Irish Budget 2015 & Economy: The renowned American baseball player Yogi
Berra (b. 1925) once quipped "It's déjà vu all over again" and there is that
sense about the continuing drumbeat of demands for tax cuts in next October's
The chart above shows that there is a need to adjust Irish income tax bands
as the top rate threshold is at a low average income level. However, just in the
past 24 hours Dermot O'Leary, chief economist at Goodbody, called for a cut in
the 52% top rate of income tax (including social charges) that applies to an individual's taxable income
above €32,800 as part of measures to "increase the medium-term potential of the
economy" while the Irish Times
reports that a tax relief for landlords that was phased out after the
collapse of the housing market should be reintroduced to help tackle the student
accommodation crisis, UCD Students’ Union has said.
Dermot O'Leary's claim that "the higher rate of
tax...including the universal social charge, is one of the highest in the EU" is
not correct as the chart above illustrates and while
the top headline income tax rates of 40% and 45% in the UK, suggest that
Ireland is out of line, when the incremental loss of the personal tax allowance
and a total loss kicks in at £120,000+ earnings coupled with benefit impacts, the
effective UK marginal tax rate is 60% (including national insurance).
Last month Ibec, the principal business lobby,
produced a laundry list of new business tax breaks despite Ireland
having the lowest corporate tax and employer social security rates in Western
Remember the magic of low taxes and how the gallery of fools argued
halving of the capital gains tax rate to 20% had more than doubled the revenue
That was ostensibly true just as a gambler can
sometimes win in the casino.
It was the time when Maurice O'Connell, Central Bank governor, was
issuing letters to bank chiefs pleading for credit restraint.
reported last month that the Bank's 1999 annual report noted: "Institutions
were...advised that it remains vitally important for them to take a medium term
perspective and to reckon with the potential consequences of rising interest
rates and a return to lower rates of growth in the economy.
gave assurances that there would be no slackening in prudential lending
It doesn't take much wisdom to understand that cutting taxes is easy while
increasing them is very difficult - - Jean Baptiste Colbert (1619–83), a French
finance minister during the reign of King Louis XIV reputedly said: "The art of
taxation consists in so plucking the goose as to obtain the largest possible
amount of feathers with the smallest possible amount of hissing."
Absent a boom, there is a limit too to the scope for raiding pension funds
(Kenny and Noonan are each entitled to draw 3 public pensions) and the like.
EU tax/ social security burdens
Last June Eurostat published the 2014 edition of 'Taxation
trends in the European Union' [pdf] which details EU tax & social security burdens in 2012.
Ireland is a middle ranking tax country.
Tax & social security revenue as a ratio of GDP was 28.7% in Ireland and
35.2% of GNP (gross national product) -- mainly excluding the inflated
profits of the significant foreign-own sector.
The ratio was more than 40% of GDP in Denmark (48.1%), Belgium (45.4%),
France (45.0%), Sweden (44.2%), Finland (44.1%), Italy (44.0%) and Austria
The UK was at 35.4%.
In Ireland with a dual public-private health care system, the cost of private
health insurance can also be viewed as a tax.
Besides debt reduction over time, the public
capital budget has taken a big hit since the economic bust and while project
management has been poor in the past, there will be a need for more spending in
average hourly labour costs in the whole economy (excluding agriculture and
public administration) were estimated to be €23.7 in the EU-28 and €28.4 in the
The Irish rate was €29 compared with €30.5 in Germany and €20.1 in
Irish prices are about one-fifth higher than the EU average despite being the
only economy to have experienced an actual price fall in 2008-2012.
There are two economies in Ireland and the foreign-owned exporting sector and
its eco system with knock-on impacts on public sector charges, contrasts with
the typical private sector worker who is an indigenous SME, is not a trade
union member, is low paid and has no occupational pension.
A government minister has promised to review public service austerity era pay
and pension cuts but with silence on pay rises in the private sector, there is
the promise of cake!
Recent reports on the economy: