% of GDP misleading on government spending

[Conor]

Is there a conspiracy on the political left to quote government spending figures as a percent of GDP to make Ireland's spending look small in international comparisons? I heard a trade union leader GDPee on the radio this morning.

GDP in Ireland's case is inflated compared to other countries by about 15% due to multinational financial transfers. So if the percent of GDP for a government service is say 10%,to convert that to percent of GNP, the rough adjustment is 10/(100/1.15) = 11.5%.

Could take GNP. Could take GNI either.

How does the Irish public sector compare internationally on a GNP or GNI basis, patslatt?

[patslatt]

Could take GNP. Could take GNI either.

How does the Irish public sector compare internationally on a GNP or GNI basis, patslatt?

Our spending as a percent of GNP is lower than the advanced EU economies. That doesn't mean it should be as high. The Irish political consensus is that tax should be kept low to attract inward multinational investment and skilled workers. As well, the Irish are still individualistic enough not to want a nanny state to run their lives.

[Digout]

a more interesting question is what % of our GDP spending is wasted.

[Conor]

Our spending as a percent of GNP is lower than the advanced EU economies. That doesn't mean it should be as high. The Irish political consensus is that tax should be kept low to attract inward multinational investment and skilled workers. As well, the Irish are still individualistic enough not to want a nanny state to run their lives.

If you're contending that the size of the spend relative to other EU economies is irrelevant, what difference does it make to you whether GDP or GNP is used?

[euroboy]

Someone mentioned the famous quote 'statistics, statistics and damn lies'.

I have to say the current miscalculated stats mentioned recently has to do with VAT and the .5% increase in the higher VAT rate.

People are saying it will translate into a price increase of .5%.

Thats not true.

The end price should only increase by .413% because the .5% increase is only applicable to 79% of the selling price.


Im listening to retailers complain that they will have to either increase prices by .5% or absorb the VAT increase through reduced profits. Either way they say it will hurt them.

But its only .413% increase.

I know that the difference is less than .1% but if people want to make a big story of .5% and assign great importance to factions/decimals then I think it is only right to highlight that the .5% VAT increase translates into an end price increase of .413%.


example:

An item sells for 2500 Euro. That is inclusive of 21% VAT.
Thus the base price is 2500/1.21 = 2066.11 Euro.

An increase in VAT of .5 sees the VAT rate now at 21.5%.

Thus the new selling price is 2066.11 x 1.215 = 2510.33 Euro.

But its been quoted in the media and by retailers as follows:

2500 x 1.005 =2512.5 Euro.

This is wrong because the the VAT increase is applied to the pretax price but also the inital VAT amount.

When really it should be 2500 x 1.00413 = 2510.33 Euro.


Its only a small difference, but really those people show know their maths better.

[Kevin Doyle]

Our spending as a percent of GNP is lower than the advanced EU economies..

So by either metric our Public Service is relatively smaller.

That doesn't mean it should be as high.

Why not?

The Irish political consensus is that tax should be kept low.

The Irish political consensus has never been anything to write home about. As witnessed by the disastrous handling of the countries finances during a time of unprecedented economic expansion, the political consensus has been routinely tailored to short term policies that where subservient to that expansion at the expense of forward long term strategic planning and the public good.

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to attract inward multinational investment .

That is largely limited to corporate tax which has little impact on the individual tax burden.

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and skilled workers.

The vast majority of the migrant workforce are indeed skilled but they are not employed in a capacity that exploits that skill, they where hoovered up by the construction bubble. They didn’t come here to avail of a low tax regime, they came here to earn comparatively ultra high wages and save sums of money that would not be possible at home.

As well, the Irish are still individualistic enough not to want a nanny state to run their lives.

That is not an established fact. Not by any means. Ireland has historically been a high tax country with a substantial portion of its population subsiding on social welfare income. Your assertion that the Irish would not tolerate a high tax regime to fund superb public services is unsubstantiated and based more on your own personal ideology as opposed to any definitive poll on the matter.

[Kevin Doyle]

If you're contending that the size of the spend relative to other EU economies is irrelevant, what difference does it make to you whether GDP or GNP is used?

It is analogous with his earlier claims that the findings in the last OECD report on the Public Service are flawed as it uses GDP instead of GNP as the comparative metric.

However, as has been pointed out, the consensus contained within the report is still valid using either.