FERGUS FINLAY: Give us a break — our tax system needs a strong dose of common sense

AODHÁN O’Riordáin is a Labour TD for Dublin North central and Brian Collins is a Labour councillor in Co Meath.

I’m not singling them out because they’re members of the Labour Party, but because they have both done us a service by pointing out some absurdities in social policy that are essentially caused by irrational taxation decisions. And the good news is that all of these absurdities are fixable.

I’ll get to Mr Collins in a minute, but Aodhán O’Riordáin pointed out over the weekend that a significant inequity is growing in our education system as a result of the ability of some better-off parents to buy psychological assessments for their children.

Under our system, resource supports for children with special educational needs can only be supplied by the Department of Education if a psychological assessment says they are necessary. A recent study carried out within the department shows that children in schools in Dublin 6W — an affluent part of the city are getting significantly more support on average than children in Dublin 17 (by no means an affluent area). The reason is that children from less well-off families have to wait until the National Educational Psychological Service gets around to them.

Although NEPS always denies it has a waiting list, it does — because there’s a policy of only allowing two assessments per year in the schools they service. No assessments means no support resources. On the other hand, if you are a child whose parent can afford to pay for a private assessment, the resources will follow.

That’s what’s happening — schools in richer catchments can refer children to private services. I don’t know if Aodhán O’Riordáin knows why this is happening. Here’s why.

Back in 2001, Charlie McCreevy introduced an amendment to his own Finance Act. Up to that point, parents who bought private orthodontic treatment for their children could get a tax break. Effectively, if they were on the higher tax rate, they would get back more than 40% of what they paid out. In 2001 McCreevy extended this tax break to people who bought private psychological assessments and private speech therapy for their children.

All the evidence suggests that this was done on something of a whim (as part of one of his major tax-cutting budgets). He never mentioned it in his budget speech, the Department of Education was never consulted, and the tax cut was introduced as a last-minute amendment during the committee stage of the Finance Bill. Because of the incredibly anti-democratic guillotine that was part of that Finance Bill, the amendment in question was never reached. Despite the fact that it was never reached (and therefore never debated, discussed, voted on, or even read aloud) it automatically became law at the moment the guillotine fell. It’s there to this day, in Section 8 of the Finance Bill 2001.

To this day, the longest waiting lists within the educational system are for those children who need speech and language support and access to educational psychology, and whose parents can’t afford to buy those services. In considerable part that’s because private industries grew up around the tax breaks — professionals left the public service in order to set up private practices for parents who could take advantage of the tax breaks. A vicious circle was created almost overnight, and it has lasted to this day. The formula is simple: The more you have, the more you get.

I have no idea how much the tax break for private psychological assessments and private speech therapy costs the State. I reckon it would be worth Aodhán O’Riordán’s time to table a parliamentary question on the subject. There is no doubt in my mind that the resources spent in this area should be reallocated to the Department of Education by ending the tax break, and by ring-fencing an appropriate amount of money for proper and socially responsible resource allocation policies. If better-off parents want to buy services for their children, there is nothing wrong with that. But they shouldn’t be subsidised by ever-lengthening queues for children who can’t afford services they desperately need if they’re to get a half-decent start in life.

And what, I wonder, could we afford with a rational reform and redistribution of our Vat system. Brian Collins has started this campaign for Vat reform — you can find the Campaign for Vat Reform by searching for him personally or the campaign itself on Facebook (I hope when he gets a bit more support he can get around to developing a full website on the subject).

But in the meantime here are some of the bizarre oddities he has uncovered. Most sports equipment attracts a Vat rate of 23%, but membership of a private sports club is Vat-free. Death is taxed as a luxury item in Ireland, with coffins and hearses both taxed at 23% (although grave-digging, oddly enough, is free of Vat). Irish dancing classes are a luxury item (23%), but ballet classes are essential, it seems, and attract zero Vat. Some of the nuttiest decisions related to food and foodstuffs. Bottled water, toothpaste and toilet paper all attract the luxury rate, while fondant icing, steak and kidney pie, and potato waffles are all zero. I can’t for the life of me figure out what civil servant discovered fondant icing, and what thought process decided it was an essential item. Presumably it was the same civil servant who felt that lap dancing should attract the same rate as other tourist amenities (9%) while marriage counselling is taxed at an extra 23%.

Mad and all as this is, it starts to get pernicious when it comes to taxing some items that are absolutely essential in terms of human dignity. I hope I don’t arrive at the point where I need to buy (or have bought for me) items like incontinence pads, a walking stick or a commode, but it is utterly unjust that they should be taxed as luxury items. One contributor to the campaign’s Facebook page asked if anyone could come up with a worse tax than the 23% on incontinence pads. I can’t.

Nobody associated with the campaign is suggesting doing away with Vat — that’s not the point. But the case is overwhelmingly made for a root and branch review to make it fair and logical. And who knows? Perhaps such a review, properly carried out, would actually earn some additional revenue. Extra tax on the range of foods that contribute to obesity, for instance, not only makes sense but would be a significant earner for the State — in fact it could make a decent contribution to our over-stretched and under-funded health service. And (forgive a personal hobby horse) how in God’s name did stockbrokers arrive at a point where their fees are zero-rated?

All in all, the campaign is a decent piece of public service activity. Started by a young politician, I hope it grows to the point where the demand for fair and reasonable reform becomes unstoppable — especially in respect of things that are truly essential in some of life’s more difficult circumstances. All it needs is a good solid dose of common sense. That’s not a lot to ask, surely?


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