Tax net to catch low-pay workers

Count Dooku

March 2010

In the medium term, we should explore the potential of social insurance and local taxation to broaden the tax base while providing real benefits in return. PRSI can be expanded to incorporate a comprehensive free healthcare system (in particular, primary care) as well as earnings-related pensions. Stronger local taxation powers have the potential to be more accountable while providing investment in services responsive to local needs. On the expenditure side, it is time to make public sector workers partners in the process to increase productivity and efficiencies.

.........

Tony Moriarty and Michael Taft, Unite trade union.

'All the wrong options have been pursued'

June 2010

Ireland's lower-paid workers are to be brought into the tax net from the end of the year, as part of Budget plans being considered by Finance Minister Brian Lenihan and his department, it has emerged.

"The situation whereby 50 per cent of the workforce is outside the tax net can no longer continue. We have to widen the tax base," said one senior government minister this weekend.

It has also been confirmed that two of the three big-budget departments -- Mary Harney's Department of Health and Tanaiste Mary Coughlan's Department of Education -- are to be most severely cut in December.

Tax net to catch low-pay workers

No benefits in return, poor private sector workers must pay more to prevent compulsory redundancies in public sector

PS unions won again:mad:

I'm all for bringing everyone into the tax net, but it's pointless without massive reductions to Social Welfare benefits.

Sickening that health and education will suffer so that PS wages and welfare benefits can remain sky-high..

Ricky91t

Rojomcdojo wrote: »

I'm all for bringing everyone into the tax net, but it's pointless without massive reductions to Social Welfare benefits.

Sickening that health and education will suffer so that PS wages and welfare benefits can remain sky-high..

And what happens to the unfortunate people who have this as their only scource of income? They're just forgotten about?

They learn to live on what they have. With net income reductions comes deflation.


I'm on the dole myself at the moment and I'm saving most of it. It's far too high and needs to be slashed. The difference between someone with all the benefits and someone working for a very low wage is FAR too small.

Or do you think that it's correct?

ei.sdraob

if more people are paying taxes

they might actually start to listen, care and act on the events happening in this country

the "proles" are to politically apathetic and economically uninformed, this might change if it hits them directly in pockets

Count Dooku

Ricky91t wrote: »

And what happens to the unfortunate people who have this as their only scource of income?

It will mean that more people will prefer to have only this source of income

Count Dooku

ei.sdraob wrote: »

if more people are paying taxes

they might actually start to listen, care and act on the events happening in this country

the "proles" are to politically apathetic and economically uninformed, this might change if it hits them directly in pockets

Do you mean that greed of PS unions will strike back and not only posters on boards.ie will look more carefully on public sector earnings?:rolleyes:

Ricky91t

Rojomcdojo wrote: »

They learn to live on what they have. With net income reductions comes deflation.


I'm on the dole myself at the moment and I'm saving most of it. It's far too high and needs to be slashed. The difference between someone with all the benefits and someone working for a very low wage is FAR too small.

Or do you think that it's correct?

I suppose it depends on if you have Children etc, I know a few single parents with Children over 18 in College, None have got jobs for the summer( You know how bad the situation can be in places ) and therefore both need to live off that small payment for the summer monthes, If that was to reduce I know it would be near impossible, I think it needs to be reviewed for certain situations and reduced in some.

If it's a 22 year old, Living at home on the dole with parents both working then yes it should be reduced, But for other situations it shouldn't be. For people like you, Saving a majority of it show's there is a problem with the system but reducing it for everyone who receives it would only cause more problems.

ei.sdraob

Count Dooku wrote: »

Do you mean that greed of PS unions will strike back and not only posters on boards.ie will look more carefully on public sector earnings?:rolleyes:

hopefully more people would start asking "hard" questions about the situation the country is in

and not only focus on the PS train carriage of the state gravy train

djpbarry

Ricky91t wrote: »

If it's a 22 year old, Living at home on the dole with parents both working then yes it should be reduced, But for other situations it shouldn't be. For people like you, Saving a majority of it show's there is a problem with the system but reducing it for everyone who receives it would only cause more problems.

I think the point is that, in general, social welfare payments are too high. Obviously, there are exceptions, but that’s what means tests are supposed to be for. Having said that, my claim for Jobseeker’s Allowance was recently processed (the missus is still working and doing fairly well for herself) and I am absolutely astounded by how much I have been deemed eligible to claim. Like Rojomcdojo, I will be putting a sizeable chunk into a savings account every week – now that’s just not right, is it?

RichardAnd

It has also been confirmed that two of the three big-budget departments -- Mary Harney's Department of Health and Tanaiste Mary Coughlan's Department of Education -- are to be most severely cut in December.

Does anyone know just what is meant by this? Will it be admin jobs cuts or what?

johnnyskeleton

As a basic premise, it is undenyable that spending must be cut, and taxes must be raised. I don't think even the most unrealistic commentator can deny that that is the realty, the question being how much spending to be cut, how much taxes to be raised, and where to make these changes.

From the tax side, there are a number of principles:
1) make sure that whatever increases in tax rates are made that it does not discourage the payment of tax i.e. any new or increased tax must lead to greater total revenue;
2) make sure that whatever increases in tax rates do not discourage productivity i.e. if you tax minimum wage employees such that they would make more on the dole, then they are unlikely to work and the unemployed are unlikely to take a low paid job, equally if you increase corporation tax or tax on high earners too much they might leave the country.
3) make sure that the taxation does not damage socially beneficial things e.g. don't tax charitable donations, don't disproportionately tax the lower paid.

So any new tax should comply with the above prinicples, although sometimes a balance has to be made.

Taxing the lower paid should be done so as to avoid:
1) people working cash in hand instead of PAYE;
2) basic social welfare payments should be reduced in line or greater than the tax will reduce wages by;
3) a perception that the lower paid are unfairly targeted.

This may not seem fair or nice, but it is a fairly sound basis to increase the tax base. If people were a bit more publically spirited (and I include myself in my lack of public spirit) they would look at tax increases from the point of view of whether it is good for the economy, not whether it is good for their own pockets.

Spudmonkey

Ricky91t wrote: »

If it's a 22 year old, Living at home on the dole with parents both working then yes it should be reduced, But for other situations it shouldn't be. For people like you, Saving a majority of it show's there is a problem with the system but reducing it for everyone who receives it would only cause more problems.

So everyone should be paid according to their need? :rolleyes:

ei.sdraob

Spudmonkey wrote: »

So everyone should be paid according to their need? :rolleyes:

From each according to his ability, to each according to his need :P

ei.sdraob

ei.sdraob wrote: »

From each according to his ability, to each according to his need :P

The problem is that people's needs are beyond met. Many people are just stupid with their benefit money.

Cookie_Monster

About time, the tax base in this country has been too narrow for far too long.
It definitly needs downward adjustment, but also a higher band.

This will of course affect me before anyone harps on and I obviously do not want to pay more tax but it needs to be done.

The point about SW is also relevant. There should be some factoring brought in, ie if you ar on minimum wage paying the proposed new tax rates and bands, the dole need to be a significant % less than this per week to encourange working while also providing some reasonable level of support to people

rightwingdub

The tax band needs to be broadened and yes someone starting off at €10k per year should pay tax, I heard the economist Constantin Gurdgiev state that a flat tax of 20% should be introduced and taxes should be directed more towards property.

Count Dooku

rightwingdub wrote: »

The tax band needs to be broadened and yes someone starting off at €10k per year should pay tax, I heard the economist Constantin Gurdgiev state that a flat tax of 20% should be introduced and taxes should be directed more towards property.

Property tax is another way to hit poor working people more because they will have to pay it for unemployed, OAP, people in negative equity etc..

rightwingdub

Count Dooku wrote: »

Property tax is another way to hit poor working people more because they will have to pay it for unemployed, OAP, people in negative equity etc..

Most OAPS, all the unemployed should be exempt from a property tax.

I think Count means that the working poor people will be paying not just their own property tax, but in essence unemployed people/OAP's (people who would be excluded) too.

rightwingdub

Rojomcdojo wrote: »

I think Count means that the working poor people will be paying not just their own property tax, but in essence unemployed people/OAP's (people who would be excluded) too.

Most of the working poor should never have been approved for a mortgage over the last 10-12 years, they would have been better off renting.

Lockstep

I can see benefits in widening the income tax base to include low paid workers.

Idea being that everyone should pay income tax, even if they can only contribute a small amount. Would help raise some extra revenue but I'm mainly into the idea as a sort of solidarity; idea being that we're all part of a society with everyone contributing what they can afford.

zielarz

Abandon income tax all together with a drastic budget cuts. That's the proper way of solving the problem.

beagle001

Problem is in this country the taxed money will only be wasted by a government department and unaccounted for.
The people who think they can save money on the dole are obviously living at home with their folks or have some saving or everything paid for them.
Not everyone gets a medical card or rent allowance beside`s the hype media stories.
If we had a decent government who could guarantee that all the collected money would be pooled into a fund to stimulate jobs and take people of welfare then I believe the general population would accept the extra tax,I think it is only going to be a minor tax even when it is implemented and it will be wasted.

Nijmegen

I never can figure out why we here in Ireland look at things like applying a broad tax base and social welfare in a targeted, means tested manner such as they do in France, Germany, Sweden, etc etc etc.

We're like the people discovering fire for the first time when introduced to the concept of a state that tracks its people in all their circumstances - if you live at home and collect the dole while your parents work, why don't we cut your dole? If your parents earn X amount and have Y many kids, why don't we give them a tax break?

Our state agencies are so dysfunctional that different ones have different criteria for means testing the same things... It's crazy!

Everyone should pay some tax, even a rennet a month is a contribution! And we should have a linked up system that takes your entire life in stock when deciding how to fork out benefits or taxes.

It's not impossible rocket science to achieve.

djpbarry

beagle001 wrote: »

Problem is in this country the taxed money will only be wasted by a government department and unaccounted for.

That is true of every country - inefficiency is part of life. It can be minimised, but it cannot be eliminated.

beagle001 wrote: »

The people who think they can save money on the dole are obviously living at home with their folks or have some saving or everything paid for them.

Let's take the case of a single individual with no dependents as an example - you don't think that they could survive on less than 196 Euro per week?

Liam Byrne

Nijmegen wrote: »

if you live at home and collect the dole while your parents work, why don't we cut your dole?

Agreed.

Nijmegen wrote: »

If your parents earn X amount and have Y many kids, why don't we give them a tax break?

Er.....because they chose to have kids ? Why should that entitle them to a tax break ?

Nijmegen

Liam Byrne wrote: »

Agreed.



Er.....because they chose to have kids ? Why should that entitle them to a tax break ?

What I mean is, means test. If we take dole off of young adults living at home, we should ensure that their family doesn't suffer if they rely on that income same as any other family.

It's the general principal of means testing to ensure we give people what they need, not too much or too little.

Godge

ei.sdraob wrote: »

From each according to his ability, to each according to his need :P

just like in North Korea, just add on self-reliance as well.

smokin ace

i work 4 days a week 6 hours a day and get crap wages (€210 this week) i rent a room for €75 a week plus food costs and other bills(credit union esb running a car to get to work) i cant get a part payment off the dole because i am working 4 days i cant get rent allowance because i am working and they wont give me a medical card i am left with €10 for myself after paying my bills there is no such thing as me going for a pint because i cant afford it and i dont smoke
how can i afford to pay tax or even a better question why am i working at all because if i was not working i would get everything paid for for example rent allowance and a medical card and what ever perks that comes along with being unemployed in this country of ours

smokin ace

smokin ace wrote: »

i work 4 days a week 6 hours a day and get €220 a week i rent a room for €75 a week plus food costs and other bills(credit union esb running a car to get to work) i cant get a part payment off the dole because i am working 4 days i cant get rent allowance because i am working and they wont give me a medical card i am left with €10 for myself after paying my bills there is no such thing as me going for a pint because i cant afford it and i dont smoke
how can i afford to pay tax or even a better question why am i working at all because if i was not working i would get everything paid for for example rent allowance and a medical card and what ever perks that comes along with being unemployed in this country of ours

This is the problem. You obviously spend money getting to and from work. You pay your own rent etc, all out of 220 euros. Really irks me when people complain that 200 euro a week (PLUS rent allowance/med card etc) for doing absolutely nothing is not enough.

People's idea of what their lives should be like while on the dole is simply over inflated.

Liam Byrne

Rojomcdojo wrote: »

This is the problem. You obviously spend money getting to and from work. You pay your own rent etc, all out of 220 euros. Really irks me when people complain that 200 euro a week (PLUS rent allowance/med card etc) for doing absolutely nothing is not enough.

People's idea of what their lives should be like while on the dole is simply over inflated.

Agreed on that part, but it's only half the story......smokin ace is working, and having a tenner a week for himself is not "living".....and taxing that level of income is a non-runner.

So by all means rejig the dole, but likewise make sure that people willing and able to work can actually "live", not just "exist" or "barely survive".

oppenheimer1

smokin ace wrote: »

i work 4 days a week 6 hours a day and get crap wages (€210 this week) i rent a room for €75 a week plus food costs and other bills(credit union esb running a car to get to work) i cant get a part payment off the dole because i am working 4 days i cant get rent allowance because i am working and they wont give me a medical card i am left with €10 for myself after paying my bills there is no such thing as me going for a pint because i cant afford it and i dont smoke
how can i afford to pay tax or even a better question why am i working at all because if i was not working i would get everything paid for for example rent allowance and a medical card and what ever perks that comes along with being unemployed in this country of ours

I'd talk to your landlord, or think of moving. I was living in Glasnevin (the nice part) for the same money all bills included and the house/room was good quality (double with my own shower room) and that was a year ago. If you're living down the country I reckon you could get much better value.

€10 a week. Whatever happens, I hope the tax bands changing don't put people like yourself under extreme pressure. That isn't fair at all.

Liam Byrne

Liam Byrne wrote: »

Agreed on that part, but it's only half the story......smokin ace is working, and having a tenner a week for himself is not "living".....and taxing that level of income is a non-runner.

So by all means rejig the dole, but likewise make sure that people willing and able to work can actually "live", not just "exist" or "barely survive".

Benefits such as rent allowance can keep rents artificially high. If it was slashed or even went altogether then rents would fall sharply.

oppenheimer1

Rojomcdojo wrote: »

Benefits such as rent allowance can keep rents artificially high. If it was slashed or even went altogether then rents would fall sharply.

Perhaps the way rent allowance is paid needs to be reformed, as a direct payment to the candidate rather than straight to the landlord. There would then be real incentive on the candidate to get the rent reduced.

djpbarry

smokin ace wrote: »

i work 4 days a week 6 hours a day and get crap wages (€210 this week) i rent a room for €75 a week plus food costs and other bills(credit union esb running a car to get to work)...

You're paying way too much in rent - maybe look into the possibility of moving closer to your place of work to cut down on the car expenses?

I take your point about potentially being better off on welfare compared to working, but which would look better on your CV?

K-9

Sadly more revenue has to be raised and obviously this helps, well hopefully!

Obviously, this also means less money being spent in the economy.

So, people will earn the same money but big Govt. gets to keep more of it and people get less to spend or save.

Big Govt. getting more money is a good thing? We can trust them?

Even if we trust them, where does the reduced VAT and PAYE/PRSI Revenue come from? It isn't companies, because the cost to employ people is still the the same, just Big Govt. takes more of the employee cost.

The cost of employing somebody is still the same, just Big Govt. gets more of employee wages.

dromdrom

Broadening the tax base is necessary , the degree to how wide it is broadened is up to how much the government have the stomach to tackle the PS unions. However it could have the interesting side effect of making people buy in to the state more, someone in the low wage tax bracket might ask themselves why they are being asked to stump up more out of their limited resources to keep our Nurses , Guards, State functionaries and teachers among the highest paid in the world while there standard of living is being reduced, might shake up the culture of ignorance and entitlement we have in this country.

AARRRRGH

djpbarry wrote: »

I think the point is that, in general, social welfare payments are too high. Obviously, there are exceptions, but that’s what means tests are supposed to be for. Having said that, my claim for Jobseeker’s Allowance was recently processed (the missus is still working and doing fairly well for herself) and I am absolutely astounded by how much I have been deemed eligible to claim. Like Rojomcdojo, I will be putting a sizeable chunk into a savings account every week – now that’s just not right, is it?

Did you pay PRSI while you were working. Believe it or not then, you are only collecting on insurance you paid. Would you complain if an insurance company paid out what you were paying for cover for?

And in case anyone in this thread hasnt noticed, the public sector has taken more of a hit than anyone else. So enough of the public sector bashing. Its getting old.

The only hit ive taken so far is a health levy and an income levy. I still get my pension, bonus, meal allowance, accommodation allowance, VHI and other benefits (because i took a job because those benefits were part of the job.). Public sector have taken a pension levy too. I can afford a bigger hit. And im happy to take it as long as everyone takes the same percentage of a cut. I dont expect one sector of society to pay for me. I expect us all to pay the same percentage extra.

djpbarry

AARRRRGH wrote: »

Did you pay PRSI while you were working.

Nope - I'm on Allowance, not Benefit.

dromdrom

AARRRRGH wrote: »

Did you pay PRSI while you were working. Believe it or not then, you are only collecting on insurance you paid. Would you complain if an insurance company paid out what you were paying for cover for?

And in case anyone in this thread hasnt noticed, the public sector has taken more of a hit than anyone else. So enough of the public sector bashing. Its getting old.

The only hit ive taken so far is a health levy and an income levy. I still get my pension, bonus, meal allowance, accommodation allowance, VHI and other benefits (because i took a job because those benefits were part of the job.). Public sector have taken a pension levy too. I can afford a bigger hit. And im happy to take it as long as everyone takes the same percentage of a cut. I dont expect one sector of society to pay for me. I expect us all to pay the same percentage extra.

Status Quo will not do, Public Sector wages have to be brought into line with the rest of the economy, the "premium" enjoyed by public sector workers by virtue of their unions interfering in the running of the state is immoral and it is only right that wages in both sectors become comparable, I have yet to hear a compelling argument as to why public sector workers deserve to be paid way in excess of their fellow citizens (at their fellow citizens expense of course)

danbohan

rightwingdub wrote: »

Most OAPS, all the unemployed should be exempt from a property tax.

absolutely not , lot oaps are extremely wealthy and have very valuable property's, means test them , same for unemployed

Count Dooku

djpbarry wrote: »

I take your point about potentially being better off on welfare compared to working, but which would look better on your CV?

He will have much better CV if he will take some rest from hard work and will spend his time on education

deise blue

AARRRRGH wrote: »

Did you pay PRSI while you were working. Believe it or not then, you are only collecting on insurance you paid. Would you complain if an insurance company paid out what you were paying for cover for?

And in case anyone in this thread hasnt noticed, the public sector has taken more of a hit than anyone else. So enough of the public sector bashing. Its getting old.

The only hit ive taken so far is a health levy and an income levy. I still get my pension, bonus, meal allowance, accommodation allowance, VHI and other benefits (because i took a job because those benefits were part of the job.). Public sector have taken a pension levy too. I can afford a bigger hit. And im happy to take it as long as everyone takes the same percentage of a cut. I dont expect one sector of society to pay for me. I expect us all to pay the same percentage extra.

+ 1
Excellent post , I also am Private Sector and am quite happy to take a bigger hit.

An equitable revamping of our tax system is the way this Government seems to be heading particularly as the Croke Park deal seems certain to be agreed which will effectively mean that current Public Sector pay and pensions will remain unchanged until 2014.

Nijmegen

Smokin ace presents a great example of why we need joined up thinking when it comes to tax and benefits!

Surely if we considered his position, he'd get dole money - even different amounts, depending on his pay packet each week - rather than suffering by some arbitrary rule that gives other people too much money and some too little.

Our government put up its hands and said it is too incompitent to means test simple payments to people.

Yet, in nearby Europe we have countries where all tax and benefits are linked to a big sliding ruler of means testing.

Why can't we be innovative enough to copy the wheel?

djpbarry

Count Dooku wrote: »

He will have much better CV if he will take some rest from hard work and will spend his time on education

Depends - generally speaking, experience is more valuable than qualifications. However, 'up-skilling' is obviously better than sitting on the dole.

Permabear

This post has been deleted.

deise blue

donegalfella wrote: »

This post has been deleted.

The latest CSO figures show a differential in private sector and public sector pay of 19.1 % which differential was further reduced by the pay cuts implemented by the December budget.

The premium of 30% to 50% suggested by you are totally incorrect .

deise blue

deise blue wrote: »

The latest CSO figures show a differential in private sector and public sector pay of 19.1 % which differential was further reduced by the pay cuts implemented by the December budget.

The premium of 30% to 50% suggested by you are totally incorrect .

That is just an overall average. Low level PS workers are making FAR more than private sector equivalents.

But yeah I would hope that some of the points made, re: more taxpayers means more people will be wondering where their money is going, will come true.

Permabear

This post has been deleted.

Welease

deise blue wrote: »

The latest CSO figures show a differential in private sector and public sector pay of 19.1 % which differential was further reduced by the pay cuts implemented by the December budget.

The premium of 30% to 50% suggested by you are totally incorrect .

If memory serves correctly, the CSO reports don't factor in PS pension benefits.. (which is a huge benefit), because not all privater sector workers receive them.. A defined benefit pension is on average worth about 30% on top of your salary as part of a total compensation package.

So the previous poster is probably pretty close with their estimations.