JIM POWER: People happy to pay more taxes if public services are improved

We need to spend more money on public services and we need to reform in a serious way the manner in which they are being delivered, writes Jim Power.

Figures from the Department of Finance last week showed that in the first 10 months of the year Ireland’s public finances continued to improve and we look on target to, at least, achieve the fiscal targets set at the beginning of the year, or more precisely in Budget 2017.

One feature of the public finances is the ongoing strong growth in tax revenues. Just under €39bn was collected in the first 10 months, which is €2.3bn or 6.2% ahead of the same period last year. Income tax is the single biggest category of taxation at €15.25bn, which is €813m higher than the same period in 2016.

Income tax, which includes the Universal Social Charge (USC), accounted for just over 39% of total tax revenues collected. This is a big number and shows exactly where the main burden of taxation falls in this country.

The second biggest category is Vat at €11.2bn, much of whose burden also falls on those who pay income tax.

I have argued for some time that this burden on people who get up early in the morning and work is too high, and I think this is starting to resonate with some politicians at least.

However, a clear message that is emanating from the electorate is that the quality of public services is way below what one should expect in a modern, developed and supposedly civilised society.

After a serious reduction in expenditure on public services during the economic downturn, most if not all public services are creaking at the edges.

I think most sensible people would be happy to pay their current level of taxation, or perhaps even more, if they really believed that the quality of public services would improve. However, in many public services there is a suspicion that the more that is spent on them, the more inefficient they become.

In other words, increasing spending without improving the mechanism through which public services are delivered just serves to reinforce the inefficiencies.

We need to spend more money on public services and we need to reform in a serious way the manner in which they are being delivered.

Whatever views people who pay tax in this country might have on how their taxes are utilised and whatever latent anger they might have, the revelations this week from the so-called Paradise Papers will have most normal people seething with anger.

I suspect it is way too early to decipher the legality, or otherwise, of the millions of revelations, and whether the various schemes represent tax avoidance or tax evasion. The morality of what has been revealed is seriously questionable.

The notion that one could have one’s salary paid into an offshore bank account and then access this money through so-called loans seems to me to be bizarre in the extreme. The role that banks play in the whole process is also bizarre in the extreme, but totally predictable.

I argued in this column last week that the manner in which some elements of the corporate sector behaves will just feed the obvious anti-corporate sentiment out there and ultimately propagate and nurture the growth of non-conventional political forces around the world.

This will ultimately come back to bite the corporate sector through much stricter regulation and tax treatment.

It is high time that mobile multinationals, in particular, step up to the plate and pay the amount of tax they should in the jurisdictions where they generate employment and real economic activity.

The Irish Government — or any other government for that matter — should not be complicit in allowing multinationals avoid paying the level of taxation that they should.

Many governments seem quite happy to see the tax burden fall on the shoulders of those who are not in a position to avoid paying, and allow mobile multinationals get away with murder.


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