Ireland is not low tax

ei.sdraob

... nor was for that matter

Gurdiev has 2 articles on his site where he analyses and graphs tax information for Ireland and EU+OECD
Article 1 here and Article 2 here

I will just post the graphs (click for larger size), his thesis is that when compared against GNP our taxes are middle of the road, since our GDP is highly distorted by various companies laundering money via Ireland.


I myself don't buy the low taxation meme sometimes used in arguments here, and not just because I have to pay a ton of it . Increasing taxes such as VAT will end-up being counter-productive and this is already evidenced in falling VAT receipts, same for income taxes and levies. So that leaves cuts...

RichardAnd

I have never seen Ireland as a low tax economy. Certainly, income tax here might not be what it is in France or Germany (I don't know the actualy figures for either) but we have dozens "under the table" taxes and charges.

spank_inferno

And its the distribution of tax burden that grinds my gears.

Apart from VAT there is a huge slice at the lower end of the wage scale who pay little or no tax.

Those at the top can afford the assistance and have the aid of many ways & means of avoiding tax or putting said monies into other schemes to generate more wealth.

Its us wage donkeys in the middle who keep getting squeezed.

KindOfIrish

I've made tax calculation for single person with no children and gross salary of 26k p.a. in UK, Germany and Ireland. here results of take home pay
(in Euro):
26,000 gross gives

Ireland - 22,186
Germany - 21,358
UK - 20,400

net.

lasnoufle

RichardAnd wrote: »

I have never seen Ireland as a low tax economy. Certainly, income tax here might not be what it is in France or Germany (I don't know the actualy figures for either) but we have dozens "under the table" taxes and charges.

France also has "under the table" taxes and charges... For example there's an property tax (for the owner) and an occupancy tax (for the person who actually lives in the property), of course they're cumulative if the owner lives on his property. I really wouldn't bet that Ireland has more taxes than France outside income tax.

Also strictly speaking income tax in France is actually far lower than in Ireland; however there is a huge compulsory "social contribution" taken out of your salary that usually amounts to between 20% and 25% of your gross (and your employer also matches a similar "contribution" for you on its side).

To give you a rough idea, when I got a job in Ireland in 2008 (OK tax rates have changed etc), the same annual gross (35K) would land me 500 euros more a month on my net salary in Ireland compared to France. (approx 2400 in Ireland vs 1900 in France, and that's not even counting that I had tax relief in France for charity donations).

irishh_bob

spank_inferno wrote: »

And its the distribution of tax burden that grinds my gears.

Apart from VAT there is a huge slice at the lower end of the wage scale who pay little or no tax.

Those at the top can afford the assistance and have the aid of many ways & means of avoiding tax or putting said monies into other schemes to generate more wealth.

Its us wage donkeys in the middle who keep getting squeezed.

the super wealth elite have the ear of politicans and the lower earners and wellfare recipients have the poverty industry with its close aly the media to look out for them , those in middle ireland ( the coping class ) have no one to pull for them

Nijmegen

KindOfIrish wrote: »

I've made tax calculation for single person with no children and gross salary of 26k p.a. in UK, Germany and Ireland. here results of take home pay
(in Euro):
26,000 gross gives

Ireland - 22,186
Germany - 21,358
UK - 20,400

net.

Good for the single person on €26k. Are you attempting to disprove the idea that Ireland is an average tax economy?

Because the figures cited look at the entire economy, and clearly show that the person on €26k might win, but in the end we all pay what our peers do... And for much better return at that!

murphaph

KindOfIrish wrote: »

I've made tax calculation for single person with no children and gross salary of 26k p.a. in UK, Germany and Ireland. here results of take home pay
(in Euro):
26,000 gross gives

Ireland - 22,186
Germany - 21,358
UK - 20,400

net.

I think your German figure is way off. I plugged 26k into nettolohn.de and accepted the standard defaults without church tax (for a "PAYE" worker in Germany on 26k you must have "standard" health insurance etc. (alone this costs the employee about 8% of their gross pay!)).

Nettolohn says you'd come out with 17.281,74 € a year.

I reckon this is about right. You can't escape paying tax as a "low earner" in Germany. Everyone must contribute something to the system.

In Ireland they get you elsewhere...higher VAT, excise duty, road tax, VRT etc. etc. Ireland is certainly not a low tax economy, just a more sneaky one. In Germany you also get stuff for your taxes!

ardmacha

Ireland is not low tax, but is still lower than in the mid 90s for instance. At this point Ireland should not be low tax, as it is running up a deficit.

Nijmegen

ardmacha wrote: »

Ireland is not low tax, but is still lower than in the mid 90s for instance. At this point Ireland should not be low tax, as it is running up a deficit.

Perhaps the government might lose some weight before it asks us to tighten the belt again.

Tipp Man

ardmacha wrote: »

Ireland is not low tax, but is still lower than in the mid 90s for instance. At this point Ireland should not be low tax, as it is running up a deficit.

We shouldn't be paying outrageous levels of social welfare or Public sector pay either

But we are - that's whats running up the deficit

ei.sdraob

murphaph wrote: »

In Germany you also get stuff for your taxes!

Imagine that, your taxes being spend wisely, no we cant have that! :P

ardmacha

Perhaps the government might lose some weight before it asks us to tighten the belt again.

Everyone has to do their bit, the government and you included.

Nijmegen

ardmacha wrote: »

Everyone has to do their bit, the government and you included.

I think our over bloated government, which is spending more now than this time last year while I'm certainly earning less, has the ball in its court.

tara73

murphaph wrote: »

I think your German figure is way off. I plugged 26k into nettolohn.de and accepted the standard defaults without church tax (for a "PAYE" worker in Germany on 26k you must have "standard" health insurance etc. (alone this costs the employee about 8% of their gross pay!)).

Nettolohn says you'd come out with 17.281,74 € a year.

this figure is right.

Liam Byrne

KindOfIrish wrote: »

I've made tax calculation for single person with no children and gross salary of 26k p.a. in UK, Germany and Ireland. here results of take home pay
(in Euro):
26,000 gross gives

Ireland - 22,186
Germany - 21,358
UK - 20,400

net.

Take home pay is only a tiny aspect.

VAT
VRT
Excise
Car / Road Tax
Tolls
TV licence
Bin Charges
Fuel & Carbon Tax
Levies on Insurance
Stamp Duty
...and there's probably more

Not to mention the fact that the net cost of everything is higher because - well - everyone else has to pay THEIR taxes out of what you pay them.

So I could nearly guarantee that that supposed grand or so "better off" is quickly swallowed up and then some.

Try doing a full comparison based on where an average person's wages go and THEN see how we fare out.

Dale Parish

ardmacha wrote: »

Everyone has to do their bit, the government and you included.

So we'll start seeing those on social welfare out and about helping to improve this great country?
No?

dissed doc

KindOfIrish wrote: »

I've made tax calculation for single person with no children and gross salary of 26k p.a. in UK, Germany and Ireland. here results of take home pay
(in Euro):
26,000 gross gives

Ireland - 22,186
Germany - 21,358
UK - 20,400

net.

Your figures are wrong. On a €26,000 gross yearly salary, these are the net earnings after normal taxation.

Ireland: 22,186 (non-public sector), 20,824 (public sector)
Germany: 14,283
UK: £17,873 (22811 pounds is 26000 euros at today's rate).

Effective income tax rates (all inclusive) on a €26000 salary:

Ireland public sector: 19.9%
Ireland non-public sector: 14.6%
Germany: 45% (with church tax)
UK: 21.6%

As you can see, the non-public sector in Ireland at the moment is significantly undertaxed, no naturally we have underfunded public services like hosptials, schools, police, etc., .

dissed doc

murphaph wrote: »

I think your German figure is way off. I plugged 26k into nettolohn.de and accepted the standard defaults without church tax (for a "PAYE" worker in Germany on 26k you must have "standard" health insurance etc. (alone this costs the employee about 8% of their gross pay!)).

The health care insurance payment is the biggest thing missing in Irish salary deductions. 8% is what pays for hospitals and doctors. However, people in Ireland generally pay nothing at all (perhaps the Health Levy if anything but that is only new), and complain about having to pay *something* at the GP.

beeftotheheels

ei.sdraob wrote: »

... nor was for that matter

Gurdiev has 2 articles on his site where he analyses and graphs tax information for Ireland and EU+OECD
Article 1 here and Article 2 here

I will just post the graphs (click for larger size), his thesis is that when compared against GNP our taxes are middle of the road, since our GDP is highly distorted by various companies laundering money via Ireland.


I myself don't buy the low taxation meme sometimes used in arguments here, and not just because I have to pay a ton of it . Increasing taxes such as VAT will end-up being counter-productive and this is already evidenced in falling VAT receipts, same for income taxes and levies. So that leaves cuts...

An alternative view might be

1. Let's take a bunch of numbers produced by people who actually know what they are doing (the OECD know their tax)
2. Let's arbitrarily choose some of those numbers (2009 for transactional taxes when there were precious few transactions in that year????)
3. And let's redefine them by reference to certain arbitrary criteria (why is GNP more relevant than GDP when GDP more properly reflects our taxbase, no analysis for this given?)
4. In order to come to a simplistic conclusion which accords with one's own philosophical beliefs.

So

1. Our income tax based on the OECD numbers, which actually reflect reality collated as it is by people who understand tax, is disproportionately low when looking at the average industrial wage or lower.
2. Our VAT rate is, within the parameters set by the EU, reasonably high but VAT is a tax on consumption. Not just personal consumption mind, Financial Services (being exempt themselves) also bear VAT so the IFSC skews this
3. VAT is a tax on luxuries for the most part so your spuds, bread, milk, rent etc are zero rated/ exempt, your chocolate biscuits not so much.
4. Duties are charges on, for the most part, things we know are naughty, booze, fags, petrol.

So, if you're a lower income earner and you spend a significant amount on booze, fags, and luxury food items then the OECD numbers wildly misrepresent your effective tax rate. But you are still not deserving of my sympathy because these are all "optional" taxes on luxury items.

If you're a lower income earner who spends wisely then the OECD numbers broadly reflect your effective tax rate which is out of step with the OECD norm (although the USC has gone some way toward remedying this and no doubt will go further in the next budget).

And if you're a higher earner then you are still better off than someone on a comparable salary in the UK, France, Germany etc (again the IFSC skews the numbers on income taxes due to the fact that non-resident corporations can pay income tax on their Irish income which is GDP and not GNP).

So what is his point? Quite frankly given his apparent love for all things Swiss, I really wish he would move there and leave us alone. I am pretty sure we could survive without his level of intellectual dishonesty - he ignores for example the fact that where you live in Switzerland can more than double your effective tax rate, he assumes that Swiss GDP is relevant while Irish GNP is relevant which is odd given the number of companies having their European (i.e. non-US) headquarters in Switzerland is comparable to Ireland.

tara73

dissed doc wrote: »

Your figures are wrong. On a €26,000 gross yearly salary, these are the net earnings after normal taxation.

Ireland: 22,186 (non-public sector), 20,824 (public sector)
Germany: 14,283
UK: £17,873 (22811 pounds is 26000 euros at today's rate).

Effective income tax rates (all inclusive) on a €26000 salary:

Ireland public sector: 19.9%
Ireland non-public sector: 14.6%
Germany: 45% (with church tax)
UK: 21.6%

wrong again!
net income (tax class 1, no children, not married as original poster took as the example) with gross 26 000 € is 17.281,74 € a year, 1440 €/month without church.

but church tax isn't 3000 € a year (jesus...:P), it's roughly 20 € a month, makes 240 €/year.

so that's 33,5 % tax.

in germany also there are tax steps, taxes are adjusted to the income so somebody with low level or even intermediate income is not paying 45 or 50 % taxes!

murphaph

dissed doc wrote: »

Germany: 14,283
..
Germany: 45% (with church tax)

Church tax is entirely voluntary, so including it is not appropriate. It is a voluntary donation to your church of choice, taken at source.

dissed doc wrote: »

The health care insurance payment is the biggest thing missing in Irish salary deductions. 8% is what pays for hospitals and doctors. However, people in Ireland generally pay nothing at all (perhaps the Health Levy if anything but that is only new), and complain about having to pay *something* at the GP.

I believe we could have German standards in health care if people paid a little more (not a lot more as I believe Ireland is not a low tax economy, just has low headline income taxes) AND the health system was COMPLETELY reformed, including removing the army of admin staff currently hiding in it. Added to this, German nurses, dentists, doctors and consultants would never dream of earning the equivalent salaries of their Irish counterparts. The wages demanded by Irish health care professionals are simply too high to allow for a system as exists in Germany (or Holland, UK, Sweden etc.) to be implemented in Ireland without these people seeing pay cuts.

murphaph

beeftotheheels wrote: »

So, if you're a lower income earner and you spend a significant amount on booze, fags, and luxury food items then the OECD numbers wildly misrepresent your effective tax rate. But you are still not deserving of my sympathy because these are all "optional" taxes on luxury items.

If you're a lower income earner who spends wisely then the OECD numbers broadly reflect your effective tax rate which is out of step with the OECD norm (although the USC has gone some way toward remedying this and no doubt will go further in the next budget).

If the low income earners who waste their money on fags and booze stopped doing so, their income taxes would have to be increased, along with those of the more prudent members of society. The fact remains that the exchequer gets the money back out of people one way or another.

I think the point he's making is that the exchequer is not under funded given the overall population, rather that we are spending too much. The fact that much of that revenue comes from naughty things from people who should know better doesn't really change this.

Personally I am in favour of shifting our reliance on unreliable sources of revenue like VAT/duty to property taxation, higher income taxes for low earners (up until this year you could earn ca. 18k before paying a penny in income tax!).

Scofflaw

Are the tax figures people are using net of direct government social transfers? One can pay tax, but also receive child benefit - from the point of view of disposable income, then, the amount paid in tax should really be discounted by the amount received in child benefit, and likewise from the point of view of government service provision.

cordially,
Scofflaw

murphaph

Scofflaw wrote: »

Are the tax figures people are using net of direct government social transfers? One can pay tax, but also receive child benefit - from the point of view of disposable income, then, the amount paid in tax should really be discounted by the amount received in child benefit, and likewise from the point of view of government service provision.

cordially,
Scofflaw

The comparison made was for a single person so child benefit shouldn't skew it but your point is well made. In Germany for example I can include all sorts of things as a "PAYE" worker in my tax return that I couldn't in Ireland. I can offset my travel costs to work, any books I buy related to my work, strange things like the cost of tradesmen's labour etc.

Many more "PAYE" workers here make a tax return and receive tax back than in Ireland because there are a raft of things you can offset against tax here that you can't in Ireland, so again, although German headline income tax is higher, it's not the full story and reinforces that Ireland is not a low tax economy.

Sand

@Beef

(why is GNP more relevant than GDP when GDP more properly reflects our taxbase, no analysis for this given?)

Because the GDP reflects profits washed through our system to take advantage our low corporate tax rate - this is one of the primary explantions for situations where Irish GDP can go up whilst Irish GNP drops. The components of GDP are not something we can rely on sticking around for very long at all should it become more profitable to declare profits elsewhere.

GDP and GNP are just statistics at the end of the day, one size does not fit all, but given the peculiarities of the Irish economic position, GNP is the best answer when it comes to figuring our sustainable taxbase. Anything earned from GNP->GDP gap should be seen as a bonus or windfall.

ei.sdraob

There is also the out of control government expenditure which distorts our GDP

GDP =private consumption + gross investment + government spending + (exports − imports)

We still we have the largest deficit in EU

WalterMitty

People in Germany or scandinavia dont mind paying more of their income as tax as they dont have to put their hands in their pockets for GP, schools,childcare,medicines,rubbish removal etc.

Comparing Ireland to these places is like comparing ryanair to lufthansa business class. When the new charges/taxes per house come in and further levies and charges are applied in coming years we will per capita be paying as much as highest in europe but will be getting lot less in return for our taxes/charges.
We actually spend more per capita on public services than sweden but get nowhere near as many and varied services as average swede does. This was pointed out on RTE radio by a former high ranking public servant last year. Of course that makes sense when pay costs eat up all the resources that a public services has meaning less needed peole can be employed and/or lower service levels and service variety can be provided. We could actually grow numbers in public service thus reducing numbers on dole if public servants pay was cut to provide resources for such a move. We dont have a high number employed by state by international standards its just that they are vastly overpaid by international standards and by our ability to sustainably pay them.

Nijmegen

As you can see, the non-public sector in Ireland at the moment is significantly undertaxed, no naturally we have underfunded public services like hosptials, schools, police, etc., .

Or... The public sector is paying more for their gucci pension, which most private sector workers have to provide themselves, and the total tax wedge in Ireland is right on average with the EU.

(why is GNP more relevant than GDP when GDP more properly reflects our taxbase, no analysis for this given?)

Because in Ireland GDP is skewed by foreign companies. In most countries GDP and GNP are 98% of one another. In Ireland it's about 84% (or more), because so much money washes through the country.

2. Let's arbitrarily choose some of those numbers (2009 for transactional taxes when there were precious few transactions in that year????)

That looks at total tax revenues also.

I believe we could have German standards in health care if people paid a little more (not a lot more as I believe Ireland is not a low tax economy, just has low headline income taxes) AND the health system was COMPLETELY reformed, including removing the army of admin staff currently hiding in it. Added to this, German nurses, dentists, doctors and consultants would never dream of earning the equivalent salaries of their Irish counterparts. The wages demanded by Irish health care professionals are simply too high to allow for a system as exists in Germany (or Holland, UK, Sweden etc.) to be implemented in Ireland without these people seeing pay cuts.

A quick search shows Germany spends $3,628 per capita versus $3,996 in Ireland.

Anyone who's ever been in a German hospital will tell you that they clearly get the better deal!

Are the tax figures people are using net of direct government social transfers? One can pay tax, but also receive child benefit - from the point of view of disposable income, then, the amount paid in tax should really be discounted by the amount received in child benefit, and likewise from the point of view of government service provision.

So long as the figures for other countries are taken on the same basis as ours, I don't see it being highly relevant.

In any event, % of gross pay on PRSI and income tax Germany then Ireland:



The below shows Ireland's tax take against GNP, the others are in GDP, because of the skew we see:

Scofflaw

murphaph wrote: »

The comparison made was for a single person so child benefit shouldn't skew it but your point is well made. In Germany for example I can include all sorts of things as a "PAYE" worker in my tax return that I couldn't in Ireland. I can offset my travel costs to work, any books I buy related to my work, strange things like the cost of tradesmen's labour etc.

Many more "PAYE" workers here make a tax return and receive tax back than in Ireland because there are a raft of things you can offset against tax here that you can't in Ireland, so again, although German headline income tax is higher, it's not the full story and reinforces that Ireland is not a low tax economy.

Actually, no, since any decent treatment of tax will include the range of possible write-offs. I was thinking more of this:

http://www.cso.ie/releasespublications/documents/economy/current/regincome.pdf

cordially,
Scofflaw

Scofflaw

(why is GNP more relevant than GDP when GDP more properly reflects our taxbase, no analysis for this given?)

Because in Ireland GDP is skewed by foreign companies. In most countries GDP and GNP are 98% of one another. In Ireland it's about 84% (or more), because so much money washes through the country.

Yes, but that's irrelevant in this particular case, since those foreign companies that contribute to GDP also pay taxes - quite a lot of taxes. Therefore dividing the total tax paid by GNP is meaningless, because you've removed the contribution of the foreign companies only from one side of the equation.

cordially,
Scofflaw

BrianD3

Nijmegen wrote: »

Or... The public sector is paying more for their gucci pension, which most private sector workers have to provide themselves

:rolleyes: The example used was a 26,000 gross salary. The public sector pension is far from good at that level, in fact it's a bad deal. 40 years of pension levy, superannuation, widows and orphans and PRSI for a 13k pension and a 39k lump sum.

Whereas the poor downtrodden private sector worker on an average/low wage gets a defined benefit old age pension of 12k after at least 10 years of paying PRSI only. Even if they pay if for 40 years, the contributions don't come close to covering the cost (assuming average life expectancy)

Then there's the fact that PRSI is more than just a contribution to the COAP. If a private sector worker claims JSB for one year, their net contribution to their pension is even less.

If any pension is "gucci" it's this one. Yet private sector idiots continually moan the public sector pensions using exaggerated terms like "gucci" "gilt edged" and "golden" and complain about how they themselves have "no pension". An absolute joke.

Count Dooku

Scofflaw wrote: »

Yes, but that's irrelevant in this particular case, since those foreign companies that contribute to GDP also pay taxes - quite a lot of taxes.

I don't think so

In 2007 spend in Irish economy by IDA supported FDI is €15.9b of which salaries €6.8b, Irish raw materials €2.5b and Irish services €6.6b

And compare it with repatriated profit which is equal to difference between GDP and GNP

Nijmegen

BrianD3 wrote: »

:rolleyes: The example used was a 26,000 gross salary. The public sector pension is far from good at that level, in fact it's a bad deal. 40 years of pension levy, superannuation, widows and orphans and PRSI for a 13k pension and a 39k lump sum.

Whereas the poor downtrodden private sector worker on an average/low wage gets a defined benefit old age pension of 12k after at least 10 years of paying PRSI only. Even if they pay if for 40 years, the contributions don't come close to covering the cost (assuming average life expectancy)

Then there's the fact that PRSI is more than just a contribution to the COAP. If a private sector worker claims JSB for one year, their net contribution to their pension is even less.

If any pension is "gucci" it's this one. Yet private sector idiots continually moan the public sector pensions using exaggerated terms like "gucci" "gilt edged" and "golden" and complain about how they themselves have "no pension". An absolute joke.

Don't be silly, a PS worker on €26,000 for their entire life, 40 years of work?

Increments alone would sort that out.

Yes, but that's irrelevant in this particular case, since those foreign companies that contribute to GDP also pay taxes - quite a lot of taxes. Therefore dividing the total tax paid by GNP is meaningless, because you've removed the contribution of the foreign companies only from one side of the equation.

I think we'll be having the GDP/GNP debate and trying to untangle it for a long time. Realistically a country like ours needs a third measure, GDP adjusted for the money that really doesn't wash through the country.

beeftotheheels

Count Dooku wrote: »

I don't think so


And compare it with repatriated profit which is equal to difference between GDP and GNP

That misses the point that if 100bn worth of dividend comes into Ireland and flows on out of Ireland (so is GDP and not GNP) we have the right to tax that dividend. We don't actually tax it in 99% of cases but we have the right to tax it. It is in our tax net, it forms part of our tax base.

Interest and royalties are even clearer since we do tax those in numerous cases, and the tax we charge is income tax and not corporation tax.

So to exclude the difference between GDP and GNP is to distort the numbers.

The OECD model, which starts from the bottom up by taking a set of facts and working out the tax on those facts is the better method of determining how we rank in terms of the actual income tax take for most individuals.

The indirect tax numbers will also be difficult, but the IFSC can skew VAT too and the slice that is GDP and not GNP could be subject to VAT depending on what it is.

Hence my suggestion that we accept we are on the low end of average tax for income tax and just plain low for corporation tax. We acknowledge that we can be high tax on indirect taxes but the individual has the right to control how much they spend on these by how they spend their salary.

I took issue with the blatant intellectual dishonesty in Gurdgiev's numbers, whether we're getting value for money in terms of our tax is a whole different ball game.

BrianD3

Nijmegen wrote: »

Don't be silly, a PS worker on €26,000 for their entire life, 40 years of work?

Increments alone would sort that out.

The example used was 26k and you responded by talking about "gucci" pensions.

And in any case, even if increments did bring gross salary up to 30, 35, 40k
a) there is a corresponding increase in PRSI, superannuation, widows and orphans and pension levy
b) it's still far from being the great pension that it's portrayed as.

As for increments, most grades would run out of increments years or decades before retirement but of course the idiots in this forum think that increments keep going till retirement. There are plenty of grades that have a small number of increments. Not every public servant is a teacher with 20+ increments.

As for low paid private sector workers, they get an excellent pension deal for their PRSI contributions. As I said, a minimum of 10 years of PRSI and then a 12k pension when they retire. The other poster's point was that private sector workers at this level are undertaxed and this backs it up. It's even worse when these same private sector worker with their 12k, defined benefit, underfunded pensions whinge about having "no pension".

dissed doc

murphaph wrote: »

The comparison made was for a single person so child benefit shouldn't skew it but your point is well made. In Germany for example I can include all sorts of things as a "PAYE" worker in my tax return that I couldn't in Ireland. I can offset my travel costs to work, any books I buy related to my work, strange things like the cost of tradesmen's labour etc.

Many more "PAYE" workers here make a tax return and receive tax back than in Ireland because there are a raft of things you can offset against tax here that you can't in Ireland, so again, although German headline income tax is higher, it's not the full story and reinforces that Ireland is not a low tax economy.

This is immensely important when discussing taxes - similar tax deductable things occur in Netherlands. For example, employer will pay for your commuting costs, and so on. A massive amount is tax deductable. In Ireland, virtually nothing is for a normal PAYE worker. E.g., most doctors pay a few thousand of net income every year just to maintain active registration costs. None are tax deductable despite having been made mandatory by the state. You usually lose one gross monthyl paycheck every year as a junior doctor just to keep the legal certifications/registrations up to date.

beeftotheheels

Scofflaw wrote: »

Are the tax figures people are using net of direct government social transfers? One can pay tax, but also receive child benefit - from the point of view of disposable income, then, the amount paid in tax should really be discounted by the amount received in child benefit, and likewise from the point of view of government service provision.

cordially,
Scofflaw

Couldn't do this. You (parents) pay the tax, your child (who I'm assuming pays no tax) receives the benefit.

So no net off because the persons paying the tax are not the beneficiaries of the benefit (in strict legal terms).

We could (should, in my view) move to a UK style system of replacing benefit with refundable children's tax credits being allocated to the parents of the child (which also then allows means testing to operate properly).

Nijmegen

a) there is a corresponding increase in PRSI, superannuation, widows and orphans and pension levy

As a private sector worker if I earn €26,000 or €62,000 I will get the same state pension.

b) it's still far from being the great pension that it's portrayed as.

As has been pointed out on many occasions, the cost to fund such a pension as a private sector worker - no matter if you think the outcome is 'meager' - is far, far higher than as a public sector worker.

As for increments, most grades would run out of increments years or decades before retirement but of course the idiots in this forum think that increments keep going till retirement. There are plenty of grades that have a small number of increments. Not every public servant is a teacher with 20+ increments.

If you remain on a low grade, that's your problem.

As for low paid private sector workers, they get an excellent pension deal for their PRSI contributions. As I said, a minimum of 10 years of PRSI and then a 12k pension when they retire. The other poster's point was that private sector workers at this level are undertaxed and this backs it up. It's even worse when these same private sector worker with their 12k, defined benefit, underfunded pensions whinge about having "no pension".

Good for them, that's social solidarity. On my €62,000 I pay more tax than the guy on €26,000 and I fund more of his social services than he does of mine, which is fine.

What we're discussing here is the generous pay and conditions of the public sector, the average cost of each worker being north of €50k (divide pay bill by number of workers from Croke Park progress report.)

I actually don't have much problem with the lowly paid in the PS, but we always seem to come back to Gardai, nurses and low paid clerical workers despite the evidence seeming to point to the fact that at an average wage north of €50k, they're not the whole issue.

In any event, the size of the PS needs to reduce in terms of numbers employed, and taxing the hell out of the productive sectors (economically speaking) is counter productive, as it will kill further demand and as this thread points out, it's bulls*** to suggest that Ireland is some low tax haven to begin with.

Scofflaw

beeftotheheels wrote: »

Couldn't do this. You (parents) pay the tax, your child (who I'm assuming pays no tax) receives the benefit.

So no net off because the persons paying the tax are not the beneficiaries of the benefit (in strict legal terms).

We could (should, in my view) move to a UK style system of replacing benefit with refundable children's tax credits being allocated to the parents of the child (which also then allows means testing to operate properly).

Legally, that is the case - practically, you can offset the one against the other. Household income might be more relevant.

Nijmegen wrote:

I think we'll be having the GDP/GNP debate and trying to untangle it for a long time. Realistically a country like ours needs a third measure, GDP adjusted for the money that really doesn't wash through the country.

I accept that we have to disentangle the question of taxation on foreign companies from the question of taxation in the domestic economy, but doing so is hardly as simple as dividing tax burdens by GNP rather than GDP when considering whether Ireland is a low tax economy.

cordially,
Scofflaw

Nijmegen

Scofflaw wrote: »

I accept that we have to disentangle the question of taxation on foreign companies from the question of taxation in the domestic economy, but doing so is hardly as simple as dividing tax burdens by GNP rather than GDP when considering whether Ireland is a low tax economy.

cordially,
Scofflaw

Well, stick your thumb in your mouth and then hold it up to the wind, do you think we're a low tax economy?

ei.sdraob

@Scofflaw

In 2009 (last available figure) corporation take was 3.9b out of total of 33b in tax revenue and of course not all of that is from foreign companies
to put into perspective more was collected from excise
if it is a variable then its not as significant as you make it out

ei.sdraob

Look what I dug up, with a familiar comment from our resident @Scofflaw in comments
Gurdiev is not the only one who has written on this, Seamus Coffey (who Scofflaw likes to quote often) also has written a detailed article linked above on the subject. His conclusion is that we are not too far below the average and definitely not low tax.

The next issue to consider is the burden of tax on Irish residents. For most of the EU the distinction between GDP and GNP is of little significance. Figures from eurostat reveal that for the EU27, the aggregate GDP of the EU was €11,787,279 million (€11.8 trillion). Separately eurostat reports that the aggregate Gross National Income (GNI, which bar a minor adjustment is the equivalent of GNP) was €11,748,223 million (€11.7 trillion).

Across the EU as a whole the GNI-to-GDP ratio is 99.7% – both measures of national income are essentially the same. The is not the case with Ireland. There is a substantial difference between GDP and GNI in Ireland because of the substantial outflow of profits by multinational firms. These profits form part of Irish GDP as they are based on economic activity in Ireland, but they do not form part of GNI, as the income does not accrue to Irish residents.

Using eurostat’s figures for 2009 the Irish GNI-to-GDP ratio for 2009 was 83.1%. This is a clear outlier. Nearly 17% of “National Income” flows out of the country and because it is taxed at a low rate it can distort the view of the tax burden on Irish residents. Using the GNI figures available the next lowest ratio is Portugal’s at 96.6%.

I would add to the above that his figures are up to 2009 (article is from 2010) and since then taxes have gone up as we all know, and yet more to come down the pipe.

My theory is that we are going to endup (already are by this stage in 2011?) an above average taxed European nation with very little to show for it, once our glorious public servants decide to release more statistics and data we should be able to check this theory.

Scofflaw

Nijmegen wrote: »

Well, stick your thumb in your mouth and then hold it up to the wind, do you think we're a low tax economy?

On balance, no, not really. I think we get low services because we return quite a lot of the tax take directly through social transfers, which leaves a relatively smaller amount of tax take to pay for common services - but that's very much a thumb in the wind impression.

Look what I dug up, with a familiar comment from our resident @Scofflaw in comments
Gurdiev is not the only one who has written on this, Seamus Coffey (who Scofflaw likes to quote often) also has written a detailed article linked above on the subject. His conclusion is that we are not too far below the average and definitely not low tax.

Thanks for reminding me - note that Coffey agrees that the contributions of the MNC sector need to be factored in to a more comprehensive analysis. To come back to your previous point:

In 2009 (last available figure) corporation take was 3.9b out of total of 33b in tax revenue and of course not all of that is from foreign companies
to put into perspective more was collected from excise
if it is a variable then its not as significant as you make it out

Quoting from that study of US companies, it should be clear that their tax contribution is in no sense limited to CT:

US companies paid €891m, €975m and €790m in VAT revenue in 2007, 2008 and 2009 respectively. For example, this represents about 7.5 per cent of the total VAT revenue paid in 2009. Although it is still a significant amount of revenue, it is low compared to the share of CT from US companies.

The number of US companies that pay excise duty is very small but the amount of revenue involved is high. Around ten US companies paid excise duty in 2009 but their combined payment was €986m, which is equal to 20 per cent of the total excise duty paid in that year. US companies paid €900m in excise duty in 2008.

Based on Revenue data, US companies employed around 100,100 people in Ireland in 2008. This represents about 5 per cent of 2 million in employment in that year. The income tax revenue from these employees for that year was €698m or 7 per cent of the total income tax revenue of €10bn from pay-as-you-earn (PAYE) sources. Employment by US companies in 2007 was slightly higher, at 108,200 and PAYE revenue was €650m.

The amount of CT revenue from US companies is substantial, €2bn at its peak in 2008 and over one third of total revenue from all companies in most years. It is notable that, although revenue from US companies decreased in 2009 due to the impact of the economic downturn, it appears revenue from US companies was less severely affected than the overall corporate tax base.

That's US multinationals only, and it represents about €4.1bn for 2009 out of a tax take of €33bn - 12.4%. If we took the contribution of other MNCs (UK, EU, Rest of World) as being in proportion to their "top 250" share of CT (13%, 14%, and 4% respectively) compared to the US' 48%, we would be looking at a contribution from the MNC sector of another 8% from them, for a total of 20.4% of contributed tax. Hardly small.

cordially,
Scofflaw

ei.sdraob

Wages from MNCs are accounted for under income tax/PRSI etc, but of course you already know that.


Anyways why would Ireland need to be a high tax country? We have young population as compared to EU, hence not as many pensioners to support via taxation (in theory, and of course pensions reserve is gone) we also dont have large military outlays and adventures like the rest.

BrianD3

As has been pointed out on many occasions, the cost to fund such a pension as a private sector worker - no matter if you think the outcome is 'meager' - is far, far higher than as a public sector worker.

And what of the cost to privately fund the 12k p.a, defined benefit, index linked contributory old age pension. Funny how this never gets brought up. Then again it's not surprising as this constitutes "no pension" :rolleyes:

For public servants finishing on <40k and reaching average life expectancy, the COAP makes up the majority of their pension - and the COAP part is more underfunded than the PS part.

In the case of the public servant on 26k they contribute more than they get out of their pension. Whereas a private sector worker on 26k gets much more back from the state pension than they pay in. In effect, the 26k public sector worker is subsidising the 26k private sector employee's pension.

What we're discussing here is the generous pay and conditions of the public sector

No we're discussing whether Ireland is a low tax economy. Salary deductions from private sector workers and expenditure on social welfare - which includes pensions for private sector workers - is just as relevant to this as PS pay and pensions is.

If you remain on a low grade, that's your problem.

Irrelevant, I didn't say it was a problem. I was responding to your quote below about increments increasing PS salaries and pensions.

"Don't be silly, a PS worker on €26,000 for their entire life, 40 years of work?

Increments alone would sort that out."

I actually don't have much problem with the lowly paid in the PS

Then don't refer to their pensions as "gucci".

In any event, the size of the PS needs to reduce in terms of numbers employed, and taxing the hell out of the productive sectors (economically speaking) is counter productive, as it will kill further demand and as this thread points out, it's bulls*** to suggest that Ireland is some low tax haven to begin with.

The public sector makes up a minority of the workforce The private sector makes up the majority and the average private sector employee's COAP is underfunded. While the cost of the PS needs to come down this has been done to death in the media and on this forum. Whereas I don't recall seeing private sector workers calling for their COAPs to be cut or for their contributions to be increased.

ei.sdraob

On further thoughts the MNC sector would also distort the export part of the GDP equation

GDP = private consumption + gross investment + government spending + (exports − imports)

and the investment bit

Maybe any of the economists out there could somehow strip out the whole of the MNC sector and then give us figures we can use to compare Ireland with

Nijmegen

And what of the cost to privately fund the 12k p.a, defined benefit, index linked contributory old age pension. Funny how this never gets brought up. Then again it's not surprising as this constitutes "no pension"

For public servants finishing on <40k and reaching average life expectancy, the COAP makes up the majority of their pension - and the COAP part is more underfunded than the PS part.

In the case of the public servant on 26k they contribute more than they get out of their pension. Whereas a private sector worker on 26k gets much more back from the state pension than they pay in. In effect, the 26k public sector worker is subsidising the 26k private sector employee's pension.

Do we have a social security net or not...? The state pension is a transfer payment, and some people get a better deal than others in terms of the amount they pay in vs what they get out.

It's the same that if I went on the dole tomorrow I'd get the same €188 as the next fella, despite him paying half the dole in tax a year and me paying a multiple of it when employed.

The cost of the state pension would be about €204 a month in today's money, starting at age 25 and retiring at 68.

No we're discussing whether Ireland is a low tax economy. Salary deductions from private sector workers and expenditure on social welfare - which includes pensions for private sector workers - is just as relevant to this as PS pay and pensions is.

Ok, well lets put it this way: Tax from PS workers is a rebate to the government. We can either raise taxes on all, kill demand in the economy further, or fire a whole load of PS workers, to reduce our deficit.

I don't think we're particularly low tax to begin with and don't get value for money from the state. So, the state ought to be reduced in size.

The public sector makes up a minority of the workforce The private sector makes up the majority and the average private sector employee's COAP is underfunded. While the cost of the PS needs to come down this has been done to death in the media and on this forum. Whereas I don't recall seeing private sector workers calling for their COAPs to be cut or for their contributions to be increased.

You're right that social welfare needs a stick taken to it too.

It's not an either-or discussion.

Maybe any of the economists out there could somehow strip out the whole of the MNC sector and then give us figures we can use to compare Ireland with

That would be quite a job.

By the by for MNC contribution in Ireland, the recently released IDA Annual report for 2010 has a good goo at discussing it (we have to remember they may not cover all the MNC's, but I'd assume a majority.)

IDA sponsored companies represented:

• €110 bn exports (88% of total)
• €17.3 bn direct expenditure in Irish economy (about 12% of GDP)
• 140,000 employed directly, further 100,000 indirectly (7.5% and 13% of workforce respectively)

ei.sdraob

Thanks we have both @beefoftheheel and @Scofflaw claiming that comparing against GNP is still not good enough, tho not attempting to come up with a way of compensating for this distortion


I am not an economist but I presume that our comparison would be something like this if we wanted to strip out the multinationals from the equations


(Tax Revenue) as % of GDP

=>

Where "Tax Revenue" = Tax Revenue minus Revenue due to MNC presence
and
GDP = (private consumption + gross investment + government spending + (exports − imports) )

where "gross investment" has to be adjusted down
and
"exports" have to be seriously adjusted down

Dannyboy83

Nijmegen wrote: »

Do we have a social security net or not...? The state pension is a transfer payment, and some people get a better deal than others in terms of the amount they pay in vs what they get out.

Open to correction, but I believe the German Welfare system also gives bigger transfers to higher earners, initially at least, and is downgraded over the duration of unemployment.

So if you plan to offset, presumably that could have quite an impact on the effective German tax rate, reducing it substantially.

murphaph

Dannyboy83 wrote: »

Open to correction, but I believe the German Welfare system also gives bigger transfers to higher earners, initially at least, and is downgraded over the duration of unemployment.

The German system used to be much more generous to the unemployed but about 15 years ago the government under Schröder (a socialist one) realised Germany was slowly going bankrupt and instigated the Hartz reforms.

Nowadays you get 60% of your last 12 months average salary for a period of 1 year, after which you immediately step down to a fixed Hartz IV payment of ca. €350 a MONTH (health insurance is paid by the state as is rent in a small flat-if you have any assets of note however you'll have to sell them first before getting these payments). If you refuse to go to job interviews and refuse to do assigned work (helping pick up litter or trim hedges etc.) then your benefits are reduced. It is entirely possible in Germany to receive no benefits (ie, become homeless) if you refuse to cooperate with the system. Germans as a rule have little sympathy for the homeless as to end up there means you have refused to cooperate. People with mental health etc. issues are treated as such and are assigned carers etc.

The system for unemployed people is MUCH harsher than in Ireland. I believe other "nordic" states will eventually follow suit as the likes of Denmark is currently struggling with an increasing welfare bill and an exodus of native Danes who are sick to the back teeth paying extortionate taxes.