Revenue today published our Annual Report for 2016. The report itself contains a lot of interesting material on our activities and outputs last year. In addition, we have published research reports on Corporation Tax returns for 2015 and payments in 2016, the oil market in Ireland, our latest illicit tobacco survey results and a summary of lessons from the application of behavioural economics in Revenue. We have also updated our regular statistics on Local Property Tax.
Category: Taxation
Here is an Analytical Note on the Challenges Forecasting Irish Corporation Tax from staff economists of the Fiscal Council.
For readers who want a good summary of what’s going on with Apple, the EU Commission, etc., Adam Davidson of the New Yorker has a nice piece putting the decision in its historical and political context. From the piece:
Is the Ireland of the real Apple—the physical place with people doing things that produce profit—going to dominate, or will it be the Ireland of tax-free fictions and arbitraging loopholes in a complicated global economy?
Ireland’s economic transformation in the course of the past thirty-five years was remarkable in many ways. Up until the early nineteen-eighties, Ireland’s income per person was one of the lowest in Europe, right alongside Greece’s. Unemployment was well above sixteen per cent for much of the nineteen-eighties. The country’s income began to hurtle upward after 1995. Dell, Intel, and Microsoft joined Apple in Ireland. Large pharmaceutical firms also came, and now more than half of Irish exports are pharmaceuticals. At first, these big firms were excited to find people with advanced degrees willing to work at a fraction of what American, French, or German workers are paid. By the early two-thousands, Ireland’s per-capita gross domestic product was higher than that of the U.S. or the U.K., and fully a hundred and thirty per cent of the European average. For the first time in Ireland’s history, the country experienced net immigration. Alongside the new economy of high-tech and pharmaceutical companies, Ireland continued to develop its agricultural businesses, especially food manufacturing. Ireland is now a major exporter of snack foods and dairy products. For the first few decades, this growth seemed to have been based on something beautiful and right: the Irish had always been highly educated, clever, and hardworking, and they were now earning what they deserved.
A great deal of political debate in Ireland rests on the assumption that Ireland’s rates of taxation are prohibitive. This is generally taken to mean that Irish taxes on income, specifically, are particularly onerous. This perception is rarely, however, assessed with reference to available statistics.
A new NERI Research inBrief by Paul Goldrick-Kelly uses the Organisation for Economic Co-Operation and Development (OECD) data concerning estimates of the effective direct taxes paid by households of varying income and marital status in 2014 to assess Ireland’s rates of taxation on income relative to those observed in other comparable nations.
The NERI Research inBrief series are short four page research notes on various topics of socio-economic interest. Other contributions in the series are available here.
The NERI is on twitter: @NERI_research
The Minister for Social Protection wants to index many social protection payments to a cost of living index as an anti-poverty measure. This makes sense on the face of it, as long as that cost of living index is going up, and as long as the level of benefits fall when the cost of living falls. It’s also worth thinking about the virtues of indexation, as this was one of the main criticisms IFAC had of the fiscal space calculations during the last election.
Let’s say you index benefits to the consumer price measure of inflation.
Here’s what happened to that reading over the longer run.
Just messing about with the idea a little more, imagine we ‘begin’ the Irish economy in year 1 with a CPI reading of 100, and grant benefits of €100. Then we can add in (say) the last 20 years of real CPI data from 1995 to 2015 to get a sense of what would have happened to benefits in a year-on-year basis as a result.
The line is the increase in benefits as a result of the indexation, and the bars are the changes in euros to the benefits as a result of the cost of living increase or decrease, measured on the right hand axis. The excel sheet I used to knock this up is here.
Hopefully you can see two things. First, the measure is highly pro cyclical. Precisely when we want benefits to decrease a bit, because the economy is growing strongly, they go up, and when we want benefits to increase a bit to cover the cost of living during a crash, they go down. Second, in recent years inflation has either stagnated, or fallen, so you wouldn’t see a huge increase or decrease in benefits either way. Now you could smooth out some of these effects out with a moving average of, say, 3 years, but this little exercise shows, I think, that it’s worth looking carefully at indexation proposals.
(Updated with thanks to commenter Tony_Eire.)