The era of permanent and pensionable work — a job for life — is largely over

The era of permanent and pensionable work — a job for life — is largely over
Finance Minister Paschal Donohoe presenting Budget 2019

Though at the time of writing the final figures aren’t in, it already looks like 2018 has been a record year for tax collection.

There are more people in work now — some 200,000 more than at the time of the last general election — and that means more income tax, USC and PRSI being collected.

It’s hard to know where government policy starts and stops in driving the recovery.

The era of permanent and pensionable work — a job for life — is largely over

It’s a crude measure of government productivity, but the number of acts passed in the Oireachtas is in decline. In 2015, which was the last full year where a majority government was in power, there were 74 acts added to the Irish statute book.

In 2017, the first full year of a minority government, there were just 44. There won’t even be that many this year.

As against that, many of the jobs initiatives seem to be paying off, ministers managed to keep Irish concerns at the very top of the Brexit agenda, and we find ourselves in a robust position to attract foreign direct investment because of measured responses to EU and OECD-led initiatives to change the corporation tax rules.

With stronger economic growth, there have been modest increases appearing in the pay packets of workers.

The tax bands and allowances have not kept pace with these modest increases, and the net effect is a higher burden of taxation.

The terms of the Fine Gael-led minority government confidence and supply arrangement permeated Budget 2019.

As in previous years, the finance minister stuck strictly to the agreement between his party and Fianna Fáil when pulling together his budget.

The Fianna Fáil priority of universal social charge (USC) reduction was accommodated, alongside the Fine Gael priority of widening the 20% band.

Budget 2019 marked the completion of the confidence and supply term, and the option to renew has been since taken up.

This year saw a ramping up in preparations for a new PAYE system operable from January 1. Known as PAYE Modernisation, it introduces significant additional costs for employers.

Running the payroll will now be as much about satisfying Revenue as it is giving employees their proper dues. A more accurate PAYE system should, ultimately, benefit everyone but there will inevitably be initial problems with it.

This year was also the year when Revenue took it upon themselves to review, and by all appearances, phase out the system of flat rate expenses for employees.

These are the standard tax deductions granted to different categories of workers to reflect money they have to spend on exclusively work-related items, like cleaning their uniforms. This administrative decision would have resulted in considerable disruption on top of the revamped PAYE system, but after some clamour, its impact has been deferred by a year. That’s not adequate.

The project should be dropped entirely, if for no other reason that it stops Revenue having to deal with large-scale, sometimes erroneous, claims for expenses — claims which might never have arisen if a flat rate expenses regime operated.

The changes to USC and tax bands in the budget will leave many workers with a few euros more a week after tax this year, but the elusive feelgood factor remains missing.

A suggestion at the start of the year that a reduction to the Vat rate of 13.5% on housing might boost the supply of housing units got nowhere.

Such a move, according to a response to a parliamentary question from the minister for finance, might cost in the order of €240m per annum.

It doesn’t seem to be the amount involved that presents the problem, as much as the very notion that a property tax incentive could be part of a solution to the current market failure.

Perhaps less pressing, but affecting substantially more people than even the homelessness crisis, is the so-called “pensions timebomb”.

The pension funding situation is getting worse for reasons that cannot really be controlled by the worker.

The era of permanent and pensionable work — a job for life — is largely over for most people in the private sector. There is plenty of evidence to suggest that private sector workers will change jobs and careers multiple times.

That makes longer term pension planning more difficult.

One of the proposals put on the table — again — in 2018 is auto enrolment. This, in effect, means that a worker is automatically put into a contributory pension scheme the day they start their job. It could be of significant help in tackling pension funding shortfalls.

A decade ago, we were dealing with the banking collapse and the recession it triggered. Measured against 2008, 2018 was a pretty good year when economic growth got us close to optimum levels of employment.

But how much better might it have been without the indigenous infrastructure problems, particularly housing, and the protectionism and isolationist approach of the British?

Brian Keegan is director of public policy and taxation with Chartered Accountants Ireland.

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