Taxing matters

It’s as catastrophic and shocking as a sudden death. The deceased is the Celtic Tiger, aka the good times. He wasn’t looking that good for a while there yet nobody expected him to go so fast nor that his grave would morph into a gaping black hole right before our eyes.

Of what did he die? Was he sick or poisoned? If the latter, who killed him? There are more pointing fingers than at a death metal concert. But everybody knows the truth. And even as we speak, there’s a shift from rage to fear. Not a good combination and very open to manipulation and abuse.
Actually, I’m not sure that many people want to go back to the Celtic Tiger’s pomp. A seachange seems to be happening. We’re on the edge of a new era. We’re thinking of Berlin more than Boston. But before that unfolds, we need to get a few things sorted, starting with the public finances.
Recent Governments got very used to billowing income from stamp duty and taxes on construction and property. It allowed them to indulge the McCreevy/PD tendency and reduce income tax. Now that these cash cows have dried up, right here, right now, the Government is in a lather, retracing its steps and trying (all at once) to reconstruct a reliable tax regime, a plausible story to cover its mistakes and a villain or two to blame.
They’re talking of ‘widening the tax base’. Which means what, exactly?
Well, mostly it means finding yet more ways to whack the same people who already pay taxes, more ways to harvest the fish in the barrel, the ones who can’t avoid paying. That’s what it has always meant before.
The latest nonsense is to tax texts. One of them even suggested one cent a text. That’s twice the actual cost of a text for some accounts.
These bits and bobs might raise tax revenue. But what they won’t do is widen the tax base in the most important way, that is, extract money from people who don’t pay at all or don’t pay anything like their fair share. I’m talking about farmers, the professions and the self-employed in particular.
Almost every day you’ll hear people refer to the anti-tax marches of the 1970s and early 1980s. They were co-opted by the PDs who cited them as supportive of the low tax regime promoted by the McCreevy/PD tendency.
But there were other issues in play. In fact, the marchers, PAYE workers all of them, were more angry that they paid almost all the income tax and that almost no tax was contributed by farmers, the professions and the self-employed.
And they pointed out that, among other things, these groups were disproportionately represented among those whose children qualified for university grants. In other words, they had ways of minimising their income for tax purposes and means tests…
That’s certainly still the case and begs a very fundamental question. In an era when everyone is expected to make a contribution, how do you get these groups, and also the bankers and speculators, to pay their fair share? And how do you get very rich people, including media mouths who are free with their attacks on others but who can shelter from many tax obligations by being, in effect, limited companies whose accounts are handled by clever accountants, to pay up?
And remember, according to the Comptroller and Auditor General John Buckley, quoted in the newspapers on February 20, almost one third of self-assessed taxpayers may be significantly underdeclaring the money they owe to the Revenue Commissioners,
A comprehensive property tax may be one way, one that includes a tax on land, including farm land. Not like the old Residential Property Tax, which was anti-urban and anti-Dublin in particular – identical homes in different parts of the country paid different bills. Two out of three RPT taxpayers were based in Dublin and they paid 75% of the income.
That’s not fair.
Partly this is because it was based on notional value. But what’s value? In a declining market, what value has any property? Whatever it is, it’s taken care of by stamp duty and VAT.
Overall, it’s much more fair to have a sliding scale of obligation based on area, for example the first twenty square metres free, second twenty €5 each, third twenty €10 each, fourth twenty €20, and so on, so that very big houses pay much more, proportionately, than small ones and second houses would simply be added to the total…
And yes, there are many forms of property. Cars, at least, are covered by VRT and motor taxation. But how do you tax things like horses, art and jewellery? Through an insurance levy? And how do you factor in ability to pay?
Apart from getting the super-rich, protected landlords, farmers, the professions and the self-employed to pay a fairer share, the key question is how to raise money for Government without hurting the poor and damaging economic prospects and how to encourage economic activity and promote social solidarity.
Foolish or poorly thought-out policies have unintended consequences. For example, it may have seemed like a good idea to raise the betting levy but with a border beside us and levy-free betting on the internet, it whacks up to 1500 jobs. Likewise VAT and excise duty increases. Similarly, poorly thought out kneejerk policies on public disorder and nightclubs are causing hundreds of job losses and irreparable damage to our tourism industry.
But to finish, even as we rage against the machine, we must be careful that our fury does not prove our undoing. US researchers have proved that anger and other strong emotions can trigger potentially deadly heart rhythms in certain vulnerable people. According to Dr. Rachel Lampert of Yale University in New Haven, Connecticut, ‘…when you put a whole population under a stressor… sudden death will increase’.
So take a deep breath, will ya?