Here is the excerpt from their website:
TOO FEW PEOPLE PAY TOO MUCH TAXATION IN A SYSTEM THAT IS OVER-COMPLICATED
Tax and Welfare Systems Don’t Just Shield the Poor, they Shield the Middle Class Too
Citizens may believe that the Irish tax and welfare systems operate in a way where the broad public contributes to a minority who have low incomes. In fact, the broad public benefits from a minority who have high incomes. This is the unavoidable conclusion from an examination of data from Table A2 of the CSO’s most recent (2013) Survey on Income and Living Conditions (SILC). That shows that it is not just the bottom three deciles (or tenths) of the population that are in receipt of significant net state transfers but the bottom six deciles. Net state transfers are defined as social transfers less tax and social contributions.
While the seventh income decile makes a small net contribution to the state’s coffers, it is the top three income deciles that are effectively paying for the Irish state with the top decile bearing over half of the net cost of the State. It is right that those on higher incomes should bear a higher share of the burden of supporting the poor. But is it right that those on middle incomes (deciles 4-6) should be net recipients of significant state transfers? Is it proper that those in the fourth decile – rather than those in the poorest, first, decile – should be the recipients of the highest net benefits?
Ireland’s Income Tax System is Extremely Progressive
Ireland has the most progressive income tax system (including employee social insurance contributions) in the EU. The tax paid by a single person on half average earnings(average earnings are just under €34,500) is the second lowest in the OECD (out of 34 countries) and is about one-tenth that in Denmark while the tax paid by a single person on two and a half times average earnings is the 7th highest in the OECD. At average income levels we are the 15th highest in OECD. A single worker on an average income of about €34,500 pays about €13,000 in income tax and social insurance contributions in Denmark compared to over €6,000 in Ireland a difference of over €6,500.
Ireland’s Tax System is Overly Complicated
The 2009 Commission on Taxation reported that there is evidence to suggest that, if economic growth is the main policy aim to be pursued, a flatter income tax structure is a more appropriate instrument than one that leans towards greater progressivity, as the latter is likely to act as a disincentive to further effort. According to an OCED working paper:
A flat tax system with few allowances and tax credits is generally simpler to administer and probably gives rise to fewer tax-induced distortions than other systems, but it puts less emphasis on redistribution. By contrast, a highly progressive income tax system normally reduces incentives to work and to invest in human capital, although ‘in-work benefits’ can improve work incentives for low wage workers while increasing progressivity. High progressivity may also increase the incentives for tax avoidance and tax evasion and contribute to a growing shadow economy that reduces measured GDP, although it is arguable that the tax level is more important than its progressivity in this regard. This may reduce tax revenues and undermine the fairness of the system. There is also a possibility that high top marginal rates will increase the average tax rates paid by high-skilled and high-income earners so much that they will migrate to countries with lower rates resulting in a ‘brain drain’.
Internationally, where a flat tax has been introduced, the tax take has tended to increase. Similarly, the black market has shrunk as the incentive to under-declare personal liabilities is diminished. And costs of compliance have fallen due to radically more simple nature of the system.
Flat Tax Rate
Lithuania 15%
Romania 16%
Hungary 16%
Estonia 21%
Latvia 25%
Hibernia Forum calls for:
- A rebalancing of tax and welfare over the next decade to significantly reduce middle class welfare (i.e. aim to eliminate the net benefit currently enjoyed by deciles 4-6) so that the burden borne by the top three deciles can be reduced.
- The introduction of a Flat Tax to replace income tax, employees PRSI and USC. We will prepare and present a detailed report on this proposal in the future.