Pension insurance 19.5%
Unemployment insurance 6.5%
Health 14.3%
Nursing care 1.7%

Employer pays half and employee pays half. That’s 21% each. Am I right? Works out almost three times ours for employees.

I presume though it means there’s less need for private pensions, health insurance etc. Which would close the gap a bit if you’re contributing 5% to a private pension and say 4-5% for health. (My VHI for a family of 4 costs €1800).

It’s a bit of the chicken and the egg. We all go out and take out private health insurance and pensions because we don’t think much of the state’s offering in this area. If the state improved its offering we might cancel the private stuff but we won’t do that till we see the state’s offering improve……

apologies for my rant at Vincent Browne. Quite clearly i dislike the guy (!), but this thread ain’t about him.

What i will say is that at times of crisis and panic like this, people tend to lurch left or right of the political divide, they’re no longer interested in the cosy middle, cost it ain’t so cosy anymore. Look at the formation of the PD’s and how that came about, it being a direct consequence of the horrible 1980’s.

This report could i suppose be described as being to the right of the political spectrum, even though cost cutting and waste/innefficiency reduction should be of interest to everyone, left or right. As such, i fully expect the likes of Vincent Browne, Joe Higgins, CORI, Richard Boyd Barret etc, who i would see as being to the far left of the discussion, to come up with an alternative plan which involves huge tax hikes across the board, and little if any real cuts in the public sector.

Whether the country buys into such a plan is anyone’s guess, but the fiscal deficit as it stands is completely and totally unsustainable. Real and permanent changes need to be made to how we run and fund the country and the public services. Those in favour of cost cutting have made their pitch, so i think there’s an obligation on those against it to come up with an alternative plan for us to discuss, analyse and contrast against.

What d’you want - - more job cuts?

Look beyond the figures because in the real world, no well run company would cut wages unless its a response to a steep drop in demand and is designed to keep a sructure in place until a recovery.

It’s hardly consolation to an exporter to the UK who has lost 30% of its business that Pfizer and a small number of other companies have ramped up their output.

What’s on offer: Goverment ban or subsidy or more job cuts and no pay cuts for the continuing employees?

Wages ARE being slashed. I admit there is a dearth of official statistics on the matter which, as a staistician, annoys me. But, read Garret Fitzgerald’s article in today’s Irish Times. This is what he writes today (I’ve condensed it for brevity):

” during the past century pay rates almost everywhere have moved in one direction only - upwards - but now pay, in the Irish private sector, is actually falling”

“private sector pay (in Ireland) will fall by at least 7 per cent this year and probably by more - in the rest of the eurozone pay is still rising and labour costs are expected to rise by around 4 per cent this year”

Those aren’t my words, they are Garret Fitzgerald’s. He’s a statistician.

So, our wages are falling 11 per cent below the eurozone this year - which, surprise, surprise, is almost exactly the amount by which domestic spending in Ireland is lagging behind that in the eurozone this year.

The reality is that we are being subjected to a unique experiment, massive wage deflation. Its never been tried before, anywhere. It was dreamed up by quack economists under the pretext that exports were collapsing, when we now know they weren’t and aren’t. Its proving disastrous.

As for this business of it not being exporting firms that need these pay cuts (the argument that we were losing export market share now having been destroyed), but non-exporting firms dependent on the domestic market.

Well, of course these businesses are doing badly. If everybody’s pay is being slashed, nobody can afford to buy anything. In addition, if they’re told that their pay will be slashed next year again and the year after again, then quite naturally they will immediately reduce their current spending to bring it below their projected future reduced income. In a nutshell, that’s what’s happening. Incomes have fallen and the proportion of those incomes saved has shot up. Spending has collapsed as a result.

How about putting it to the test?

Reduce employees wages to zero for a year. Let them work for nothing. I mean, they’re all lazy sods anyway, so zero pay is too much for them. Then, let’s see how bars, restaurants, hairdressers, garages, corner shops, beauticians, estate agents, and so on fare in that year. It won’t be pretty!

One strand, then, on each on the three biggest areas by spend (Social Welfare, Health, and Education) one on specific issues in the remainder and one on the strategic and structural aspects.

No doubt some contributors will also be drafting substantive posts on particular aspects, and on the overall implications of the report and reaction to it.

Your tax figures are completely accurate with the one exception - PRSI. Ireland has exceptionally low PRSI when compared to continental Europe. Indeed Employer social insurance contributions are a key source of State income.

The German stats office, Destatis said in June: “Real earnings in the first quarter of 2009 were down 0.4% compared with the same quarter of the previous year. This is the result of the index of real earnings, which has been calculated for the first time; it compares the development of earnings with the price trend. The decrease in real earnings is mainly due to the small increase in earnings (+0.4%).

Major reasons were the decline in extra payments, which were down by 7.9% compared with the first quarter of 2008. In the same period, the basic remuneration, that is gross monthly earnings excluding extra payments, rose by 1.5%.”

Destatis also reported employers in industry and in the entire service sector paid a seasonally-adjusted 5.8% more for one hour worked in the first quarter of 2009 than in the first quarter of 2008. That is the highest increase since the labour cost index time series began to be calculated in 1997. Compared with one quarter earlier, labour costs were up a seasonally and calendar-adjusted 1.7%.
 
The hourly rate rose because of the stimulus program support for part-time working.

So there hasn’t been a large permanent increase in German pay.

The link above without the asterisk!

http://www.finfacts.ie/irishfinancenews/article_1017081.shtml

Whether it’s public or private, the gravy train has had a kaleidoscope of characters; €1.6 billion annually for State drug purchases, which have an ex-factory price of €1 billion (even the factory price itself has a subsidy); multi-millionaire farmers on public welfare, then hitting property purchasers with a hidden tax through the corrupt rezoning system; huge outlays on IT projects via the opaque procurement process, for private consultants* and then the cornucopia of allowances and other perks available in the public sector, led by the political class, while the majority of private sector workers do not even have a basic occupational pension scheme.

The biggest unreformed vested interest is at the top and I cannot recall any proposals of radical reform from the 216 members of the Oireachtas, most of whom are nonentities, in response to the current crisis.

In recent months, Senator David Norris made a plea in the Irish Times for the retention of the Seanad. It is however instructive, that his own significant contribution to Irish society, would always leave his membership of that defunct institution, as a footnote.

The cost of running the Oireachtas has increased at an annual rate of 12% in the past 5 years.

There has been resistance on both sides of the aisle to sacrificing priviliges and embracing radical change in the archaic system.

The 1828 US term, “‘to the victor belong the spoils,” likely sums up the outlook of the Opposition.

All roads lead back to the political system and Ireland needs to badly look in the mirror.

In contrast to the propaganda, the country remains deeply conservative.

Since a government collapsed in 1951, through pressure from the Catholic Church and the medical profession, the significant change in the system has been the neutering of the influence of the Catholic Church, related to its history of child abuse, and trade union power becoming focused on the public sector, because of its exclusion from much of the private sector.

The system of political clientism remains essentially the same and the vested interests retain their power, with the top earners in the medical profession post-1951, no longer against “socialised” medicine but having a well-healed foot in both camps.

An example of the insider system of little accountability is provided by the first “benchmarking” award, where a system of checks and balances could not work.

They all got the increase and the same Secretary General of the Taoiseach’s Department, five years later was given another 25% pay increase - - as were his 3 retired predecessors.

Inside the loop was RTÉ, the State broadcaster with a virtual monopoly in domestic TV broadcasting and while ministers never took issue publicly with evidence that the benchmarking system was a sham, they were never held to account elsewhere either.

The same people who resist necessary radical reform of the system and a surrender of their own over-the-top perks, are now responsible for selling the béal bocht to a public they had convinced a short time ago, that the free lunch had been invented.

Exports

Caution is required when bragging about export success when the better performance than elsewhere recently, is based on the operations of less than 20 American-owned firms.

Knowing the facts about Irish exports is not an easy process.

This week a public statement read: “Enterprise Ireland today reported that its client companies achieved new export sales of €1.3bn in 2008, bringing the total value of exports from Enterprise Ireland-supported companies to €14.3bn.  This represents a net increase of 3% on 2007, which was itself a record year for export growth.”

So what does “new” mean?

EI confirmed to Finfacts on Friday that no additional exports came from new client companies of the agency.

Exports sales grew by €400m but the €1.3bn makes a better headline.

Even the total figure is a guess.

*http://www.finfacts.ie/irishfinancenews/article_1017081.shtml

I work in the private sector and I am disgusted by this report. This government has increased taxes on citizens, but continues to leave corporation tax at 12.5%. THIS IS NOT SUSTAINABLE.

They now want to hit the most vulnerable people in society with welfare cuts, and cuts to public services. It seems they won’t be happy until the public sector is destroyed and everything is privatised. It was bankers, property developers, de-regulation, subsidies given to private companies like DELL (who have now buggered of to Poland) and politicians who benefited from the so-called Celtic Tiger and it is they who are responsible for this economic crash.

THIS GOVERNMENT NEEDS TO BE OUSTED FROM OFFICE NOW.

BTW: I must read the Shock Doctrine again.

“Vincent Browne is a complete nut-job . . . you work 20 hours a week, and i work 60 hours a week, and i get paid more than you, apparently thats inequality.”

Stamps foot, juts out chin.

You see what I mean about the deterioration of quality and standards?

This blog is one of the few places where certain serious matters are discussed seriously. In the past couple of days it has been overwhelmed by this kind of childishness.

first off, im getting rather tired of this “look at how successful the export sector is” argument. What about the non-export sector, how do you reckon that’s doing??

Secondly, German wages basically stagnated between 1998-2005 in real terms, while Irish wages went through the roof. Interesting that you don’t refer to that when comparing Ireland against Germany. Somewhat selective comparisons going on there.

Thirdly, Vincent Browne is a complete nut-job. The guy is more or less a communist. He firmly believes that the ownership of private property is the cause of all inequality. If you work 20 hours a week, and i work 60 hours a week, and i get paid more than you, apparently thats inequality. He’s insane. He repeatedly gives out about Tony O’Reilly having too much domination of the Irish media even though Browne himself has the following: his own tv show, his own colum in the IT, his own magazine up until last year, his own radio show up until a couple of years ago. Referring to him in your arguments only makes you look like a similar looney toon.

Net factor income from the rest of the world (NFI) is the difference between investment income (interest, profits etc.,) and labour income earned abroad by Irish resident persons and companies (inflows) and similar incomes earned in Ireland by non-residents (outflows). The data
are taken from the Balance of Payments statistics. However the components of interest flows involving banks in this item in the national accounts are constructed on the basis of “pure” interest rates (that is exclusive of FISIM) whereas in the balance of payments the FISIM
adjustment is not carried out. There is an equal and opposite adjustment then made to the imports and exports of services in the national accounts which is not made to these items in the balance of payments. The deflator used to generate the constant price figures is based on the implied quarterly price index for the exports of goods and services. In some years exceptional income payments have had to be deflated individually.

http://www.cso.ie/releasespublications/documents/economy/current/qna.pdf

The cuts are necessary. Departments need to work together, smaller neighbouring counties need to be transformed to one bigger county. And yes, the head of our political body needs a dramatically pay cut.

This whole report is to make sure the IMF or maybe the ECB keep their hands of Ireland. Because if that happens we’re in very deep shit.
I can’t get a grasp of the full document, even 5 years Ireland is not enough to know the full society. But that things are a bit pear-shaped must be obvious to everybody in this country.
What I did see is still plenty of opportunities in this report. Especially in the areas of IT. Also in a newer way of thinking. If that could be brought in to the education system, this country will be facing the future brighter than it is today.

2. Private sector wages are not being slashed. We’ve had this argument before. They’re firing people. Businesses don’t do this for fun. They’re losing money. They’re losing money because their revenue has dropped. Their revenue has dropped because their customers are buying less. So they cut costs. That means jobs as well as any unnecessary expenditure. The state is in a very similar position.

3. On the exports I’ll hold fire. I still am suspicious about our figures (as I was about property during the boom), I wonder how much of the figure is real and how much inflated transfer pricing. Time will tell. Germany’s exports will take off again when recovery comes. Hard to see how they can justify pay increases at the present time but they are more unionised.

4. As for this site being some sort of right wing conspiracy there seems to be plenty of debate and opinion on it from all sides. On the other hand I do wonder if your real name is “Brian”

Note what it says in the article, about half way down:

“Ireland’s export sector is outperforming all but two of the 30 OECD member countries.”

So, in that case, why are workers in Ireland the only ones of the 30 OECD countries being required to take massive wage cuts, which are one of the major causes of the collapse in demand in Ireland that the article bemoans?

In fact, what the article say about exports is a massive under-statement. The full figures for exports in January to April of 2009 were published by Eurostat today. They are in the following link, about halfway down. In January to April of 2009, exports from Ireland were up 1% y-o-y. In every other country they were down - in nearly all by between 20% and 35%. Yet, we’re the ones being told we are so uncompetitive and we have to take wage cuts, not the countries whose exports, like Finland, are down 35%.

http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/6-17072009-BP/EN/6-17072009-BP-EN.PDF

Those behind the drive to cut wages, principally Brian Cowen, Brian Lenihan and Alan Ahearne should be challenged either in the Dail or by some tv interrogator like Vincent Browne to answer that question.

If you are reading this, Vincent, please note.

Its funny how we are being asked to copy Germany in some respects but not others. So, we are being told that we have to have these cuts so as to get our deficit in line with Germany’s and make Angela Merkel happy. But, when it comes to wage increases this year, there is of course no question of us following Germany. In Germany, wages are up 5% this year. In Ireland, down around 5% (estimates vary). And, before you say that German exports are competitive and our’s are not, I should point out that German exports were down 28% y-o-y in April, while our’s were up 12%.

http://www.economist.com/daily/news/displaystory.cfm?story_id=14025314&fsrc=nwl

No prizes for guessing which country they are talking about.

You can easily get bogged down in the details of individual taxes. There are millions of them, all with different rates, allowances, exemptions, levels of avoidance and so on and on and on. Accountants working in the Department of Finance might be able to keep track of them, but I can’t. And, in countries like Germany or the U. States (although not Ireland), there are Federal taxes, and individual State taxes, and City Taxes, and all sorts of other complications. I don’t think you can possibly do comparisons by selecting a few taxes and comparing them like that. Its far more complicated.

The way simple people like me (and indeed most people) know how high or how low is the overall level of taxation in a country is when its expressed as a percentage of GDP. That’s nice and easy to understand.
That’s how organisations like the OECD and the IMF show comparisons between taxation levels in different countries.

The bottom line is that in most continental EU countries taxation as a percentage of GDP is in the range 40% to 50%. In the Nordic countries its close to 50% and, if I’m not mistaken, in some of them its over 50%. In Ireland, its been in the range 30% to 35% for the past decade, which was perfectly fine for keeping CT low, while not having other taxes at exorbitant rates to compensate.

The bottom line is that An Bord Snip Nua (apart from murdering the beautiful Gaelic language) is all about moving the Irish economy From being merely a low-tax economy (30% to 35% of GDP) to being an ultra-low-tax economy (under 25% of GDP). Their mechanism is to adjust public spending to the very depressed levels of taxation that are typical in a recession, and then freeze it at that level when the economy grows again. You could say that the cuts will be restored when the global recession ends and the economy is growing again. But, we all know that, in the prevailing political climate, it won’t happen. What will happen is that, as long as the recession lasts, it will be cuts, cuts and more cuts. And, then when growth resumes, public spending will simply be frozen until its about 25% of GDP.

I really don’t know why we bother debating it any longer. The decisions have been made. The fact is that the government (and opposition too), in alliance with the business world and academic economists, has allready made two strategic decisions. One is to slash private sector wages by 30% to 40% relative to other countries and the other is to slash the public sector share of the economy to an ultra-low 25% or under. To achieve these goals, they will scaremonger us to death. And, I have little doubt that they will succeed. In fact, I’d go so far as to say that the setting up of this site was part of the drive to achieve these goals.

Forecast German revenue 2009 €527b, down €45b
Deficit expected to be €50b i.e expenditure of €577b

And they’re pretty upset about it.

If we were running a pro rata income/expenditure ratio based on 2008 we would have revenue of €40.8b and expenditure of €44.8b. And if we were German we would still be upset.

I found the following on Tax rates in Germany (A German tax expert may be able to confirm these)

Income Tax
In Germany singles pay 45% on income above €250k (plus there is a solidarity tax of 5.5% to pay for reunification of Germany) 42% is paid on incomes from €53k to €250k.
Members of churches pay 8-9% church tax

Capital Gains Tax
Exempt for shares and property held more than 10 years
Flat rate 25%

Corporation Tax
Works out about 33%

Vat 19% mainly.

Property Tax: Couldn’t find one

Irish Tax receipts for 2008 were as follows
IT €13.2b
CT €5.1b
CGT €1.4b
Excise €5.4b
VAT €13.4b
Stamp €1.6b
Total €40.8b

If our CT rate was similar to the EU average in theory we would collect an extra €5b. But in practice you may find the profitability of those export companies might drop somewhat.

Otherwise our taxes are not out of line with Germany. So we either bring our CT rates in line with the rest of Europe or we have to push personal taxes way above them. If you are suggesting total tax take increases say €10b and we don’t touch CT, VAT can’t go much higher, then IT would need to go up some 75% (and that’s based on 2008 figures)

The net result is if we want to continue with very low business tax we either increase personal taxes to compensate or reduce expenditure. I vote for reduced expenditure.

The Buck stop’s nowhere system prevails.

Over the past couple of days, the standards and quality of this site have taken quite a tumble.

Ok if 33% is your target by reference to a European range and
tax/GDP is running at 21-23%-can’t be more precise until we know GDP
add some part of A in A as this is tax in all but name and may indeed be counted as tax in other jurisdictions-that would add another 5% to the tax/GDP ratio again assuming this total is about 10bn this year.
Then allow for the fact that taxation would be somewhat depressed due to the economic cycle. In other words we could be at or close to your target once the full year effect of the tax changes kick in in 2010.

We are still left with an expenditure problem through the cycle.

I’d set as my central objective having taxation as a percentage of GDP at 32.5 per cent and public spending as a percentage of GDP at 32.5 per cent, averaged over the economic cycle. That would keep us the lowest-tax economy in western Europe by a mile. Its hardly excessive. Its what Gordon Brown targeted for Britain, except that his target was 40 per cent, which itself is lower than in most EU countries.

The key element would be “averaged over the economic cycle”. During booms, if natural buoyancy sent tax receipts above that, I would run a surplus, and still keep public spending at 32.5 per cent of GDP. During recessions, if tax receipts fell, I’d run a deficit and still keep public spending at 32.5 per cent of GDP.

As we are in the middle of a recession, and taxation receipts are depressed, its impossible to know by how much they need to be raised to have them at 32.5 per cent of GDP averaged over the economic cycle. Its obviously absurd to think that house sales and new car sales are going to remain at their present rock-bottom level over the whole economic cycle.
Basing future taxation and spending plans on the assumption that tax receipts remain at current low levels is as daft as Brian Cowen basing his taxation and spending plans on the assumption that tax receipts remained at their 2007 peak levels.

So, you’d need a large team of accountants to establish how much, if any, tax increases were needed to bring taxation as a percentage of GDP to an average of 32.5 per cent over the economic cycle. Its quite possible it will be very small or even none. You can’t measure these things accurately from when you are right at the bottom of the cycle, any more than you can from when you are right at the top of the cycle.

The key figure to be decided on is how much total taxation should be as a percentage of GDP. The figure I suggest (32.5 per cent) would keep us the lowest-taxed economy in western Europe. We should be flexible about the details of rates of taxation on individual items necessary to achieve this target. What is clear from An Bord Snip, however, is that the powers-that-be in Ireland have now decided that the taxation/public spending share of GDP should average about 23 to 25 per cent of GDP averaged over the economic cycle. I have no doubt that they will achieve it. They will achieve it by slashing public spending now and then, when the economy is growing again, freezing it. But, in my opinion, 23 to 25 per cent of GDP is far too low. Its way out of line with every other advanced country.