does hit those with small incomes worse and is a regressive tax. Basic taxation policy should always be principled around ability. For me review would include Corpo up a little, VAT down, Cap Gains same, big inheritence tax, stamp duties significantly lowered, and another band on income for those salaried on more than €100k, as for the tax avoidance parasites – execution.
Taxation could be slashed immediately by reducing the size of Government to 1 TD per 80,000 of population and reducing the Cabinet to six Ministers.
A proportionate reduction in Civil Service support would further reduce the cost to be borne by the PAYE sector & the non-sheletered sectors of the workforce.
The replacement of Corporation Profits Tax with a Distributed Profits Tax would be simple to administer & would eliminate the fraudulent manipulation of Government Grants etc.
A Consumption Tax – to replace the tax on work – would collect from the entire population.
As Simon says, “VAT is not on basic items such as food child clothes” (sic).
A graded system to reflect the differentials between basics & non-essentials would put an end to the tax-free benefits of the Black Economy; crime; non-residents etc. that seem to engage the energies of so many social commentators.
KEEP IT SIMPLE.