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The Sunday Times - Money Comment 13/09/09

Posted by Jill Kerby on September 13 2009 @ 20:20

The first thing that struck me after reading great chunks of the Commission on Taxation report is how out of date it is; the country the report refers to doesn’t seem anything like the 2009 one in which so many Irish people are now struggling to live decent, productive lives.  

 

You certainly wouldn’t get the impression from this report that the Commissioners were aware that the Irish economy had a massive stroke a year ago and has been on life support ever since, hooked up to a permanent drip of foreign borrowings. 

 

Much as there is merit in the idea of taxing capital assets instead of labour or financial transactions (like stamp duty on property) and in cutting out the great clutter of reliefs and allowances that were introduced piece-meal over several decades, exactly who do they think will be paying these new capital or consumption taxes, like the carbon tax or water charges?  

 

By upholding the extreme ‘progressive’ nature of taxation in this country, until the cadaver on the table shows some real signs of life, there are probably going to be more householders, for example, who will be exempt from the proposed €1.23 billion annual property tax:  the poor, the elderly poor, first time buyers who’ve already paid a mountain of stamp duty and the unemployment. 

 

The same sense of the unreal pervades their suggestion that hundreds of millions will be raised by taxing child benefit payments or with the introduction of the carbon tax.  Didn’t anyone, even a year into their task, observe how the patient they were commanded to treat was already a goner?  Clearly it didn’t dawn on any of them that they’d have been doing us all a greater service by putting a pillow over its face that to continue to proceed with such an irrelevant course of treatment.  It certainly would have been a cheaper outcome than the irrelevant 600 page diagnosis they delivered last week. 

 

Tax reform is going to be crucial if we are to get out of this economic depression it is the recommendations of the McCarthy, An Bord Snip report on which minds should be concentrating.  Unlike that one, this report is 

wishy-washy and non-committal. They suggest we return to a more complicated three layer income tax rate system, but don’t suggest what is the new rate or rates.  I found it hugely annoying that the actual tax rates we are paying – well in excess of 25% and 51% when the income and health levies and higher PRSI rates and ceiling change is taken into account – are not really acknowledged in the report. They kept using the 20% and 41% standard and marginal tax rates as their benchmarks. If only. 

 

 

Regarding the detested health levies, which have been doubled, the Commission notes that they “should be abolished and integrated into the income tax system when fiscal conditions improve sufficiently to allow a transition to the new structure.”  Surely you either abolish them, or you integrate them, but not both? And with fiscal conditions still dis-improving, surely now is the time to remove these anti-labour levies, not when condition improve…whenever that is. 

 

 

Even the Commission’s key pension recommendations – to lower tax relief on contributions and to bring in an SSIA type pension funding scheme might, someday, boost coverage among the lower paid.  But it also probably means lower pension incomes for middle and higher earners and a longer term lower tax take for the exchequer. 

 

Until the €23 billion spending deficit is tackled and 440,000 unemployed people get back to work, this report is a non-runner.  Ordinary working people – especially those with dependent children, grossly inflated mortgages and falling incomes - simply don’t have an additional €3,000 or €4,000 a year to hand over to this wasteful government. 

 

I wonder how much this report has cost us.  Too much I’d suggest in terms of its relevance to an economy that is unrecognizable from 18 months ago. 

 

Ends

 

 

Last Saturday, I bought a car, a nice, shiny ’07 Nissan Almera that looks brand new and has very low mileage.  I keep buying Nissans for the same reason that I shop at Lidl:  good quality, reasonable prices and I don’t have to mull over endless other choices of cars (or tinned tomatoes). 

 

But that isn’t why I bought a ‘new’ car right now.  Like most people reading this, I have sharply curtailed my discretionary spending this year.  We dine out less; I buy fewer clothes and shoes (alas) on a whim and my credit card mostly stays in my wallet. 

 

I bought this car because the old one was nearly nine years old and while the engine would have kept running for a few more years, it was beginning to have minor ailments that were going to start costing me money. Body-wise, rather like its driver, the Almera had certainly seen better days. 

 

With such amazing bargains in the forecourts, it is a good time to replace the car.  And since I tend to drive my cars pretty much into the ground, I’m counting on this one to run for at least another six or seven years as well.  

 

“Why didn’t you wait for a scrappage scheme,” a friend asked.  Well, mainly because like the roll-out of electric cars as the flip side of the abolishment of vehicle registration tax, as outlined in the Commission on Taxation report, car scrappage is aspirational, not realisable.   

 

The biggest gainer from any car scrappage scheme here is going to be the foreign motor manufacturers, not Irish workers or the environment, and frankly, electric cars will only happen here when cheap plentiful electricity becomes available in this country along with indestructible, curb-side plug in stations on every street in every village, town and city. 

 

Nah, I can’t see that happening anytime soon either; in any it’s just an aspiritional It’s all very environmentally correct to think that we’ll all be driving VRT-free electric cars in the near future – even the Taxation Commissioners noted it as an aspiration, along with a car scrappage scheme to encourage such purchases – I really didn’t feel like waiting until both the car and I are ready for retirement before we generate enough cheap electricity for that to happen.  

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