Key Post Nevin Institute: " low paid pay more tax"

Joe_90

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New research on the total amount of tax Irish people pay finds that, on average, 24% of gross income is taken by tax - both direct and indirect.

However, it finds that because of indirect taxes such as VAT, the poorest 10% pay a bigger share of their income to the tax authorities than the richest 10%.

In Ireland’s income tax system, the more money you earn, the more tax you pay - on average 23% for the top 10%, 0.3% for the bottom tenth.

However, there are also indirect taxes such as VAT or excise that we pay when we buy things.

Combining direct and indirect taxes produces a different picture.

Research by Dr Micheal Collins of the Nevin Economic Research Institute finds the poorest 10% pay just over 30% of their income in taxes.

This is mostly in the form of indirect taxes levied on the things they spend money on.

Meanwhile, the top 10% spend 29.5% of their income on tax - mostly in the form of direct income tax.

The combined tax burden produces a u-shaped graph, with the bottom and top of the income distribution paying most, and those on lower middle incomes paying least.

Dr Collins, a former member of the commission on taxation, says government should pay more attention to the effects of indirect taxes such as VAT on incomes.
http://www.nerinstitute.net/research/Household_Tax_Contributions/
 

Brendan Burgess

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More nonsense from the Nevin Research Institute.

Presumably the poorest 10% of the population get most of their income in social welfare payments, so their tax rate is negative!
 

amgd28

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Nevin institute and "research" should not be used in the same sentence. The unions merely felt that they had to set up a fancy name so that their grasping could be framed on "pseudo research".
It is disturbing that they are receiving any credibility whatsoever
 

ClubMan

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Is it possible to compare this with Ronan Lyons's similar analysis (also previously discussed here) albeit from 2012?

http://www.ronanlyons.com/2012/04/10/who-pays-tax-in-ireland-the-little-quiz-revisited/
http://www.ronanlyons.com/2012/04/10/paying-tax-in-ireland-where-the-richest-and-poorest-pay/

From my view the majority of people on Social Welfare would love a reasonable job.
The numbers on the Dole increased from people losing jobs not them
having a wish to go on welfare.
Bit of a non sequitur?
Who said otherwise?
 

Sophrosyne

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I don’t think I would dismiss this out of hand, simply because it is coming from the Nevin Research Institute.

Unlike income tax, which is progressive, for instance, VAT, PSOL and Carbon Tax payable on a unit of electricity or gas is the same, irrespective of income levels.

The same is true of excise duties.
 

Brendan Burgess

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I don’t think I would dismiss this out of hand, simply because it is coming from the Nevin Research Institute.

.
Hi Sop

They have form in this area.

They have tried to suggest that Top 10% of households have an effective tax rate between 22.5% and 27.5% .

This post http://www.askaboutmoney.com/showthread.php?p=1350995 shows the extent of the tricks they use to back up a nonsensical point. But they continue to make the point with a straight face.

Brendan
 

Deas

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Ironically, the findings work against the very unions that paid for it. Those that pay the most tax don't actually work or earn too much to be members. The middle income demograpic who pay the least are the most likely to be union members. The unions can no longer call for more taxes on the 'rich' now based on their own research.
 

T McGibney

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Ironically, the findings work against the very unions that paid for it. Those that pay the most tax don't actually work or earn too much to be members. The middle income demograpic who pay the least are the most likely to be union members. The unions can no longer call for more taxes on the 'rich' now based on their own research.
They don't want more taxes. But they want pay hikes for public servants as a substitute for any proposed tax or USC cuts.

This report is tailormade for that particular agenda. Both should be rejected forcefully.
 

Brendan Burgess

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I can't find the report on their website, but here is the Irish Times report on it

http://www.irishtimes.com/business/economy/poorer-people-in-ireland-pay-out-more-of-their-income-in-tax-1.1910725



Specifically, the research showed the poorest 10 per cent of the population shelled out 16 per cent of their income on VAT while the top 10 per cent of earners paid out just 4 per cent.
The top rate of VAT is 23% or 19% of the sales price.

They must be spending 84% of their income on goods rated at 23% to pay 16% of their income in VAT.

What do the poorest 10% spend their income on? Rent and food? Are these not exempt from VAT? OK, ESB and Gas is subject to VAT. What proportion of their income do they spend on this?




A similar pattern emerged when it came to the other big indirect tax, excise duty, with the poorer cohort paying 8 per cent of their income on this tariff compared to top earners who pay 1.4 per cent.
According to Jar.ie 20% of the price of a pint is VAT while 12% is Excise Duty.


According to ITMAC, 19% of the cost of 20 smokes is VAT while Excise Duty is 60%

According to the AA, 19% of the cost of petrol is VAT while 36% is Excise Duty.



So, say you spend 10% of your income on cigarettes and 10% on beer, you would pay 7% of your income in Excise duty.
 

Sophrosyne

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Hi Sop

They have form in this area.

They have tried to suggest that Top 10% of households have an effective tax rate between 22.5% and 27.5% .

This post http://www.askaboutmoney.com/showthread.php?p=1350995 shows the extent of the tricks they use to back up a nonsensical point. But they continue to make the point with a straight face.

Brendan
I see. I have no truck with personal bias regarding statistics. It leads to endless fruitless discussion regarding who is right and who is wrong and results in either stagnation or inappropriate action.

That said, I think that reports based solely on direct taxes, do not present the full picture.

Regarding your latest post, at a very basic level people also need to buy among other things, clothes, personal grooming and household cleaning products, in addition to household furniture and appliances.
 
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T McGibney

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That said, I think that reports based solely on direct taxes, do not present the full picture.

Regarding your latest post, at a very basic level people also need to buy among things, clothes, personal grooming and household cleaning products, in addition to household furniture and appliances.[/FONT]
That may be so, but it's also well-established that spending on consumption-based taxes such as VAT rises sharply as income rises.
 

orka

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The biggest issue I have with the report and ‘analysis’ is the use % of income to show how hard done by the lowest income groups are – when these groups are somehow spending more than their income. For example, the lowest group has a gross income of 9K pa but spends 18K pa. Showing indirect tax on 18K of expenditure but as a % of 9K is just misleading – e.g. paying 10% of the 18K as tax becomes a 20% ‘rate’ when looked at as a percentage of 9K.

The HBS explains why/how expenditure can be higher than income (students getting loans, recently unemployed living off savings, pensioners living off savings) but ignoring loans and savings as income skews the results twice.

For example, a person in the last year before retirement – earns 30K, spends 20K and saves 10K. Assuming 15% VAT on spending, this person pays 3K in VAT (20K spending * 15% VAT rate) – so that’s 10% of income on indirect taxation (= fatcat not paying their share).

Then in the first year of retirement, they have an income of 10K plus they spend their 10K saving from the previous year – so again total spending of 20K and VAT of 3K (again 20K spending * 15% VAT rate). But now in Nevin-world, the 3K VAT is looked at as a % of the 10K gross income = 30% of income on indirect taxation (= the most vulnerable in society subsidising the fatcats).

So 15% VAT on 20K spending in both years but quite a different spin depending on which way you want the reporting…
 

T McGibney

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It is established that it rises, but not necessarily as a larger percentage of income!
.. but certainly not to the point that the difference in percentage outweighs the massive difference in income tax % rates once a single employee's income exceeds circa €20k and then when they hit the high tax band at €31.8k.
 

Purple

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The Nevin Institute is the propaganda office of the Trade Union movement, nothing more.
They are peddlers of half-truths and misinformation and seek to subvert the truth in order to further a political agenda. It is deeply disturbing that RTE in particular do not challenge or highlight their agenda as they do, for example, when introducing representatives of the Iona Institute who is routinely referred to as a conservative right-wing think tank (which is what it is). Why is the Nevin Institute not introduced on RTE as an ultra-left wing Trade Union lobby group/think tank? They are far freer with the facts that the people from the Iona Institute.
 

amgd28

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The Nevin Institute is the propaganda office of the Trade Union movement, nothing more.
They are peddlers of half-truths and misinformation and seek to subvert the truth in order to further a political agenda. It is deeply disturbing that RTE in particular do not challenge or highlight their agenda as they do, for example, when introducing representatives of the Iona Institute who is routinely referred to as a conservative right-wing think tank (which is what it is). Why is the Nevin Institute not introduced on RTE as an ultra-left wing Trade Union lobby group/think tank? They are far freer with the facts that the people from the Iona Institute.
I agree wholeheartedly. The portrayal of the Nevin Institute as a "research institute" is a gross distortion and effectively a manipulation of the average viewer.
 

Purple

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If the better off add back their variety tax reliefs , maybe they are not being screwed on income tax after all.
What tax reliefs? Health insurance is a subsidy of the public health system by tax payers. Private pensions amount to the same thing in relation to state funding of the elderly. No private health insurance and no private pensions = a much bigger burden on the state. The "relief" is enjoyed by the state, not the tax payer.
 

Deiseblue

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After having time to examine and reflect on the Nevin report the general approbation of same continues in the mainstream media.

The Irish Times in it's editorial headed " Tax and Fairness " opines that when the Government meets to consider taxation and spending measures in the coming budget - " The work of Dr Michael Collins of the Nevin Economic Research Institute may inform Government deliberations in that regard. "

Thomas Molloy in the indo states " It may be funded by the trade unions but the researchers are serious and trying hard to throw some light on parts of the economy that are often poorly understood "

Mr Molloy does point out that the ESRI findings in this regard are fundamentally different but that " The International Monetary Fund has also questioned the idea that the middle class is bearing the brunt of the financial crisis "

Hopefully not only will this report inform in terms of the coming budget but will segue neatly into the deliberations of the low pay commission & further into negotiations on partially restoring pay cuts in the Public Sector & pay increases in the Private Sector.
 
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