Indo - "Almost one in four Irish earners is paying no income tax, says Revenue"

At the risk of wading into this debate:
  • Pensions are not a "tax break", they are a deferral of income to the future, and thus the income tax charge.
  • Notwithstanding this, you still end up paying USC and PRSI (often in excess of 12pc) today on income you might not see for 40 years.
  • Saying "I'd pay 40% IT today but I'll pay 20pc in two decades" is like saying I'm healthy and wealthy today so I'll be healthy and wealthy in 20 years. You have no control over the tax regime that will apply at drawdown.
  • Australia is advancing legislation to tax previously tax free unrealised pension funds.
  • You need to take a look at demographic, fiscal and economic trends and draw your own conclusions about whether tax rates in decades time will be higher or lower than they are now.
  • Ireland has recent precedent of directly levying pension funds - regardless of whether in gain or loss. You have no control over whether or when that recurs.
 
joe sod said:
If so many people are disincentivised to work or work alot less by our welfare and taxation system
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We used to have high rates of household joblessness, as in we were an outlier.

However, those rates have fallen.

Also, note that societal preferences for providing informal social care in the home, supported by Carer's payments and tax reliefs, may mean lower employment rates than in other countries where the bonds of family may be weaker, and more formal social care is used.
 
blackdog said:
Ireland has recent precedent of directly levying pension funds - regardless of whether in gain or loss. You have no control over whether or when that recurs.
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The tax optimised 'deferral' of income is one of the only good things workers have here. In the US and UK there are a zillion variations of tax advantaged accounts while we instead have deemed disposals. There has to be a reason for people to come work here other than great craic. I don't see them hurting the pension too much unless something terrible happensm
 
The Horseman said:
If the 53k properties were available in the private market it would reduce the impact on rents remember supply v demand in economics. They are not because they are fulfilling a social service ie housing those who can't house themselves.
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Are you suggesting that these people should live in tents, or that the state should find other ways to house them that, through some miracle, has no effect at all on the private housing market? Good luck with that. The provision of social housing in any form will affect the private housing market.
The Horseman said:
People purchasing a property to live in do not see it as financial investment they see it as having stability to start a family etc. I wonder how many of those who purchased a property to live in during the boom would agree with you in 2011/2012.
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Sure. I myself did not buy my house as an investment and have never seen it as an investment. Nevertheless it has been an astonishingly good investment, delivering a far better return than any actual investment that I have ever made. And, despite what you say about 2011/12, my experience is typical. Home ownership is, by far, the biggest factor associated with accumulating wealth in Ireland, and does more than anything else to determine whether you will be in the haves or the have-nots.
The Horseman said:
Those who avail of the "generous tax breaks" will end up paying it back via higher income tax when drawing down their pension by ending up in the higher tax bracket.
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No, not at all. The bulk of tax deductions for pension contributions are claimed against the higher rate. At the other end, a substantial portion of the pension payout is not taxed at all (the tax-free lump sum, remember?) and the majority of the rest ends up being taxed at the standard rate. The result is that the tax on pensions paid out doesn't remotely balance the tax deductions granted on pension contributions. (And that's before we take any account of the benefits of the tax free roll-up within the fund, which is actually the most valuable aspect of pension fund tax treatment.)

I stress, I'm not saying that this is a bad policy or that it should be changed. I'm just saying that anyone in denial about the fact that it is a hugely advantageous policy to those who benefit from it risks creating the impression that their views on tax policy are not grounded in reality.
 
This is an issue in all economies, not just Irealdn. It's in the nature of things that a signficant part of the public sector workforce is engaged in doing work that it isn't profitable, or isn't very profitable, for the private sector to do — that's why the state does these things. The output of these workers — education, social care, medical care — may be hugely important and beneficial but much of it is not financially valuable, which is why the private sector is not good at providing it (at least, not without massive taxpayer subsidies to do work which is not profitable).

The upshot of this is that, in financial terms (which is all that is measured by labour productivity) public sector workers are, on average, less productive than private sector workers. But this doesn't mean that they work less hard, or less smartly, or less efficiently, or that what they do is unimportant. It just means that we need to realise the limitations of the information that labour productivity gives us.

(Hypothetically, it could be the case that public sector workers work less hard, etc. Or, the opposite could be the case. But labour productivity figures are not much use in casting light on this, one way or the other.)
 
joe sod said:
However you have completely ignored my main arguments ,the disincentives to work by all these government interventions. If so many people are disincentivised to work or work alot less by our welfare and taxation system . . .
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But are they? You're ignoring the point I'm making, which is that I've often seen this claimed but never seen any evidence that it is actually true.
 
I'm not sure that the Indo article presents useful analysis, neither would I agree that is a useful conclusion to support broadening the tax base.

The article refers only to income tax. We have extremely high rates of indirect taxes by international standards, such as VAT, excise duty, VRT, etc. Those paying no or very little income tax are largely two categories:

(1) those on comparatively low incomes, including those on social welfare, and also those in full or part-time employment but not on sufficient remuneration that they fall into the income tax bracket

(2) the wealthy, who use various legal tax avoidance schemes

Most of the both categories often pay large amounts in other taxes.

Disproportionately, the burden falls disproportionately on category (1) if we compare it to income.

Overall, the article seems to support a narrative that Ireland is a "low tax regime".

In fact, we have anything but, I'd argue. We have admittedly low Corporate Taxes, but on every other tax, we are about average compared to similar countries, and in some cases very significantly higher - in % terms and compared to income.

Personally, I don't have an issue with us being a relatively high tax country, once the public services, infrastructure is there. But the narrative in the article strikes me as intellectually dishonest.
 
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T McGibney said:
I'd instead cut public expenditure, mercilessly.
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This strikes me as a somewhat simplistic solution to complicated problems.

I would cut public expenditure in some areas, mercilessly even, and increase it in others. Regarding the former, I would probably favour state requisition of ill-gotten gains by some very wealthy people, those who have derived the sources of their wealth from corruption. But the current political reality is there seems to be limited realistic feasible possibility of that at present.

If you are being intellectually honest, I would imagine you'd concede that you have been reliant on the state at some point in your life? And if not, that you may be in the future?
 
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T McGibney said:
Dont dare question my honesty here, on any level.

You are anonymous. I am not. I depend on my honesty for my living.
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I'm assuming you had a bad day on Twitter or something, but while I don't use my real name on here, like most posters, I'm not anonymous, and if you send me a PM, and if you're nice, happy to provide you with my name and identity, ok?
 
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I don't care for your name or identity. They are irrelevant as I'd never dream of outing you here, nor of impugning your honesty or integrity.

I simply ask you to respect my wishes. You have no business questioning my honesty or integrity, nor you have any business idly speculating as to how I spent my working day yesterday or any day.

Obviously, any substantive engagement on my part in the topic being discussed above is at an end.
 
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The idea of cutting public expenditure, mercilessly or otherwise, doesn't really address the issue of broadening the tax base.

Cutting public expenditure is just another form of the game of wack-a-mole.

Cutting doesn't work. Managing public expenditure to improve efficiencies and value for money is the key.

A €300,000+ bike shed is, for example, an obvious area to inquire about efficiency and value for money.

But the base reality is that most of that money went into the construction industry. Archaeological services and contract administration took a small but not insignificant portion.

It is effectively just government expenditure that finds its way into the economy creating demand for services and goods boosting employment and investment.

It is not an effective or efficient way of creating demand in the economy for boosting employment and investment.

The €300,000+ of course could be cut for the next bike shed (if there was ever a thought for an extension) and that reduces government expenditure into the economy reducing demand for services and goods, reducing employment and investment.

Alternatively, the €300,000+ could simply be put to more efficient and effective use in any amount of areas where public services are badly needed and could be improved sustaining demand in the economy for goods and services, employment and investment.
 
walktothewater said:
the wealthy, who use various legal tax avoidance schemes
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We don’t tax the wealthy. We tax those on high incomes. The problem in Ireland is that most of the wealthy don’t know they are wealthy as they conflate income and wealth.

If you own a house worth a million euros and have a pension fund worth in excess of a million euros then you are wealthy. You mightn’t have a high incomes but that’s a different thing. Such a person isn’t taxed on their wealth and pays very little income tax. Those are the people who are under taxed.
 
Protocol said:
Given the following three realities, it is very difficult to cut public spending:

(1) rising population
(2) ageing population
(3) infrastructural deficits
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Given those realities it makes the current levels of waste and inefficiency in the State funded sectors, particularly the healthcare industry, totally unsustainable.
It also shows how vulnerable we are to economic shocks because of our narrow tax base which taxes work and transactions but not wealth.
 
For 50 somethings, it depends when houses were purchased. A lot of people bought houses in 2004-2008 that are only now (in Dublin) just about worth more than we paid - and we paid 9% stamp duty. Everyone looks at property price increases from 2012, the low of the market. Some of us have not had huge net worth benefit from property price increases (although did benefit from low interest rates).
 
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