No shortage of ideas on taxes, but General Election plans need to be right ones

One inevitable consequence of a General Election campaign is that there is no shortage of tax ideas in the public domain. Most of these involve someone else paying more tax, while our family/business/cause (delete as appropriate) pays less.
No shortage of ideas on taxes, but General Election plans need to be right ones

Just as the Six Nations makes rugby pundits of us all, and the European Championships breeds prototype soccer panellists, an election breeds tax economists.

The political parties are the worst culprits. Their only defence is that they have skin in the tax changes game. All of this punditry risks trivialising what is a very serious business.

It is not a small thing for any nation to confiscate money from its citizens using threats, which is what a tax system does.

Tax policy has to be done right. Renua, for example, is calling for political parties to receive State assistance when designing tax and economic policies.

It is easy to be cynical about political parties calling for State assistance, but I think in this circumstance the call is justified.

There is no point in anyone holding out tax policies to the electorate which are under-researched or not properly costed. When and if those politicians get into power, they will find out quickly that their election manifesto is not deliverable. Failing to deliver on a manifesto rarely ends well for anyone.

Outside the hustings, the routine tax policy decisions underpinning the work of Government are made in a more mundane manner.

A number of civil servants and political advisers belong to a group called the Tax Strategy Group; it meets regularly over the late summer and early autumn.

Drawn from various government departments and the Office of the Revenue Commissioners, they decide on the universal social charge, income tax, and other tax options to be offered to the Minister for Finance for inclusion in the budget the following October.

Tight-lipped to a fault, the members would be unlikely to use #TaxStrategyGroup on Twitter. The Tax Strategy Group work is in complete contrast to electioneering.

Advance knowledge of the contents of a budget confers considerable political and commercial advantage, so an obsession with secrecy is understandable.

Despite this, or perhaps because of it, once the dust has settled on a budget the papers reviewed by the Tax Strategy Group are published.

This year, the papers were published within a few days of the election being called so their publication did not receive much attention.

The papers show that there is ongoing reference to the Programme for Government and to various pronouncements made by cabinet members in the previous few months.

Much in the same way as election promises are discounted and dismissed, many of us tend to dismiss the public musings of senior politicians on tax issues.

Nevertheless political comments, particularly those by the Taoiseach and the Minister for Finance, are captured and brought into the mix at budget time.

Another thing featuring in the mix is the submissions to Government by various social and representative organisations in advance of the budget.

In July 2015, the public consultation process was institutionalised into the National Economic Dialogue, a two-day tax parliament with representative groups arguing why someone else should pay more tax.

As these policymakers have the most current tax and economic information presented to them, some of the evidence considered by the Tax Strategy Group last year will have a considerable bearing on what our new government, however constituted, can and cannot do. The details of categories of taxpayers in particular are quite striking.

Three-quarters of income earners earn less than €50,000. The remaining 25% of income earners pay 80% of all the income tax and USC in this country. If you count someone earning more than €50,000 as wealthy, then the tax system already taxes the wealthy.

Because income tax and USC account for nearly half of all tax from all sources including corporation tax, property tax, excise, VRT and the like, that is a very heavy burden on relatively few backs.

Most of the tax proposals currently being floated by the political parties, whether they involve USC reductions, new income thresholds or higher rates for higher earners, will result in even fewer taxpayers shouldering the overall burden of taxation. An even sharper divide can be seen in the amounts of tax paid by companies. A tiny number of large companies account for the bulk of the corporation tax receipts. These divisions in the share of the tax burden make future taxing decisions particularly critical.

It is socially just to expect the better off to contribute more, but it is socially unjust to ask any group in society to contribute everything.

There is no shortage of ideas on how to raise taxes to be heard at this election, but the ideas have to be right.

* Brian Keegan is director of taxation at Chartered Accountants Ireland.

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