We all hate paying taxes, but fair tax is the key to a fair society

BEING a taxpayer is no fun, we all know that.

But to judge from the storm that broke in the media last week, one could be forgiven for thinking that some terrible injustice was perpetrated on Ireland’s taxpayer pensioners at the turn of the year.

The media loved it, of course. Another nice juicy political scandal to get 2012 off to a good start. Headlines like “crackdown on old age pensioners” helped to ramp it up. Phone-ins were jammed by angry pensioners, demanding to know what would be done about this latest attack on them.

And to make matters worse — and this was the lead story on an RTÉ News bulletin during the week — pensioners who called a quickly established Revenue helpline had to wait for (in some cases) 12 whole minutes.

But there was no attack. No injustice was perpetrated. What happened was that the Revenue got some additional information from the Department of Social Protection about who was getting a State pension. Some enthusiast in the Revenue decided to write to every pensioner involved telling them they might have an additional tax liability as a result. And the country went berserk for a few days.

It does seem that the Revenue may well have written to quite a few people who have no additional tax liability, either because they’ve been declaring their combined pensions all along, or because the total they earned in pensions from all sources was less than the amount you’re entitled to earn before tax. Although they haven’t admitted it, the Revenue, it seems, acted in haste, writing to thousands of people before carrying out the necessary checks.

But apart from that, they were only doing what the Revenue is supposed to do. They’re supposed to collect tax. And organisations that advocate on behalf of pensioners, even though they were angry at the way the Revenue had gone about it, were the first to acknowledge that pensioners, just like everyone else, have to pay their taxes if they fall into the tax net.

Organisations like Age Action Ireland and the Senior Citizen’s Parliament are really good at what they do. If you look at Age Action’s website, for instance, you’ll find a wealth of information about what elderly people should be, and are, entitled to. There’s a helpful fact sheet, for instance, about some of the practical issues that face people as they get older. And that fact sheet spells out, in clear and accessible language, that pensions can be subject to tax: “Pensions are taxed as earnings under the Irish tax system,” it says. “However, there is an annual age exemption threshold, under which income is not subject to tax. This has been reduced in recent years to €18,000 for a single or widowed person aged over 65 years and €36,000 for a married couple.”

And you can download a particularly helpful “pensioner’s handbook” from Age Action too. It’s more than 250 pages long, and it deals with every aspect of growing old. It’s really well written, and I would imagine it’s essential reading for everyone getting on in years. In fact, I found myself more engrossed in reading it than I thought I would — that may have something to do with the fact that I’m a lot closer to pension age than I used to be.

It’s all there — everything to do with tax, and also everything to do with entitlements. In fact there’s 10 pages covering allowances and entitlements. I presume it is the case that getting access to the full range of entitlements probably involves endless battles with bureaucracy, but there’s little doubt, reading the handbook, that there is a lot of support available for people who have contributed a lifetime’s work to the state.

And by the way, the handbook is also full of ads offering very considerable discounts on all sorts of things for people who have reached pensionable age. I can’t wait.

But to get back to the row. Maybe the reason it is so hyped up is because it pushes two psychological buttons. We’ve developed a conventional wisdom in politics that says “never pick a row with the pensioners”. And we seem to have a knee-jerk reaction to anything associated with income tax compliance.

Take the first point first. I can fully understand why people who have worked a lifetime for a level of pension entitlement would want to protect that. But if we’re being entirely honest, pensioners are by no means the most vulnerable group of people in Ireland.

The Central Statistics Office, for example, published what they call a “Thematic Report on the Elderly” last September. It compared income and living conditions between 2004 and 2009 for elderly people. And among its findings were these:

* The gross weekly income of the elderly population (those aged 65 or over) increased by 48% over the period — compared with an increase of just under 18% for those of working age.

* In 2009 the “at risk of poverty” rate for those aged 65 or over was 9.6%, down from 27.1% in 2004.

* The consistent poverty rate for the elderly population fell to 1.1% in 2009 from 3.9% in 2004. That’s a fraction of the consistent poverty rate that applies to more vulnerable groups, including children, lone parents, and people with disabilities.

I’m not making the point that being a pensioner is a bed of roses — that would be foolish. It is not easy to live a life of dignity if one has to depend on the support of the state, and that’s a fact. But there is no reason in these figures, or in any concept of justice that I understand, why pensioners shouldn’t pay their fair share of tax.

But we all hate paying tax, don’t we? That’s the other reason everyone got so hot under the collar last week.

I actually thought that whole thing about paying tax had changed a bit in Ireland. I remember writing a piece here some years ago about what seemed then like a new “get tough” policy from the Revenue Commissioners. What they were talking about was “tough but fair”. It was based on an approach developed by the new Chairman of the Revenue Commissioners, Josephine Feehily. .

Her mantra at the time was “we want to make it easy for people who want to do business with us and to make it difficult for those who don’t”, and it represented a real culture shift.

We had been through decades of the black economy, the grey economy, the nod-and-wink economy. Ansbacher, the Oireachtas DIRT Enquiry, the Beef Industry Tribunal, the McCracken and Flood Tribunals. They all taught us that some people lived high on the hog by evading their taxes, and the rest of us paid for it through lousy public services.

Whatever we do, let’s not go back there. Of course it’s no fun paying taxes, and of course it can be a terrible shock to be told you owe more than you thought. But fair tax, on all sorts of incomes, is the key to a fair society.

We’d all benefit from that.

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