Time to plan for the long term - Tax policies

FINANCE Minister Michael Noonan yesterday defended the decision to phase out the €4bn-a-year USC between now and 2021. 

This figure represents just under a quarter of the personal tax yield. Such a concession has its appeal but unless public services are improved in the interim, it may prove a Pyrrhic victory.

Mr Noonan was not the only person to discuss tax yesterday. The Irish Tax Institute (ITI) made observations that deserve consideration. ITI pointed out that middle and higher-income earners still face higher tax bills than seven years ago despite the Government standing down austerity measures. It pointed out that many workers paid effective rates significantly higher than peers abroad. Recognising the disincentives built into our regime, ITI said income tax doubled on every euro earned above €33,800, even though this figure was below the average industrial wage. This seems bizarre, unfair, and counter-productive.

Tax policies are always complicated and seldom universally accepted as fair but they are one of the primary ways a society is defined. Noam Chomsky described a society’s attitude to tax as a measure of how democratic it is. Yesterday’s statements from Mr Noonan and ITI indicate that we need to plan over longer periods to achieve the kind of society where fairness is more readily identifiable — and to maximise how a fair tax policy can be an agent for good.


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