Jürgen Stark: Abandon the Croke Park Agreement, cut welfare

14-09-2011 10:14PM

RichardAnd wrote: »

Do we though? I'd be more inclined to think that the problem is not too little tax but rather, to much spending.

It's obvious, isn't it? So it is all the more startling when you realise that it is untrue. It certainly surprised me.

It is remarkable how easily the public - including most contributors to this thread - have accepted the line that Ireland has a government spending crisis, even though that is not actually the case.

easychair · 14-09-2011 10:23PM

Deleted User wrote: »

It's obvious, isn't it? So it is all the more startling when you realise that it is untrue. It certainly surprised me.

It is remarkable how easily the public - including most contributors to this thread - have accepted the line that Ireland has a government spending crisis, even though that is not actually the case.

Perhaps you judge that having to borrow +-€20 billion per annum to pay the wages of the public employees/ dole recipients is not a problem, but it does appear so to most observers.

14-09-2011 10:25PM

easychair wrote: »

Perhaps you judge that having to borrow +-€20 billion per annum to pay the wages of the public employees/ dole recipients is not a problem, but it does appear so to most observers.

And?

easychair · 14-09-2011 10:31PM

Deleted User wrote: »

And?

And it would be great if you could address the issue.

murphaph · 14-09-2011 10:33PM

Deleted User wrote: »

And?

And I want my kids to be able to live in Ireland without having to pay the debt we racked up by borrowing hand over fist rather than living within our means. We have no business passing on such a millstone of debt to our children!

The pain should be taken now.

14-09-2011 10:49PM

easychair wrote: »

And it would be great if you could address the issue.

In fairness, it would also be good if you would address the issue.

In that regard, recycling clichés is no substitute for analysis, and restating the symptoms is no substitute for diagnosing the cause.

We're all well aware that Ireland's borrowing level is entirely unsustainable. This has relatively little to do with spending, and a lot to do with taxation.

The evidence to support that is quite simple, and can be picked up from economic statistics produced by bodies like the ESRI, OECD and CSO, as well as the budget publications of the Department of Finance. The information is there, in black and white and easy to examine. We pay significantly too little tax, and we spend a bit too much. But the extent of our overspending is way, way less than the extent of our under-taxation.

In short, Ireland has a borrowing problem, and a taxation problem. We also have a spending problem, but that is a lot smaller than the other two problems.

ParkRunner · 14-09-2011 11:04PM

fliball123 wrote: »

All you need to do Godge is look at the 50% cut to ps pay in Greece thats what will happen

The consequences of such a savage cut are unpalatable unless alternative employment opportunities are available in the private sector. And those that are left would be totally demoralised.

Personally I think the government should encourage those retiring from the public sector now to take up positions in the private sector to help fund the cost of their pensions.

Rubik. · 14-09-2011 11:57PM

Permabear wrote: »

This post had been deleted.

But there has to be a balance struck between the cuts and the deflating effect they have on the economy and growth. That's why the cuts have been spread out over a period of time It doesn't necessarily follow that front-loading cuts in the next budget would result in a quicker return to the bond markets.

Stark is entitled to his opinion and you agree with him - fair enough, but all indications coming from the trokia suggest they are happy with the process so far. So front loading to any great extent isn't going happen.

The UN's Conference on Trade and Development issued a report last week warning that "The global economy faces a decade-long stagnation because governments are pursuing deficit cuts and other austerity measures rather than providing the needed stimulus package".

http://www.nytimes.com/2011/09/07/world/europe/07nations.html

themont85 · 15-09-2011 12:00AM

Deleted User wrote: »

In fairness, it would also be good if you would address the issue.

In that regard, recycling clichés is no substitute for analysis, and restating the symptoms is no substitute for diagnosing the cause.

We're all well aware that Ireland's borrowing level is entirely unsustainable. This has relatively little to do with spending, and a lot to do with taxation.

The evidence to support that is quite simple, and can be picked up from economic statistics produced by bodies like the ESRI, OECD and CSO, as well as the budget publications of the Department of Finance. The information is there, in black and white and easy to examine. We pay significantly too little tax, and we spend a bit too much. But the extent of our overspending is way, way less than the extent of our under-taxation.

In short, Ireland has a borrowing problem, and a taxation problem. We also have a spending problem, but that is a lot smaller than the other two problems.

We do pay too little tax I agree but I disagree with the broad thrust of your argument. Tax taken has fallen off the cliff because we have lost a lot of consumption taxes that we had previously and of course the income tax from previously employed people who are now dependents. The amount of stamp duty we took in was grossly inflated in line with the bubble housing prices. Our spending rose in line with this bubble and hasn't been reduced to nearly the same level as the loss of taxes from the bust.

15-09-2011 12:04AM

themont85 wrote: »

We do pay too little tax I agree but I disagree with the broad thrust of your argument. Tax taken has fallen off the cliff because we have lost a lot of consumption taxes that we had previously and of course the income tax from previously employed people who are now dependents. The amount of stamp duty we took in was grossly inflated in line with the bubble housing prices. Our spending rose in line with this bubble and hasn't been reduced to nearly the same level as the loss of taxes from the bust.

I understand your point, and it explains why our tax system became unbalanced. But it doesn't change the fact that we pay relatively less tax than just about everyone else.

Good loser · 15-09-2011 01:06AM

Deleted User wrote: »

I understand your point, and it explains why our tax system became unbalanced. But it doesn't change the fact that we pay relatively less tax than just about everyone else.

Apart from the property and water taxes I think the only tax change that should be made should be the removal of the PAYE allowance - I believe that would raise about €1.5 bn.

Godge wants a property tax of €3bn. per annum. This is completely impossible - we would be lucky to get it to €1 bn in five years.

Spending cuts are much more predictable than tax increases.

ardmacha · 15-09-2011 01:22AM

Our spending rose in line with this bubble and hasn't been reduced to nearly the same level as the loss of taxes from the bust

This is simplistic. Spending on the things we were spending on has in fact been reduced. Further spending on things like unemployment provision has arisen, ensuring that the overall spending has not reduced as much as you would expect. Posters here continually remind us how many people have been laid off from the private sector while at the same time refusing to pay any additional taxation to support these people.

Godge wants a property tax of €3bn. per annum. This is completely impossible - we would be lucky to get it to €1 bn in five years.

Spending cuts are much more predictable than tax increases.

Not if you tax things such as property where the number of houses is known and not easily concealed.

easychair · 15-09-2011 07:42AM

themont85 wrote: »

We do pay too little tax I agree but I disagree with the broad thrust of your argument. Tax taken has fallen off the cliff because we have lost a lot of consumption taxes that we had previously and of course the income tax from previously employed people who are now dependents. The amount of stamp duty we took in was grossly inflated in line with the bubble housing prices. Our spending rose in line with this bubble and hasn't been reduced to nearly the same level as the loss of taxes from the bust.

I am impressed that you consider you pay too little tax, and if you want to pay more then I am confident that no one will prevent you from so doing.

The problem is that not everyone agrees with you that "we" pay too little tax. The rate of taxes on income, when you add in the USC and levies and national insurance, is high.

The rate of indirect taxes, when you g to buy a new car, or a pack of cigarettes, or fuel for your car, are also comparatively high compared to our neighbours.

The only real hope for the Irish economy is to grow the economy, and unfortunately higher taxes act as a break to growing any economy.

It's a good rule of thumb that lower tax economies are the ones which thrive and become rich, while high tax economies stagnate and create much less wealth.

Head The Wall · 15-09-2011 07:53AM

Deleted User wrote: »

It's obvious, isn't it? So it is all the more startling when you realise that it is untrue. It certainly surprised me.

It is remarkable how easily the public - including most contributors to this thread - have accepted the line that Ireland has a government spending crisis, even though that is not actually the case.

Have you got a source or link which shows that we don't have a spending problem. As I see it from looking at the balance sheet income and expenditure should both be adjusted to solve the problem, that's obviously not what the clowns in govt see though.

In a few years time just like the FF show the other night we'll have the current govt telling us "no one told us you can't tax your way out of recession. Frankly I think its delusional to state we don't have a spending problem.

easychair · 15-09-2011 08:14AM

Head The Wall wrote: »

Have you got a source or link which shows that we don't have a spending problem. As I see it from looking at the balance sheet income and expenditure should both be adjusted to solve the problem, that's obviously not what the clowns in govt see though.

In a few years time just like the FF show the other night we'll have the current govt telling us "no one told us you can't tax your way out of recession. Frankly I think its delusional to state we don't have a spending problem.

I've accepted that borrowing +-€20 billion per annum to pay public servants and dole recipients is a problem for an economy generating +-€30 billion per annum in tax. Especially when you consider that the €20 billion has to be paid back, and in year 2 we have the extra cost of having to pay interest on the €20 billion.

Ulysses1874 thinks its not a problem, from his post, which does seem an unusual opinion.

However, both our positions are only opinions and the alternative to not borrowing the +-€20 billion is to see mass sackings in the public sector, a cut of probably more than 50% in current welfare levels, and probably civil unrest and rioting.

Its not a good position to be in.

15-09-2011 08:50AM

easychair wrote: »

Ulysses1874 thinks its not a problem, from his post, which does seem an unusual opinion.

I think no such thing. What I said was:

Deleted User wrote: »

We're all well aware that Ireland's borrowing level is entirely unsustainable. This has relatively little to do with spending, and a lot to do with taxation.

I also suggested that it would be good if you would address the issue, and pointed out that recycling clichés is no substitute for analysis, and restating the symptoms is no substitute for diagnosing the cause.

For now, I'll have to work on the assumption that you either can't or don't want to move on from recycling clichés and restating symptoms. You carry on if you want, but you're not really disguising that by pretending I've said something that I haven't.

Head The Wall wrote: »

Have you got a source or link which shows that we don't have a spending problem. As I see it from looking at the balance sheet income and expenditure should both be adjusted to solve the problem, that's obviously not what the clowns in govt see though.

In a few years time just like the FF show the other night we'll have the current govt telling us "no one told us you can't tax your way out of recession. Frankly I think its delusional to state we don't have a spending problem.

I've already said that the information can be picked up from economic statistics produced by bodies like the ESRI, OECD and CSO, as well as the budget publications of the Department of Finance. If you read them, you'll find that we pay a lot less tax than we think we do. Our tax bill in 2011 will be between 27% and 27.5% of GNP. The EU countries that have more balanced budgets have tax bills closer to 40% of GNP, and in some cases higher than that. A tax bill of 37.5% of GNP is ten percentage points more than we're paying now, and would put us in a similar position to Germany (with its centre-right government). Ten percent of GNP is over €12 billion.

Like it or not, our tax bill is about €12 billion less than it should be and could be. That €12 billion is the core of Ireland's borrowing problem.

I don't know what your last point is trying to say. "Delusional" is a grand word to lob into a debate on the internet, but since I said we have a spending problem I'm not sure of its relevance in this case.

Where Ireland is being "delusional" is in accepting the line that has been peddled that our borrowing problem is a spending problem and will be fixed by spending cuts. It is not and it will not, unless we address the far more serious problems we have in relation to tax.

Anyway, I have to work now. The information is easy to find, but if anyone really doesn't want to use Google I'll post some links later.

sarumite · 15-09-2011 09:42AM

Deleted User wrote: »

I've already said that the information can be picked up from economic statistics produced by bodies like the ESRI, OECD and CSO, as well as the budget publications of the Department of Finance. If you read them, you'll find that we pay a lot less tax than we think we do. Our tax bill in 2011 will be between 27% and 27.5% of GNP. The EU countries that have more balanced budgets have tax bills closer to 40% of GNP, and in some cases higher than that. A tax bill of 37.5% of GNP is ten percentage points more than we're paying now, and would put us in a similar position to Germany (with its centre-right government). Ten percent of GNP is over €12 billion.

Its also not as simple as matching what Germany takes in taxes. We don't have universal health care, properly funded universities or a similar defence budget compared to countries like Germany. Until you can say that Ireland spending profile is similar to Germany, its pretty irrelevant comparing our revenue profile. We have a spending problem, we spend money in all the wrong places.
Last time I heard, the ESRI was saying we have both a revenue and spending problem.

fliball123 · 15-09-2011 10:34AM

galway2007 wrote: »

no wonder they cut your wages by 15% as you spend more time on this moaning and more moaning
stop moaning do more work and you might get a payrise in the next 5 years

Once again a decent honest PS worker like yourself attacks the poster and not the post...and the term pot and kettle comes to mind

Godge · 15-09-2011 10:35AM

Deleted User wrote: »

I've already said that the information can be picked up from economic statistics produced by bodies like the ESRI, OECD and CSO, as well as the budget publications of the Department of Finance. If you read them, you'll find that we pay a lot less tax than we think we do. Our tax bill in 2011 will be between 27% and 27.5% of GNP. The EU countries that have more balanced budgets have tax bills closer to 40% of GNP, and in some cases higher than that. A tax bill of 37.5% of GNP is ten percentage points more than we're paying now, and would put us in a similar position to Germany (with its centre-right government). Ten percent of GNP is over €12 billion.

Like it or not, our tax bill is about €12 billion less than it should be and could be. That €12 billion is the core of Ireland's borrowing problem.

I don't know what your last point is trying to say. "Delusional" is a grand word to lob into a debate on the internet, but since I said we have a spending problem I'm not sure of its relevance in this case.

Where Ireland is being "delusional" is in accepting the line that has been peddled that our borrowing problem is a spending problem and will be fixed by spending cuts. It is not and it will not, unless we address the far more serious problems we have in relation to tax.

Anyway, I have to work now. The information is easy to find, but if anyone really doesn't want to use Google I'll post some links later.

This thread has got interesting and the tone of some of the posts have calmed down so we might get an interesting informed debate going.

There is a wealth of information out there to be found and it is interesting when you dig into it, especially to explode some myths. Here is one example, the Department of Finance Economic Bulletin for September 2011:

http://www.finance.gov.ie/documents/publications/meb2011/Sept2011.pdf

Buried down on page 14 is some of the detail on the budgetary situation. this year (2011) the General Government deficit is estimated to be €15.663 billion, 10% of GDP. So the first bit of good news is that we are not borrowing €20 billion as a number of posters have suggested here, we are borrowing a lot less. Now remember, the target we have to reach by 2014 is a budget deficit of 3% of GDP which is equivalent to €4.7 billion meaning that the expenditure savings/revenue increases that we need to make are approximately €11 billion.

Now the actual figure is going to be less than that for two reasons. Firstly economic growth will make the target easier to achieve. The forecast for economic growth is set out on page 2 but applying those figures means a budget deficit of €5.15 billion would be equivalent to 3% of GDP by the end of 2014. This reduces the target for expenditure savings/revenue increases to €10.51 billion by the end of 2014. If you then assume that the interest rate cuts on the IMF/EU will save us €1.1 billion a year (figures of up to €1.5 have been mentioned), then the amount of cuts/taxes, we need to generate over the next three budgets is €9.4 billion. That is a long way from finding €20 billion as some have suggested and the real picture is a lot brighter though the light at the end of the tunnel is still a pinprick:).

Now on the tax side, that Department of Finance economic bulletin gives a figure for Government revenue which is equivalent to 34.5% of GDP, which is at first glance a lot higher than Ulysses figure above. However, Ulysses ues GNP and there is a big debate over which is the correct base to use and the Department of Finance figure includes all revenue, fees, charges, taxes, EU grants etc. Either way, Ulysses basic point that there is scope to raise taxes up to European standards is essentially valid. That amount could be as much as €7.5 billion scope in taxes to bring Government revenue to around 40% of GDP.

I don't have a firm view on the taxes/expenditure debate except that changes to income tax should be limited to the removal of tax reliefs and that the focus should be on taxing assets such as property and also some element of consumption taxes as those kinds of measure encourage people to work. In fact, if it were possible to decrease any taxes, I would be looking to cut the income tax rates but that is another story. I will come back to these points in another post but I hope the above information clarifies things.

woodoo · 15-09-2011 10:51AM

Good post Godge. I hope people read it.

You've just wiped €10 Billion of the €20 Billion deficit some people have been so concerned about. They should be dancing from the roof tops

. Because if the PS pay had been slashed by 10 billion. They would surely be on the roof tops.

We'll get to see now if their concerns are really about the public finances or bring the PS down a peg or 2

fliball123 · 15-09-2011 10:54AM

Deleted User wrote: »

In fairness, it would also be good if you would address the issue.

In that regard, recycling clichés is no substitute for analysis, and restating the symptoms is no substitute for diagnosing the cause.

We're all well aware that Ireland's borrowing level is entirely unsustainable. This has relatively little to do with spending, and a lot to do with taxation.

The evidence to support that is quite simple, and can be picked up from economic statistics produced by bodies like the ESRI, OECD and CSO, as well as the budget publications of the Department of Finance. The information is there, in black and white and easy to examine. We pay significantly too little tax, and we spend a bit too much. But the extent of our overspending is way, way less than the extent of our under-taxation.

In short, Ireland has a borrowing problem, and a taxation problem. We also have a spending problem, but that is a lot smaller than the other two problems.

this my friend is a falacy and proven by tax takes over the last 3/4 years we have hit the point of diminihing returns with taxes in this country..We may not pay as much in Income tax...but we sure as hell make up for it with USC, VAT and other stealth taxes...And as we pay more tax public services are being cut to shreads so how does that work??? We pay more and get less..I dont think so my friend...

Godge · 15-09-2011 10:57AM

Good loser wrote: »

Apart from the property and water taxes I think the only tax change that should be made should be the removal of the PAYE allowance - I believe that would raise about €1.5 bn.

Godge wants a property tax of €3bn. per annum. This is completely impossible - we would be lucky to get it to €1 bn in five years.

Spending cuts are much more predictable than tax increases.

It is not just me who is suggesting a property tax take of €3 billion. Go back to 2010 and you will see this post from Ronan Lyons suggesting how a land value tax could raise €3 billion.

http://www.ronanlyons.com/2010/07/13/falling-house-prices-or-not-ireland-needs-a-property-tax/

Interestingly, he points out that in 2006, property-related taxes raised €10 billion so €3 billion doesn't seem too high a figure. I stand therefore by my view that a property tax of €3 billion is both achievable and fair.

I would also agree with the abolition of the PAYE tax allowance as it only applies to some taxpayers. However, remember the reason for its introduction back in the late 70s and 80s when it was a response to the perception (largely true) that only those in employment were paying taxes and that the self-employed were largely operating on a black market cash basis. There is anecdotal evidence at least that the black market economy is on the increase again so I would hope that some of the money saved in abolishing it would be put back into revenue for targeting the black economy and social welfare for targetting those claiming and working. In that case the saving by abolishing it may be €1 billion.

Another area I would like to see targetted is child benefit. It is costing the state around €2.25 billion a year. I would abolish child benefit. Too many people are either living abroad, putting it in savings accounts or drinking and injecting it. It is not meeting the objectives it was set up for. I would replace it with a different system. For children under 1, a payment of €80 a month to help families cope with the difficult adjustment to having children (reduced to €40 a month for subsequent children under 1). Nobody else should receive a payment. Instead a system of direct provision of school books, school lunches, school uniforms for those in school and direct provision/subsidy of montessori/creche/childcare places for those under 4. Even with all of that, there should still be a saving of around €1.25 billion as you would also be able to get rid of payments such as the back to education allowance. Interestingly, this sort of set-up is a feature of many European countries already which is why they have little or no child benefit and a indirect side-effect is that it would increase the amount of spending on education.

So those three measures taken together - property tax, abolition of PAYE tax allowance and replacement of child benefit and other payments with direct provision - could save as much as €5.25 billion towards the €9.4 billion needed as pointed out in my previous post.

sarumite · 15-09-2011 11:06AM

Godge wrote: »

Now on the tax side, that Department of Finance economic bulletin gives a figure for Government revenue which is equivalent to 34.5% of GDP, which is at first glance a lot higher than Ulysses figure above. However, Ulysses ues GNP and there is a big debate over which is the correct base to use and the Department of Finance figure includes all revenue, fees, charges, taxes, EU grants etc. Either way, Ulysses basic point that there is scope to raise taxes up to European standards is essentially valid. That amount could be as much as €7.5 billion scope in taxes to bring Government revenue to around 40% of GDP.

Firstly let me just say that was a good post. However, I still do not believe you can compare only one side of the equation and not the other. Ireland doesn't offer universal healthcare, so when a person spend money to see the doctor or pays €90 a month on prescriptions, that is in some ways "taxes" without being taxes as it is an expense that a German pays through taxation that we do not. We do not spend the same amount of money on our military and as such we don't need to raise as much taxes to cover that expense. There are other areas in the economy where German taxes fund what Irish taxes do not (or at least not sufficiently). I have no doubt that there is room for more tax increase, however invariably on these threads people pick and choose what 'european standards' we should aspire to and which ones can be ignored.

Godge · 15-09-2011 11:11AM

sarumite wrote: »

Firstly let me just say that was a good post. However, I still do not believe you can compare only one side of the equation and not the other. Ireland doesn't offer universal healthcare, so when a person spend money to see the doctor or pays €90 a month on prescriptions, that is in some ways "taxes" without being taxes as it is an expense that a German pays through taxation that we do not. We do not spend the same amount of money on our military and as such we don't need to raise as much taxes to cover that expense. There are other areas in the economy where German taxes fund what Irish taxes do not (or at least not sufficiently). I have no doubt that there is room for more tax increase, however invariably on these threads people pick and choose what 'european standards' we should aspire to and which ones can be ignored.

I agree but that is an argument for expenditure reform rather than expenditure reduction. See my post on child benefit for an example of the type of change that could be made. Replace a transfer payment that goes abroad, into savings accounts or is poured down a drain with a system of direct provision that covers the original rationale for the transfer payment.

As for our system of healthcare with the greatest number of nurses per capita in the world, don't get me started.

Also I didn't say which approach I favoured most - cutting expenditure or taxation. In fact I would like to redirect both taxation and expenditure, taxation away from income-generating economic activity and towards assets and consumption and expenditure away from transfer payments and towards direct provision.

easychair · 15-09-2011 12:35PM

Godge wrote: »

This thread has got interesting and the tone of some of the posts have calmed down so we might get an interesting informed debate going.

There is a wealth of information out there to be found and it is interesting when you dig into it, especially to explode some myths. Here is one example, the Department of Finance Economic Bulletin for September 2011:

http://www.finance.gov.ie/documents/publications/meb2011/Sept2011.pdf

Buried down on page 14 is some of the detail on the budgetary situation. this year (2011) the General Government deficit is estimated to be €15.663 billion, 10% of GDP. So the first bit of good news is that we are not borrowing €20 billion as a number of posters have suggested here, we are borrowing a lot less. Now remember, the target we have to reach by 2014 is a budget deficit of 3% of GDP which is equivalent to €4.7 billion meaning that the expenditure savings/revenue increases that we need to make are approximately €11 billion.

Now the actual figure is going to be less than that for two reasons. Firstly economic growth will make the target easier to achieve. The forecast for economic growth is set out on page 2 but applying those figures means a budget deficit of €5.15 billion would be equivalent to 3% of GDP by the end of 2014. This reduces the target for expenditure savings/revenue increases to €10.51 billion by the end of 2014. If you then assume that the interest rate cuts on the IMF/EU will save us €1.1 billion a year (figures of up to €1.5 have been mentioned), then the amount of cuts/taxes, we need to generate over the next three budgets is €9.4 billion. That is a long way from finding €20 billion as some have suggested and the real picture is a lot brighter though the light at the end of the tunnel is still a pinprick:).

Now on the tax side, that Department of Finance economic bulletin gives a figure for Government revenue which is equivalent to 34.5% of GDP, which is at first glance a lot higher than Ulysses figure above. However, Ulysses ues GNP and there is a big debate over which is the correct base to use and the Department of Finance figure includes all revenue, fees, charges, taxes, EU grants etc. Either way, Ulysses basic point that there is scope to raise taxes up to European standards is essentially valid. That amount could be as much as €7.5 billion scope in taxes to bring Government revenue to around 40% of GDP.

I don't have a firm view on the taxes/expenditure debate except that changes to income tax should be limited to the removal of tax reliefs and that the focus should be on taxing assets such as property and also some element of consumption taxes as those kinds of measure encourage people to work. In fact, if it were possible to decrease any taxes, I would be looking to cut the income tax rates but that is another story. I will come back to these points in another post but I hope the above information clarifies things.

It must be remembered that the figures quoted are estimates, and it must also be said the the Dept of Finance's track record of estimating or predicting has often been completely off the mark, and optimistic.

The real issue will be what happens elsewhere, what happens to the Euro, what happens in the EU, and what happens in the rest of the world. Irelands current predicament doesn't look like business as usual where there is a small recession for a couple of years and then its back to business as usual. This looks far more serious, and the effects of this could last a generation, and the deflationery spiral might go on for some years.

I have no confidence the Dept of Finance understand any more that they did over the last few years when they have demonstrated a remarkable ability to only see what they want to see, and avoid what was obvious to everyone else.

Head The Wall · 15-09-2011 12:41PM

Deleted User wrote: »

I don't know what your last point is trying to say. "Delusional" is a grand word to lob into a debate on the internet, but since I said we have a spending problem I'm not sure of its relevance in this case.

Where Ireland is being "delusional" is in accepting the line that has been peddled that our borrowing problem is a spending problem and will be fixed by spending cuts. It is not and it will not, unless we address the far more serious problems we have in relation to tax.

Anyway, I have to work now. The information is easy to find, but if anyone really doesn't want to use Google I'll post some links later.

You stated above that it is not the case that we have a spending problem.

Shall we just increase taxation so and that will solve everything. It hasn't achieved much too date has it.

murphaph · 15-09-2011 12:51PM

Germans do pay more (income) tax on the whole, BUT the differences are mostly at the lower pay levels. There is no notion of earning x amount in Germany before you pay tax (or PRSI equivalent).

Even on a so called "mini-job" in which you work 40 hours a week for €400 a month into your hand (you read that right-it's perfectly legal to pay €1 an hour here) the employer is obliged to make pension contributions for the employee.

Once you go over the mini job threshold (you earn more than €400 a month that is), there's income tax and unemployment insurance due. So you could be earning €4800 or so a year and being taxed on it.

In Ireland until the USC was introduced you could earn up to €18,000 or so before paying a penny in income tax or PRSI.

The main differences to income taxes and insurance payments between Ireland and Germany are at the lower levels. I believe it was one of the biggest mistakes that FF made (and they made so many!) in removing a huge proportion of workers from the tax net altogether. People got used to it.

We should never have removed so many from the tax net and we shouldn't have reduced the top rates so much either. Having said all that-increasing taxes before addressing the excess and waste in the PS and/or reducing SW is not on.

Godge · 15-09-2011 12:52PM

easychair wrote: »

It must be remembered that the figures quoted are estimates, and it must also be said the the Dept of Finance's track record of estimating or predicting has often been completely off the mark, and optimistic.

The real issue will be what happens elsewhere, what happens to the Euro, what happens in the EU, and what happens in the rest of the world. Irelands current predicament doesn't look like business as usual where there is a small recession for a couple of years and then its back to business as usual. This looks far more serious, and the effects of this could last a generation, and the deflationery spiral might go on for some years.

I have no confidence the Dept of Finance understand any more that they did over the last few years when they have demonstrated a remarkable ability to only see what they want to see, and avoid what was obvious to everyone else.

Well no, the figures for 2011 are based on the performance of the public finances to date in 2011 so there are only three months left so the projection of 15.663 billion of a deficit this year is probably accurate.

You may well be correct in relation to the predictions for growth but in my post I explained why we need to find €9.4 billion of savings/taxes rather than €20 billion, a difference of €10.6 billion. Of that €10.6 billion, only €450m, the difference between €4.7 billion and €5.15 billion, is the bit that is saved by the growth rates. Furthermore, that is a conservative estimate based on the growth rate as I did not allow for any buoyancy in taxation from that growth (or potential reduction in unemployment) so growth could be a little less and my figures would still work out in practice.

Of course, a Greek default collapsing the Euro and all bets are off or if there is a worldwide depression, ditto. But even in those extreme scenarios, the figure needed would be closer to the €9.4 billion than the €20 billion often mooted here.

murphaph · 15-09-2011 12:57PM

sarumite wrote: »

Firstly let me just say that was a good post. However, I still do not believe you can compare only one side of the equation and not the other. Ireland doesn't offer universal healthcare, so when a person spend money to see the doctor or pays €90 a month on prescriptions, that is in some ways "taxes" without being taxes as it is an expense that a German pays through taxation that we do not. We do not spend the same amount of money on our military and as such we don't need to raise as much taxes to cover that expense. There are other areas in the economy where German taxes fund what Irish taxes do not (or at least not sufficiently). I have no doubt that there is room for more tax increase, however invariably on these threads people pick and choose what 'european standards' we should aspire to and which ones can be ignored.

All very true. We pay more tax here (but not that much more) but receive a heck of a lot more for it. I can take the Autobahn to anywhere in Germany toll free, go to my doctor and get prescriptions for a nominal fee, use a fantastic underground system to get to work in half the time it would take in Dublin, bring my kids to subsidised childcare facilities. All these things either don't exist or cost extra in Ireland-they are effectively unmeasured taxes in Ireland.

easychair · 15-09-2011 01:49PM

murphaph wrote: »

All very true. We pay more tax here (but not that much more) but receive a heck of a lot more for it. I can take the Autobahn to anywhere in Germany toll free, go to my doctor and get prescriptions for a nominal fee, use a fantastic underground system to get to work in half the time it would take in Dublin, bring my kids to subsidised childcare facilities. All these things either don't exist or cost extra in Ireland-they are effectively unmeasured taxes in Ireland.

And you can buy your BMW's with much less tax also. The combination of direct and indirect taxes makes Ireland a high tax economy, with poor public services.

Jürgen Stark: Abandon the Croke Park Agreement, cut welfare

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