Ireland’s tax system outdated, says Gurdgiev

Ireland’s tax system wasdesigned for an environment that no longer exists and needs to be dramatically overhauled, says economist Constantin Gurdgiev.

“Our economy will continue to struggle until we transfer the tax burden away from income. The tax burden on income has rocketed from close to 29% in 2007 to 40.55% in 2011,” he said. He believes that increasing income taxes inevitably leads to leakage from the tax system as it forces businesses, entrepreneurs and the self-employed to either move offshore or into the black and grey economy.

He was speaking at Ireland’s Crises: The Way Forward breakfast briefing in Waterford hosted by accountancy firm, MK Brazil. “It isn’t feasible to continue to increase the tax burden on a diminishing number of taxpayers. In addition, reduced earnings have had a domino effect, stifling productivity and motivation, reducing consumption, reducing long- term savings, and diminishing the potential investment pool,” he said.

Dr Gurdgiev said a move away from earnings-based taxes towards a land-based tax needs to be considered, but cautioned against taxing buildings as it could discourage value-adding and productive activities. He also spoke about the urgent need to address the issue of debt forgiveness. “It is nonsense to argue that effects of excessive debt can be dealt with through normal trading out or that negative equity only affects people when they sell their property.

“We need to start getting serious about the debt overhang stifling Irish businesses and Irish households and be honest about the impact it has on our economy and society,” said Dr Gurdgiev.