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Ireland: Hikes have led to 23% of earners paying 81% of tax, says institute

25 September 2014   (0 Comments)
Posted by: Author: Arthur Beesley
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Authors: Arthur Beesley and Ciarán Hancock (The Irish Times)

Union-funded think tank argues against ‘flighty’ cuts in personal taxes

The Government received conflicting advice on next month’s budget as professional tax advisers welcomed moves to decrease the marginal tax rate while a trade union-funded think-tank argued against "flighty” income tax cuts .

The Irish Tax Institute said Ireland’s personal taxes were out of sync globally, especially when compared with countries which compete against the State for inward investment.

Andrew Gallagher, president of the Institute, said at a briefing that a succession of tax hikes introduced since the crash have resulted in a situation in which 23 per cent of income earners pay 81 per cent of the income tax raised this year .

Pressure

"The exchequer is now more reliant on income taxes paid by fewer people in work, and Ireland has less people working but paying more tax on more of their income.”

Citing pressure on Ireland’s corporate tax regime as due to the OECD push to stamp out aggressive avoidance by multinationals, he called on Minister for Finance Michael Noonan to improve a special tax scheme for international executives on budget day.

Saying the OECD overhaul of global tax rules aims to align liability for corporate tax with business substance and activities, Mr Gallagher said both were determined "by senior people in multinationals whose location here is critical if jobs are to follow”.

The present Irish scheme, known as the special assignee relief programme, attracted only 15 applications in 2012, the Institute said. By contrast, it said the Dutch authorities receive between 10,000 and 12,000 applications per year for their equivalent scheme.

Meanwhile, the Nevin Economic Research Institute reiterated its view that there needs to be an €800 million adjustment on budget day.

This body, funded by trade unions, said such an adjustment was largely accounted for through the introduction of water charges. It expects the water tax to yield €370 million and believes €150 million in savings will be achieved via the Haddington Road pay deal with the public service.This body, funded by trade unions, said such an adjustment was largely accounted for through the introduction of water charges. It expects the water tax to yield €370 million and believes €150 million in savings will be achieved via the Haddington Road pay deal with the public service.

Neri also wants an increase in employers’ PRSI on the portion of annual income over €100,000, from 10.75 per cent currently to 17 per cent. It said this would affect just 45,000 employees and could generate €100 million a year for the State.

It argues that "flighty” cuts in personal taxes should not be implemented in the budget. "There is no scope for reducing the overall level of taxation in the medium term without causing damage to public services,” it stated. It said a reduction in the 41 per cent top rate of tax would benefit only about 18 per cent of taxpayers.

Neri argues that the Government should instead focus attention on capital spending. It calls for 3 per cent of GDP to be spent on public capital investment projects over the next few years and said there was a "strong case” for the Government to borrow to fund social housing, education and high-speed broadband infrastructure. In its autumn economic update, Neri is forecasting that GDP will rise by 5 per cent this year, by 3 per cent in 2015 and by 2.9 per cent the following year.

It expects the unemployment rate will average 11.5 per cent this year, and reduce to 9.8 per cent by the end of 2016.

This article first appeared on irishtimes.com.


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