A flat tax

Lucozade man

Usc, tax credits, pension levies and whatever other levies should all be scrapped and replaced with a flat tax of 40% on everybodys income.

Dob74

Lucozade man wrote: »

Usc, tax credits, pension levies and whatever other levies should all be scrapped and replaced with a flat tax of 40% on everybodys income.

Oh no! Then our rich tax exiles may have to pay there fair share.

40% is a bit steep. Even the wealthly pay less then that by using there tax breaks.
30% would be about right.

Duffy the Vampire Slayer

A regressive tax rate would severely impact on those on low incomes.

Inverse to the power of one!

Flat rate isn't exactly subtle.....but I think there are more then a few ideas out there for tax simplification and reform. Neither could hurt in Ireland given the times ahead where people are going to be uncomfortably aware of their tax liabilities.

amacachi

What would a flat tax have to be set at to keep receipts at their current level? I'd be in favour of a flat tax in principle with the first 10k untaxed and a few other tax credits as well.

P. Breathnach

amacachi wrote: »

What would a flat tax have to be set at to keep receipts at their current level? I'd be in favour of a flat tax in principle with the first 10k untaxed and a few other tax credits as well.

Then it's not a flat tax.

Lucozade man

The current system is a mess, the rich get away with paying no tax at all and the poor end up with a tax underpayment on their p21

Amhran Nua

Lucozade man wrote: »

Usc, tax credits, pension levies and whatever other levies should all be scrapped and replaced with a flat tax of 40% on everybodys income.

If you earn €100 and are taxed for €40, that forty euros is a lot more painful than if you earn €100,000 and are taxed €40,000.

This is why a flat tax does not work.

Lucozade man wrote: »

the rich get away with paying no tax at all

Nonsense. Most taxes are paid by the rich.

amacachi

P. Breathnach wrote: »

Then it's not a flat tax.

Close enough.

P. Breathnach

amacachi wrote: »

Close enough.

No, not even close.

Count Dooku

Amhran Nua wrote: »

This is why a flat tax does not work.

Sometimes flat tax does work better then progressive taxation
Bulgaria and Hungary managed to increase tax take after introduction of flat rate

beeftotheheels

Count Dooku wrote: »

Sometimes flat tax does work better then progressive taxation
Bulgaria and Hungary managed to increase tax take after introduction of flat rate

That tends to happen when you have serious non-compliance issues which we don't despite what many would like to think. People will take huge risks to hide income from a 60% tax rate that they won't take to hide money from a 30% tax rate.

Irish taxpayers are pretty complaint, yes the rich guys pay for good advisors and avail of reliefs in the tax code but we don't actually have a huge problem with money being hidden in foreign accounts or anything.

So all a flat tax would do, in our scenario, is shift the tax burden from the higher paid to the lower paid.

That said, the average household in Ireland pays way less tax as a proportion of income than the OECD norm so I assume that that will change.

later12

I have to agree with the above, the only benefit I could see in the introduction of a linear tax would be in the area of compliance. It was when compliance increased in Russia following on from their revenue reforms that people sat up and started to examine these "flat taxes" in earnest. But Russia had a terrible problem with compliance, as have had many of the Eastern and Central European states that have introduced these flat, or linear taxes. And as beeftotheheels has just pointed out, tax compliance is actually not a major issue for us.

I am only vaguely aware of another argument that is put forward in favour of so-called "flat tax" and that is one of political economy. Proponents will argue that governments will find it more difficult to increase taxes or raise new taxes, therefore there will be less waste and potentially less interference by Governments in the economy.

That is an interesting suggestion, and to my mind the only reasonable argument in favour of linear taxes in Ireland. However, I fail to see how government waste could not be overcome by imposing revenue restraints instead of merely increasing the burden for the poorest.

Personally speaking, I am therefore against flat taxes for Ireland.

keithclancy

Interesting Question ... why not just dump a flat tax on everyone.

Unfortunately no government would be around long enough to implement it.

The Idea is that its meant to be a fair system for all

Duffy the Vampire Slayer

The issue that this would most likely increase taxes on the poor and decrease them for the wealthy would certainly stir up resentment.

RichardAnd

A flat tax might work but any such tax would have to be pretty low so that low earners were not crippled. If we ran the country on the cheap then taxes could be nice and low, keeping wealth in citizens' pockets which is good for the economy. In this case, a low-rate flat tax could be very much a reality.

20Cent

Tax should be charged as to how much benefit an individual gets from the Gov, the rich benefit much more than the poor so should pay more.

greendom

Count Dooku wrote: »

Sometimes flat tax does work better then progressive taxation
Bulgaria and Hungary managed to increase tax take after introduction of flat rate

It increased tax take but does that mean it worked better ? What impact did it have on the respective societies as a whole ?

RichardAnd

20Cent wrote: »

Tax should be charged as to how much benefit an individual gets from the Gov, the rich benefit much more than the poor so should pay more.

I don't see the where you're drawing that conclusion from but it's a moot point anyway; the rich pay much more tax as it is.

greendom

Tax should be equitable and charging a flat rate is inequitable. 40% of someone's income on 20,000 has much more of an impact than 40% on 200,000 for example

beeftotheheels

greendom wrote: »

It increased tax take but does that mean it worked better ? What impact did it have on the respective societies as a whole ?

It only increases the tax take if the higher earners have been non-compliant. Here the vast majority of income tax is deducted at source so the vast majority of us do not have the option to be non-compliant. Hence no real hope that it would increase the tax take.

For the avoidance of doubt it is possible to quote statistics about CGT collection going up when the rate went down from 40% to 20% but that ignores two serious points.

1. A CGT rate of 20% created a serious incentive to convert income into capital, which it did; and

2. That 20% rate is a lot of the reason why the IMF are in town, it facilitated property speculation, it helped blow up the bubble, had we kept the rate at 40% property speculation would have been less attractive and we might still be solvent.

Count Dooku

beeftotheheels wrote: »

That tends to happen when you have serious non-compliance issues which we don't despite what many would like to think. People will take huge risks to hide income from a 60% tax rate that they won't take to hide money from a 30% tax rate.

Irish taxpayers are pretty complaint, yes the rich guys pay for good advisors and avail of reliefs in the tax code but we don't actually have a huge problem with money being hidden in foreign accounts or anything.

tax breaks and other ways to avoid paying taxes in full make farce from idea of progressive taxation, rich guys pay about 30% of effective tax
As soon as state will try to increase taxes on rich, tax compliance will quickly disappear
This is why government is slowly moving from progressive taxation to effective flat rate taxation based on water charges, property tax, VAT and other indirect taxes independent form income

Chuck Stone

Amhran Nua wrote: »

Nonsense. Most taxes are paid by the rich.

If you're talking about income tax then maybe. If you're talking about tax in general then not a chance.

RichardAnd wrote: »

the rich pay much more tax as it is.

If you're talking about income tax then maybe. If you're talking about tax in general then not a chance.

Moreover - if you're talking about tax as a % of wealth then the burden is carried by lower income earners.

We have loads of flat taxes which proportionately affect lower incomes way more.

Motor tax, TV licence and VAT for example.

irishh_bob

20Cent wrote: »

Tax should be charged as to how much benefit an individual gets from the Gov, the rich benefit much more than the poor so should pay more.

i would thought the ( poor ) benefited more from goverment spending ?

irishh_bob

greendom wrote: »

Tax should be equitable and charging a flat rate is inequitable. 40% of someone's income on 20,000 has much more of an impact than 40% on 200,000 for example

thats not the point though , the point of a flat tax is that everyone would be contributing the same proportionatley , i think it would instill a good sense of civic pride and responsibility

beeftotheheels

Count Dooku wrote: »

tax breaks and other ways to avoid paying taxes in full make farce from idea of progressive taxation, rich guys pay about 30% of effective tax

What are your sources for this?

Many tax incentives have been, belatedly, withdrawn or are being withdrawn, many of those that remain are capped. So where did you get the idea that "rich guys pay about 30% of effective tax"?

Oh, and can you define "rich" here?

Count Dooku wrote: »

As soon as state will try to increase taxes on rich, tax compliance will quickly disappear

No necessarily, but from the lesson of very high rates in the 70s both here and in the UK aggressive "avoidance" would certainly increase, a high rate won't necessarily make someone break the law if they are generally law abiding, it may make them try every trick under the law to try and mitigate their tax. Higher earners by definition tend to be more mobile and thus if we increase their effective tax rate they can and may leave. Taking their wealth generating capacity with them.

Count Dooku wrote: »

This is why government is slowly moving from progressive taxation to effective flat rate taxation based on water charges, property tax, VAT and other indirect taxes independent form income

It is not this simple. In a recession if you tax people's income they feel poorer and spend less. Stealth taxation, and to a lesser extent indirect taxation, has less of an impact on people's perception of how much tax they are paying.

But you raise a valid point, where Ireland is completely out of kilter with international norms is the level of taxation applied to the average family. Charlie McCreevy realized that this was where most of the votes lay, so this was where he cut huge amounts of taxes by increasing bands and credits. So water charges, property taxes, and the Universal Social Charge to some extent address this in a manner which doesn't cause Joe Public to take to the streets in outrage that Joe Rich isn't being asked to contribute his fair share.

Because Joe Rich already contributes more than his fair share, which is in its own way, fair. And Joe Rich can leave if we ask him to pay more which Joe Public cannot do.

greendom

irishh_bob wrote: »

thats not the point though , the point of a flat tax is that everyone would be contributing the same proportionatley , i think it would instill a good sense of civic pride and responsibility

By putting more of a burden on those less able to pay. Don't see how that would work ?

Duffy the Vampire Slayer

irishh_bob wrote: »

thats not the point though , the point of a flat tax is that everyone would be contributing the same proportionatley , i think it would instill a good sense of civic pride and responsibility

Or a sense of rage in lower earners. There'd be a revolution if this idea was brought into practice.

murphaph

greendom wrote: »

Tax should be equitable and charging a flat rate is inequitable. 40% of someone's income on 20,000 has much more of an impact than 40% on 200,000 for example

Flat taxes tend not to be set at 40% as far as I can see.

I favour flat taxes to be honest. Something like 20% for all. The huge downside to so called "progressive tax regimes" is that they discourage work as the more you work, the less you receive pro-rata...and the more the state take (in many cases to hand over to the "less energetic" amongst us).

Flat taxes do the opposite...they encourage work and industry. The harder I work, the more straight money I have in my pocket. I am more likely to set up a company (and shock horror, employ people!) etc. if I can take more home.

Flat taxes eliminate the various loopholes for the very wealthy and simplify administration for Revenue.

magicianz

Progressive and regressive taxes are defined by the percentage of income that individuals must spend paying the tax.

Progressive Taxes
Progressive taxes make individuals with a larger income spend a larger percentage of their income paying the tax.

Regressive Taxes
Regressive taxes are those which take an equal or greater percentage from those with lower incomes as opposed to those with higher incomes.

Rational
Progressive taxes are defended because people with smaller incomes must spend a larger percentage of their income on basic necessities so they cannot afford to pay as much.

Examples
The U.S. federal income tax is a progressive tax because it charges a higher percentage rate as your income increases. The sales tax is a regressive tax because the expense represents a larger percentage of poorer individual's incomes.

From ehow.com

Just to show why flat rate taxes are bad for all involved =]

Cookie_Monster

15-17% would be a fair level, no credits or exceptions or anything.

Then everybody would actually have to pay tax and the whole system would be much fairer. The idea that low income people should not pay any tax is laughable anyway IMO. Completely unfair

silverharp

anyone see the irony in the fact that corperations get more equitable treatment then individuals as they are generally only charged one rate of tax


Another angle is the artificial complexity built in to the tax system, if you were looking at individuals and you still wanted graduated rates, scrap EVERY relief.

As for corperations let them pay their corp tax based on their GAAP accounts. Its amazing the amount of economic hole digging is spent by Audit and tax firms and corperations trying comply or bend every attempt at micro managing the tax system. Not to mention the opportunity cost of every student out there who has spent countless hours trying to memorise the nonsense :pac:

Duffy the Vampire Slayer

Cookie_Monster wrote: »

The idea that low income people should not pay any tax is laughable anyway IMO. Completely unfair

It'll make it even harder to encourage people to work instead of remain on social welfare if they are penalized by higher rates of tax than at present.

Cookie_Monster

Duffy the Vampire Slayer wrote: »

It'll make it even harder to encourage people to work instead of remain on social welfare if they are penalized by higher rates of tax than at present.

of course when you have the ridiculously high welfare rates we have here. but if welfare was 40-50% lower, as it needs to be.

minimum wage for 39 hours less 15% is 286.75, still much better than current welfare

murphaph

Duffy the Vampire Slayer wrote: »

It'll make it even harder to encourage people to work instead of remain on social welfare if they are penalized by higher rates of tax than at present.

You know the answer to that. Nobody wants to admit it but social welfare is going to have to be cut to levels on a par with our neighbours anyway. It's only a matter of time really.

Duffy the Vampire Slayer

Cookie_Monster wrote: »

of course when you have the ridiculously high welfare rates we have here. but if welfare was 40-50% lower, as it needs to be.

minimum wage for 39 hours less 15% is 286.75, still much better than current welfare

murphaph wrote: »

You know the answer to that. Nobody wants to admit it but social welfare is going to have to be cut to levels on a par with our neighbours anyway. It's only a matter of time really.

Which would be grand if there were enough jobs for all of the people on Social Welfare to take up. Which there aren't.

beeftotheheels

Duffy the Vampire Slayer wrote: »

Which would be grand if there were enough jobs for all of the people on Social Welfare to take up. Which there aren't.

Not to mention the billions in tax we'd lose from the higher earners without being able to replace from the lower earners.

There is a reason no civilized society takes this approach to income taxes, setting the rate low enough to not cripple the lowest paid means that the rate will not collect enough revenues from those who can afford to pay.

greendom

More equal societies perform better than less equal ones

http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/books/non-fiction/article5859108.ece

Bens

It really annoys me when I hear people giving out that people who earn more dont pay enough tax.

A little example

Tax as it is,
someone who earns €100k pays €30k tax
someone who earns €25k pays €2k tax

So flat tax of 30%
someone who earns €100k pays €30k tax
someone who earns €25k pays €8k tax

Or how about a flat tax of an amount of €30k
We should all pay €30,000 tax a year. No matter what we earn. Even if we earn less than €30,000 our tax liability should be €30,000.
If you cant pay it, you should have to leave the country.

someone who earns €100k pays €30k tax
someone who earns €25k pays €30k tax



hmmm, seems to me the high earners who people are complaining dont pay enough tax, actually are carrying those ungrateful idiots.

Wait and see what happens when you tax them out of the country. Who will carry you then. And those people, since they are capable of earning that, are probably very well capable of emigrating and getting a new job easily.

Duffy the Vampire Slayer

Bens wrote: »

Or how about a flat tax of an amount of €30k
We should all pay €30,000 tax a year. No matter what we earn. Even if we earn less than €30,000 our tax liability should be €30,000.
If you cant pay it, you should have to leave the country.

someone who earns €100k pays €30k tax
someone who earns €25k pays €30k tax

Are you seriously advocating this?

waster81

Bens wrote: »

It really annoys me when I hear people giving out that people who earn more dont pay enough tax.

A little example

Tax as it is,
someone who earns €100k pays €30k tax
someone who earns €25k pays €2k tax

So flat tax of 30%
someone who earns €100k pays €30k tax
someone who earns €25k pays €8k tax

Or how about a flat tax of an amount of €30k
We should all pay €30,000 tax a year. No matter what we earn. Even if we earn less than €30,000 our tax liability should be €30,000.
If you cant pay it, you should have to leave the country.

someone who earns €100k pays €30k tax
someone who earns €25k pays €30k tax



hmmm, seems to me the high earners who people are complaining dont pay enough tax, actually are carrying those ungrateful idiots.

Wait and see what happens when you tax them out of the country. Who will carry you then. And those people, since they are capable of earning that, are probably very well capable of emigrating and getting a new job easily.

lol utter nonsense someone earning €25k paying €30k in taxes, what planet you on

People on high incomes effectively pay at 37%, but you never read about this we are constanly told about their marginal rate of 50 odd percent

greendom

waster81 wrote: »

lol utter nonsense someone earning €25k paying €30k in taxes, what planet you on

People on high incomes effectively pay at 37%, but you never read about this we are constanly told about their marginal rate of 50 odd percent

That would be hilarious - 95% of the population would have to leave and those that were left - the extremely wealthy - would have to sweep their own floors. He has to be joking - such a regime would effectively destroy the country.

irishh_bob

greendom wrote: »

By putting more of a burden on those less able to pay. Don't see how that would work ?

a flat tax where everyone was proportionatley paying the same , surely that is equitable , where do you draw the lines when deciding who is able to pay and what they are able to pay for , you could say those on minimum wage shouldnt have to pay for thier own food if you took that attitude far enough

greendom

irishh_bob wrote: »

a flat tax where everyone was proportionatley paying the same , surely that is equitable , where do you draw the lines when deciding who is able to pay and what they are able to pay for , you could say those on minimum wage shouldnt have to pay for thier own food if you took that attitude far enough

Not for more - for me equitable means having the same relative impact on the persons' income. 20% on someone earning 20,000 has a much bigger impact than the 20% taken off the person earning 200,000 even if the amount in monetary terms is lower.

irishh_bob

greendom wrote: »

Not for more - for me equitable means having the same relative impact on the persons' income. 20% on someone earning 20,000 has a much bigger impact than the 20% taken off the person earning 200,000 even if the amount in monetary terms is lower.

entirely subjective analysis

murphaph

greendom wrote: »

Not for more - for me equitable means having the same relative impact on the persons' income. 20% on someone earning 20,000 has a much bigger impact than the 20% taken off the person earning 200,000 even if the amount in monetary terms is lower.

This is totally impossible to gauge and put a figure on and I think you know that. Even with the current system, two people in the same tax band, on the same pay, paying the same tax will feel the effect of the tax totally differently. You just can't design a tax code this way. A flat tax is fair-everyone pays at the same rate, the more you earn the more you pay, the less you earn the less you pay.

Governments don't like flat taxes because when you eliminate the various tax credits and stealth taxes and make your taxation system fully transparent this way, people know exactly how much tax they're paying and it's much harder to hoodwink them that you're "cutting taxes" (when you're actually doing nothing of the sort of course). Blind them with this tax credit and that allowance, this tax rate and that stealth tax and they switch off because they can't easily make sense of it all. A flat income tax with no VAT or other stealth taxes would be possibly even fairer as the VAT paid by rich and poor is at present the same rate, ie a flat tax on all. Eliminate it and all other stealth taxes and flat tax income (all income) at 20% and simplify the whole thing.

greendom

irishh_bob wrote: »

entirely subjective analysis

Well yes that's why I said for me - but essentially we're talking about fairness. For me fairness means equal amount of pain for everyone.. A flat rate of tax places more of the pain (relatively speaking) on the less well off. Therefore it's not equitable.

greendom

murphaph wrote: »

This is totally impossible to gauge and put a figure on and I think you know that. Even with the current system, two people in the same tax band, on the same pay, paying the same tax will feel the effect of the tax totally differently. You just can't design a tax code this way. A flat tax is fair-everyone pays at the same rate, the more you earn the more you pay, the less you earn the less you pay.

.

You make a resonable point here,apart from the fact that a flat tax is anything but fair. It disproportionately impacts on the less well off

irishh_bob

greendom wrote: »

You make a resonable point here,apart from the fact that a flat tax is anything but fair. It disproportionately impacts on the less well off

how could its disproportionatley impact on the less well off when its a flat tax , by definition , a flat tax effects all earners the same proportionatley

P. Breathnach

irishh_bob wrote: »

how could its disproportionatley impact on the less well off when its a flat tax , by definition , a flat tax effects all earners the same proportionatley

Basic economics, based on the notions of utilitarianism.

Chuck Stone

murphaph wrote: »

Flat taxes eliminate the various loopholes for the very wealthy and simplify administration for Revenue.

Those various loopholes cannot be covered by a flat income tax.

We have news reels filled with stories of rich people hiding their money and using 'creative accounting' to evade the tax.

How would people feel about making a flat tax regime on everything?

40% of months income for a TV licence

40% of a months income for a fine.

40% of a months wages for car tax.

Oh gosh no we only want a flat tax that suits the rich.
I