Comments on: Where is Ireland’s Tax Burden Heading?

By: The Irish Economy » Blog Archive » Coleman on Taxes and the Evils of PhD Economists

Thu, 14 May 2009 08:59:07 +0000

[...] of apparently illiterate economists referred to (the chief dunce, I reckon — damning evidence here and here – and this despite years of “real world forecasting experience” at the [...]

By: G

Wed, 04 Feb 2009 08:56:50 +0000

Can you let me know if the pension levy is deducted before you pay tax or after wards?

By: colm mccarthy

colm mccarthy — Sun, 18 Jan 2009 17:26:42 +0000

The 2009 tax yield as % of either GDP or GNP is not as low as it would be if, instead of VAT on new houses, CGT on property, and stamp duty, we had relied on something else. Imagine that in say 2003 these taxes had been scrapped and replaced with something stable. Think of a poll tax. This would have yielded in 2006 maybe €5bn instead of the €8bn reached by the three transactions taxes (these are Rossa White’s figs). In 2009, the three will yield only about €2bn, so €6bn has gone missing since the revenue peak, and maybe €3bn as against a stable alternative. This means that the deficit in 2006 was really €3bn worse than it appeared, and of course that it would now be €3bn better if we had gone for the stable alternative. We did’nt and it is’nt. This also means that we have had (accidentally) a big tax cut.

It is fatuous to pretend that Karl’s €28bn factor flow gap between GNP and GDP is somehow available to be taxed on the same basis as personal income or consumer spending. Some of it is a transfer-pricing book-entry and may not exist at all. I am certain that much of it would vaporise in the face of tax rate increases. The reason European countries express things as % of GDP is because GDP and GNP are nearly the same for all EU countries bar Ireland and Luxembourg, so it does’nt matter. The €28bn belongs to foreigners and is not ours to tax.

More generally, there is a different Laffer curve for the various different taxes (visit Newry if you don’t believe me) and particularly in an open economy with an endogenous labour force and capital stock, you have to be careful. The Laffer curve for Karl’s €28 bn. must be the least Exchequer-friendly of the lot, bar maybe betting tax.

I hate doing policy recommendations based on EU averages - there are too many non-comparabilities. Most continental countries do not have private sector occupational pensions, for example, and run that particular show through the State budget. So State revenue looks bigger as % of whatever. They also have large armies and so forth. Would Karl recommend EU-average academic salaries?

There is a Commission on Taxation sitting and due to report in September. The extreme volatility of recent Irish tax revenue is surely on the agenda.

By: Iulia Siedschlag

Iulia Siedschlag — Sun, 18 Jan 2009 15:25:57 +0000

Tax increases should be part of the multi-annual fiscal consolidation package and they should be announced at the same time with expenditure cuts. While expenditure cuts will hit hard the low-income group the higher taxes will be mainly paid by the high-income group.

By: Patrick Honohan

Patrick Honohan — Sun, 18 Jan 2009 10:41:10 +0000

Close reading of the officialese in the Government’s statement suggests that we may be misinterpreting this constant tax share number. A closer reading seems to show that the Government are not projecting any particular path for tax as a share of GDP (or GNP)!)

Thus although Table 5 of the Government’s new 5 year budgetary projection (”Addendum to the Stability Report”) shows a figure for tax take in each year out to 2013, this is merely technical. Just below that row are the additional adjustments to the deficit that the Government now intend to take. These are not broken down into tax, current expenditure or capital expenditure. Indeed see the footnoted remark “for illustrative purposes it is assumed that the adjustment is made on the current side”.

In other words the Government has not announced what its path for either spending or taxation is. Looks like only the borrowing figure is to be taken as an intention.

By: Kevin O'Rourke

Kevin O'Rourke — Sat, 17 Jan 2009 18:11:36 +0000

Have you ever noticed how it is those who were keenest to present Ireland as a shining example of what low taxes can do for you, who also want to deny that our tax burden is, in fact, low?

Whether low or high, it is now going to go up substantially.