Careful what you wish for. In my experience, just such blind calls for ‘accountability’ are what has led to the multiplication of costly and inefficient layers of bureaucracy in the public service. In health and in education there are now armies of very highly paid bureaucrats who see their sole purpose as making mostly dedicated professionals somehow ‘accountable’. They add virtually nothing to the ability of those services to deliver. But of course if you assume, based on the ideology promulgated in the Independent, that somehow these professionals must really deep down be layabouts, then the sting of the lash is too good for them, isn’t it?

It’s lonely talking about privatisation in the era of keynesianism 2.0 but it should be considered in several areas, it would be the best way of ensuring costs get into line with profits, get the funding out of the communal pot where it is constantly fussed over and let the provision of services become at least somewhat reliant on reality, that’s the adult solution.

So much more fun and it lets those who run the place loot it faster!

I would argue that the PS underperforms per your prefab example because when additional funding becomes available it is largely swallowed by current expense and not capital.

On the room-dwelling elephant, the other main issue is that the PS unions have got themselves into a bind on that score.

On the one hand you’ve got outfits like the CPSU and SIPTU who represent workers who are *both* just-below-average earners *and* public servants.

On the other hand you’ve got the labour aristocracy element, who for years have been masquerading as social crusaders when in fact their only aim has been improving the lot of their own well-paid members. Which makes it very difficult for them to turn around now and have a Pauline conversion on the tax-the-not-rich issue.

“Oh, I know: it has to be that low to compensate for our poor infrastructure.”

Its not just the poor infrastructure, its also the small domestic market, high costs, and in some instances the poor skill-base.

Say what?! But don’t we have the “best educated workforce in Europe” (TM)?

Not if you’re trying to recruit for the high tech sector. Property management, law, architecture, media studies, we’ve got grads coming out our ears. But pity the MNC needing a few dozen quality software engineering grads. Its not because they like multi-culturalism that you hear a Babel of languages in the IBM or Google canteen. They recruit abroad because we just don’t produce the appropriate skills. And if you’re recruiting mainly in Prague and Minsk and Mumbai, you’ve got to ask the question why you’re based in Ireland at all. Therefore serious carrot is required.

To say nothing of the fact that much of the profit supposedly made in Ireland by MNCs is pure vapour, the result of internal transfer pricing that’s motivated only by our low tax rate. Take away the low rate, and the motivation underpinning such arrangements goes also, meaning the pool of profit to be taxed will shrink significantly.

Lets say we agree that Northern European levels of taxation are appropriate for this country, and ignore the awkward fact the PS delivers nothing like the corresponding levels of service.

Do you think they’d stand for prefab schools for one minute in Denmark? You’ve got it exactly backwards: we don’t underfund our PS because it underperforms; it underperforms because we underfund it.

It never was and still is not funded at anything near the sort of levels that could deliver Nordic levels of service. The gov’t seems to have decided on Boston levels of taxation (more like Alabama, really) while attempting, feebly, to have Berlin levels of public service.

That said, I don’t disagree with any element of the rest of your analysis other than the insistence that the corporate tax rate must remain untouched. Again: what country is that 12.5% rate supposed to undercut? Oh, I know: it has to be that low to compensate for our poor infrastructure. Well, see above…

We also agree about the impossibility of keeping the average worker out of the tax net. It’s completely anomalous and obvious. But here we come down to the nub of the issue: because the elephant in the room cannot even be named (for political reasons) the gov’t has chosen to wage a proxy war against the public service. They would rather scapegoat 330,000 PS workers than have every average worker in the country on their backs. So the more emotions can be inflamed about the PS parasites living comfortably off the backs of the working stiffs (never mind the ones who aren’t paying any taxes but are being subsidised), the better it is politically for the governing parties.

Pity the selfish PS workers don’t seem to want to play along, isn’t it?

you still haven’t answered the conundrum in your “shocking” description of the CGT and CT figures as a “meagre pittance” when they make up over 20% of all tax revenue in a normal year and are running at twice the comparable figures in our closest neighbour.

The fact of the matter is that we currently tax income, profits and capital gains at more or less the same overall levels as the rest of the OECD (12.7% of GDP in 2007 vs OECD average of 13.0%). This would be roughly 14.9% of GNP, well above the OECD aerage. On what basis should we be increasing these rates if we can be pretty sure that they’ll also increase unemployment and decrease FDI at a time when the economy is still in a recession? Should everything in your proposed taxation policy be viewed as a simple tax grab for the benefit of the public service wage bill?

Oh, there’s further scope for tax increases all right, but unfortunately only limited head-room remains for the old-reliable group that has taken the brunt of the tax hikes so far.

Lets say we agree that Northern European levels of taxation are appropriate for this country, and ignore the awkward fact the PS delivers nothing like the corresponding levels of service.

I’d agree that some new taxes could be levied on wealth, but there are issues (political and otherwise) with a residential property tax.

The corporate tax rate is not going anywhere, so we can forget about that. Were it not for the MNC sector we’d be in very deep do-do right now and there’s no way the political class will countenance owt but tinkering on that score.

So lets assume that the bulk of the adjustment will come from income tax. For illustration, lets imagine graphing the tax wedge at all income deciles and compare with the corresponding figures for the germano-nordic neighbours we seek to emulate.

Hmmm … zooming in on the mid-portion of the curve reveals we’re not that far off. The problem is that yield falls away rapidly from the ideal on both the low and high tails.

Grand, says you, lets close the loop-holes and de-roof the tax-shelters! Absolutely, I agree, but that still leaves a massive elephant in room. You, I and Ronan Lyons know who I’m talking about. The problem is that keeping the just-below-average wage earner out of the tax net has been an article of faith in Irish politics for at least a decade. Attempts were made earlier in the year to fly kites in that direction, but they didn’t really gain traction (or should it be altitude?).

Until we confront this issue, there’s no way we can go anywhere near closing the gap via taxation, despite your union telling you it’ll all be OK if only we’d tax cigars and caviar.

I fear that ‘getting real’ involves an admission that, absent a return to serious growth, the gap cannot be bridged by any combination of cuts and increases. Which makes David Begg the most realistic public figure in this crisis…

Nevertheless, it remains a fact that Ireland’s PS expenditure was a smaller part of the economy in 2005 than in 1995, no?

But, fine, have it your way. Two very different phases. A first one where GDP outpaced PS growth and a second one where PS growth outpaced GDP. Given where Ireland’s PS was coming from in 1995, surely such growth was necessary as the OECD maintains. And surely much of the current growth is due to increased social welfare costs. What’s happened in the interim is that tax revenue has fallen off a cliff by much more than the decline in GDP would indicate. But of course you and the Independent newspapers and the gov’t parties and IBEC all want to treat the fall in tax revenue as though it’s some sort of natural calamity to be deplored but about which nothing can be done.

Yes, the gov’t was overly dependent on stamp duty and the like. So why are we not reforming our tax system? Why not increase the corporate tax rate from 12.5% to something at least in the ballpark of what our fellow EU countries charge? Why not a tax on wealth like the one they have in France? Surely the average worker shouldn’t be subsidised by the state as Ronan Lyons, citing the OECD claims (note to self: must remember this one next time someone trots out the familiar ‘we pay your salaries’ canard). None of this seems to be on the table. Instead, the gov’t wants to put the entire burden on the public sector.

I often hear it said that the ‘public sector needs to get real’ while pointing to the €22bn deficit. The same people also often seem to think that ‘there is no scope for increasing tax’. Who is it that needs to get real? Does anyone seriously think that a deficit that size can be made up entirely through cuts in the PS?

why does CIE strike every single year? If the workers there owned the buses it wouldn’t happen, a huge problem here is that everything becomes a problem that should be fixed ‘by the state’, is that an answer typical of an entrepreneurial or knowledge economy?

“So we have 10 years where it doesn’t keep pace with GDP and a handful where it outpaces GDP and suddenly we’re all supposed to take on the countenance of Edvard Munch’s “The Scream”?”

The last year in which public spending growth failed to out-pace GDP was 2000.

So in fact we’ve had *nine straight years* in which public spending growth has out-stripped GDP, and no real prospect of reversing that trend until 2011 at the very earliest. That’s significantly more than a handful of years, I think you’ll agree.

I’m not sure why you insist on considering the entire decade 1995-2005 as one coarse-grained blob of data. But whatever the reason, its highly misleading as that period encompasses two very different phases of economic development, the initial one being sustainably built on solid foundations, and the latter being characterized by a rapidly inflating bubble.

So, if I put together the OECD figures and your figures, here’s what I get.

From 1995-2005, Public Sector spending did not keep pace with growth in either GDP or GNI with the result that the public sector represented a smaller portion of the economy in 2005 than it did 10 years previously.

In the last few years of that 1995-2005 period and continuing to 2008, public sector growth has outpaced GDP growth (according to your figures), in particular, I would imagine Social Welfare expenditure.

So we have 10 years where it doesn’t keep pace with GDP and a handful where it outpaces GDP and suddenly we’re all supposed to take on the countenance of Edvard Munch’s “The Scream”? Why is this not just the sort of countercyclical scenario that we’re all supposed to hope for?

Except, I forgot: during those years that the public sector was shrinking relative to the economy, the gov’t was giving the money away, buying elections by means of annual cuts in tax rates….

@Eoin

Yes, I am saying that CGT and corporate taxation rates should be increased. Is there any justification for holding the latter at 12.5%. Again, who do we think we are competing with with that rate? Montenegro?

For example a clerk at the top pay scale earns c. 37k. They are also entitled to a pension valued at approx 1 million towards which they will have contributed very little.
A clerk in say a shipping company would be lucky to earn 25k, no pension, high stress, risk of job loss and no annual increments!

Yes, there do need to be cuts at the higher levels to show leadership, but the only way through our budgetary impasse is to make meaningful cuts in the ps wage bill.

Doubling the CCT rate would result in a lower CCT revenueIMO
Plus multi-nationals would pack up and leave overnight. I know for a fact my employer would be gone in the morning and I wouldn’t blame them.
Taxing banks that will probably end up almost nationalized won’t generate much for the exchequer.
Can’t seen much scope to increase revenue by increasing Corporation tax and we would probably lose more from Income tax receipts due to higher employment.

CGT to the marginal rate is a good idea.

A levy on deposits over €100k would just mean the deposits would leave the country.

Third rate of tax at 60% would raise about €2bn

Pensions to 30% is a fairer system IMO would the cuts in higher pensions subsidizing the gain for the lower paid.

Overall I think those measure would struggle to yield €4bn

No country in the world has anything anywhere close to that level of a wealth tax.

France has the highest I’ve seen at 1.8%
http://en.wikipedia.org/wiki/Wealth_tax

Actually CGT used to be 40% but nobody declared it. When it went down to 20% the take increased. You see all you have to do is invest outside Ireland and don’t bring the money home.
CT at 25%, bye bye FDI
Windfall tax on land at 80% - should bring transactions to zero.
Wealth tax at 10%. So tax my income, tax my gains and if I save money or act sensibly tax me again.

Net effect will be emigration, black economy and good old eighties Ireland again.

All this for second rate public services.

According to Michael’s Finfcts team and analysis done in June 2006. The elephant in the room, increased by 59% between 2001 and 2006. Payroll was up 18% while Pensions were up a staggering 81%. Dave Thomas and his beareded colleagues, were obviously playing a blinder! But it it no good playing a blinder for 10 minutes if you are going to loose the game, will the pensions and salaries have to be defaulted on at some point in the future?

It is time, the country copped itself on and stopped begging for the lend of 500 million Euro from foreigners every 7 days. Somebody is overpaid because half the money being borrowed is swallowed up for salary purposes and we are unable to raise that money internally.

Everybody maintains their sector, their group, their members are not overpaid.
I believe you all and there is an olympics coming up.

if nobody is overpaid, do we just cut our cloth to measure and stop borrowing 500 million every week, 50% of which we are told, is going on salaries. Maybe it suits to talk about it while the debt clock ticks away.

What about the fact, that part of the salaries paid this month and every month, have to be financed with interest on government bonds that don’t come cheap. Can some expert work out what the real cost of these salaries are when you add on the interest payments spread out over a time sequence covering the lifetime of the debt. Imagine McDonalds borrowing to pay wages, it would soon close down!

I remember talking to someone in the OPW a few years ago about…. decentralisation. He/She said that it took over two years to train any grade of staff to a level of competency and obviously, the decentralisation was knee capping the organisation.

As one of these idiots, I have to agree that the scales are creating pressure on the system. But I found the benchmarking exercise more objectionable to my ‘mores’ but not necessarily to my pocket.

All of this talk is circus speak until the political leadership man up and discipline themselves financially. The seem to be waiting for an encore of some sort so that they can do it.

Al

“cut tax relief on pensions”

Here’s an alternative idea for you.

How about taxing employers’ pension contributions as BIK?

Maybe at 60%, seeing as that nice round figure has taken your fancy.

This would yield about 4 billion from the annual accrued liability of public sector pensions alone.

i appreciate the honesty, because there needs to be an honest debate here. Most of your provisions would have a significant effect on middle class ireland, directly and indirectly (via their employers). Rather bizarrely, its probably more honest and detailed than anything that SIPTU or the other unions have put out recently, or the likes of Vincent Browne/Fintan O’Toole have been willing to go on the record about. They like to paint all their vague policy proposals as affecting only the super-wealthy, but in reality the only way you can raise the 10bn or so thats required to close the gap is to massively tax the moderately well off middle tax.

Just to clarify what i think of your actual proposals - well some of them seem off the wall to be frank. A 10% wealth tax, a 1% levy on large deposits, the eradication of all pension tax relief, 40% CGT? Wow, no need to worry about investment or savings in the future - lots of deposits would have negative real interest rates right now! A 60% tax on the ‘rich’ - wouldnt €75k include a very large portion of the public sector (30%+?)? Is it now fair game to describe a large portion of the public sector as rich? Never mind the 40% tax on banks. Forget about any foreign investment, or employment, in that sector any time soon.

here are a few suggestions as to how we close the budget gap
abolish PRSI ceiling
*third rate of income tax at 60% on the rich-say above 75k per year.
*CGT up to 40%
*Corporation tax double to 25%-Banks 40%
*Windfall tax on multinational profits at 10%
*windfall tax on land at 80%
*wealth tax at 10%
*cut tax relief on pensions and mortgage to zero
*levy of 1% on all deposits above 100k
that should about do it. I don’t know what it would raise but I sure feel good now.

We only have two semi stable taxable factors in the economy which we can yield predictable and at least semi-sustainable material revenue from - personal incomes and personal property assets. Even these are probably running at 80% (unemployment and lower personal earnings) and 65% of peak values respectively.

Beyond this we have a somewhat-predictable cyclical factors like VAT, corporate profits and exise duty. However i’d imagine that the corp tax receipts from the banking and construction sectors were probably running at close to a billion per year (higher?) at the peak, and i think we’re all very honest about these not returning to anywhere near the previous levels for some time to come (banking), if ever (construction). We also know that VAT levels have fallen off a cliff, and certain inputs to this (cars, houses) are not going to contribute as significantly in the next few years as they have in the past.

After this we have the highly cyclical and possibly temporary/one off revenues relating to stamp duty and CGT. These will probably not approach peak levels for a couple of decades. Maybe never.

As such, if we refuse to reduce public sector & social welfare expenditure levels by a truely significant level (20-30%), then the only rational alternative is to increase the only predictable and sustainable taxes, those on personal income and personal property wealth, and to do so significantly. I just wish those who are against the public sector pay cuts would be honest about this and stop claiming this is all about class warfare or a ruse from IBEC etc.

So, to those who are against public sector pay cuts, can you provide more details on how high our new taxes should go and what they would yield us? In particular i’d like you to suggest where the new income tax, CGT, corporation tax, and property tax levels should be pitched, and how much of the fiscal deficit would be closed from this.

In 2006 the average was €92k, rising to €142k in Poolbeg.

http://m.rte.ie/business/news/2006/1002/esb.html

i thought it was higher, or at least the average earnings were higher (ie including overtime etc), more like 100k? And that per employee costs after pensions, prsi etc were more like 144k, at least in some of the bigger power plants. And people wonder why we have the highest energy costs in Europe…