Constructive proposals on rescuing the public finances

[rebelicecream]

Apologies if it has already been floated elsewhere on this site, but I would be interested in hearing peoples views on slashing corporation tax as a means of improving our competitiveness internationally. Would this not be a means of compensating for our relative lack of competitiveness, albeit on a medium term basis, in the area of wage levels versus eastern economies? To those of a leftist disposition who would view this as further feathering the nests of the well-off, I would argue that this move might at least retain employment in Ireland even if the 'take' might decrease, with the alternative being the greater job losses and attendant increasing reliance on social welfare.

There may even be a political plus in that such a move, while it might antagonise our european partners, would serve as a positive test case for the contention that Lisbon does not threaten our autonomy re the setting of taxes.

[Bobert]

It's not that our taxes are to high, it's that everything else is.

The 12.5% is a great incentive. The €8.65 (soon to be a tenner) an hour, not so good, likewise for VAT. If a tax must be cut it should be VAT and Excise duty.

[politicaldonations]

Cut every public sector salary by at least 25%. Things are that bad and public sector workers so well paid.

[garlandgreen]

Set up an agency to identify what the next "big things" will be when the dust has settled and make their venture capital fund conditional that they get in there while they're going cheap.

[west'sawake]

Ok we have established that the government are out of their depth and don't have a clue what to do. We have also established they don't understand the seriousness of the situation and they are only capable of day to day planning and have no long term vision on how to turn around the state of the public finances.

First of all, the borrowing that Cowen/Lenihan plan is simply unsustainable. 12 billion this year, 18 billion more than likely next year and if they continue at being as useless as they have done, probably 25 billion the year after, that will be an addition of 55 billion to the national debt, leading to probably 5 billion a year cost to service it.

Being in government is not simply about writing budgets and not caring how big the deficits are. This government has no imagination and doesn’t have a real policy to substantially raise tax income by creating jobs and reduce tax spend by decreasing the cost of the public sector.

There is no reason to believe we will return to anything approaching an even budget if we wait for ‘international conditions’ to improve. The general consensus is that the stock market highs of a few years ago will not be repeated probably for decades, that the apparent wealth was just that, apparent and had no substance and we are into a long period of economic difficulties. So if we don’t start cutting back now, we only build up billions of debt, with no economic improvement to pay off the debt. The sooner we substantially cut the expenditure of government the better. The best paid in the PS should suffer the most.

My first suggestion is that TDs take a 20% paycut and a payfreeze after that. These feckers, I want to call them worse but it wud be censored, have lead us into the mess and rewarded themselves with year on year increases. In no way could their performance merit a pay increase.

Secondly there needs to be a cull of top civil and public servants, they need to be handed their P45, they just don’t deliver value for money for the state, they are not frontline or even essential and are only in their jobs because of union protection.

Third, borrowing over 10 billion a year should not be allowed and cuts must be made to bring borrowing within that. A government that fails to bring the deficit below 10 billion annually should be judged an incompetent one, that should be the rule of thumb from now on. Our government must immediately set itself that target rather than letting the finances slide uncontrollably.

Fourth. The unions in the PS need to be told where to go. Everything is on the table in terms of restucturing and paycuts in the PS as well as a cull of non essential staff particularly at the top end. If the unions go on strike, jail their leaders.

The EU must also be told where to go. WE cannot afford to pay social welfare for non-irish people so these people should be sent back to their home countries. We also may need to bail out struggling companies such as Waterford Crystal. 1000 people signing on the dole and the loss of foreign income and tax from such a company would not be sustainable for the country. Bail them out in the short term, tell them to cut wages and let them pay us back in the long run.

The country is going down the tubes a lot of it caused by strict EU rules and the EU haven’t lifted one finger to help us. Its time we told them where to go and help ourselves.

Other suggestions are welcome on this thread and I hope the government takes on board the policies proposed since they seem short on their own ones other than to let matters be.

Junketman,

I agree with most of what you wrote but not in regard to sending immigrants home.
They were good enough to be used during the boom and now we think we can dispense with them when it suits us. Free mobility of labour is what we signed up to Post NICE E.U, (even if others didn't)

I think many are returning home anyway, especially the Poles, and many don't want to be in an ultra expensive country trying to survive on the dole. A paid job at home with a much lower cost of living is more preferable.

[fiannafuddy]

Junketman,
I agree with most of what you wrote but not in regard to sending immigrants home.

I'm in agreement there. The Irish have done very well abroad, the least we can do is allow others the opportunity to do well here, especially if they wish to, as some already have, become naturalised citizens of the state.

They have paid PRSI the same as everyone else, they are just as entitled to a dole payment as any citizen in the country.

[BodyofEvidence]

Cut every public sector salary by at least 25%. Things are that bad and public sector workers so well paid.

Can you at least get some consistency in your dementia? You call for 30%, 20%, 25%, 40%....you call for it across the board, on the highest paid, on those above minimum wage etc etc.
What is your consistent position, if you have one . The proposal above would have people in the public sector on 25k earning less than the minimum wage.

[junketman]

Apologies if it has already been floated elsewhere on this site, but I would be interested in hearing peoples views on slashing corporation tax as a means of improving our competitiveness internationally. Would this not be a means of compensating for our relative lack of competitiveness, albeit on a medium term basis, in the area of wage levels versus eastern economies? To those of a leftist disposition who would view this as further feathering the nests of the well-off, I would argue that this move might at least retain employment in Ireland even if the 'take' might decrease, with the alternative being the greater job losses and attendant increasing reliance on social welfare.

There may even be a political plus in that such a move, while it might antagonise our european partners, would serve as a positive test case for the contention that Lisbon does not threaten our autonomy re the setting of taxes.

OK I came up with another idea today which is a variation of what you suggest too so going to give you some credit as well.


For new FDI investors in Ireland (as opposed to existing investors), they should not have to pay any corporation tax or any tax on profits for the first five years of operation here. If this creates jobs and gets thousands off the dole queues and brings in money from exports this is good for the country. This law would also apply to those who invest in companies like Waterford Crystal as well, struggling companies like that.

If the EU says its illegal or rather if the Franco/German axis of power in Europe say its illegal we tell them take a hike and we still go ahead with its implementation.

There you go Cowen/Coughlin/Lenihan, a real policy to get us out of the mess. Now go implement it!

[euroboy]

It would help if the debate moved beyond 'cut expenditure or tax the rich' and move on to focus on both sides of the government accounts: income and expenditure.

On the Income side(which seems to get little attention and most opposition to addressing)

1. We need to raise income taxes and include more people. The property boom taxes in effect cross subsided income tax cuts on tose that pay taxes and the exclusion of so many workers from tax system that ordinarly wouldnt have occured. I've also said before that it is ridiclous to have an income tax system that excludes 1/3 of the workforce. I'm not advocating that the low paid should pay high taxes, just reasonable taxes. Everyone should contribute fairly to the tax system.

My ideal system would be a four band income tax system.

Tax free allowance of 9000 Euro.
Tax rate of 12.5% on income between 9000 and 18000.
Tax rate of 20% on income between 18000 and 35000
Tax rate of 42% on income between 35000 and 100000
Tax rate of 50% on income over 100K.


2. Taxes should be placed on property and wealth as recommended by previous Tax Commisssion Reports and the OECD.

Expenditure side:

Many are calling for cuts in expenditure and from my taking, the govt have chosen to follow this path rather than sustantial raises of income tax and those who are included for taxation. I dont think the govt should cut expenditure, as it stands the govt already spend very little in terms of the total economy.

1. Maintain expenditure but look at where the little money we spend is spent. There should be a re-direction of expenditure from tax incentives in housing and other reliefs towards essential services. By this I mean END Mortgage relief, end capital gain exemptions for primary residences over a threshold(1million euro) and other reliefs that benefit a select few etc.

2. Public sector wage bill should be cut by 10%.
I dont believe it is wise for people to be calling for job cuts in numbers employed and that line of argument should be severly curtailed, not only would it add to unemployment, but we need a certain level of public service provisions and lets face it, we already only receive basic services. So we need a cut in the wage bill and that can be achieved through wage cuts rather than layoffs.





On a different point, I note that the OP mentioned that the EU have not helped us. Let me remind the OP that the EU(Minister Ministers) warned us (Mr McCreevy) during our record budget surpluses that government policy was inapprociate and that using those surpluses to finance tax cuts(with include exempting workers from tax net) was unwise. The EU warned us not to go down that route or we could face a serious crisis in the government finances if housing sector slowed to more sustainable level. Well housing taxes have fallen and now we are paying.

[west'sawake]

It would help if the debate moved beyond 'cut expenditure or tax the rich' and move on to focus on both sides of the government accounts: income and expenditure.

On the Income side (which seems to get little attention and most opposition to addressing)

1. We need to raise income taxes and include more people. The property boom taxes in effect cross subsided income tax cuts on tose that pay taxes and the exclusion of so many workers from tax system that ordinarly wouldnt have occured. I've also said before that it is ridiclous to have an income tax system that excludes 1/3 of the workforce. I'm not advocating that the low paid should pay high taxes, just reasonable taxes. Everyone should contribute fairly to the tax system.

My ideal system would be a four band income tax system.

Tax free allowance of 9000 Euro.
Tax rate of 12.5% on income between 9000 and 18000.
Tax rate of 20% on income between 18000 and 35000
Tax rate of 42% on income between 35000 and 100000
Tax rate of 50% on income over 100K.


2. Taxes should be placed on property and wealth as recommended by previous Tax Commisssion Reports and the OECD.

Expenditure side:

Many are calling for cuts in expenditure and from my taking, the govt have chosen to follow this path rather than sustantial raises of income tax and those who are included for taxation. I dont think the govt should cut expenditure, as it stands the govt already spend very little in terms of the total economy.

1. Maintain expenditure but look at where the little money we spend is spent. There should be a re-direction of expenditure from tax incentives in housing and other reliefs towards essential services. By this I mean END Mortgage relief, end capital gain exemptions for primary residences over a threshold(1million euro) and other reliefs that benefit a select few etc.

2. Public sector wage bill should be cut by 10%.
I dont believe it is wise for people to be calling for job cuts in numbers employed and that line of argument should be severly curtailed, not only would it add to unemployment, but we need a certain level of public service provisions and lets face it, we already only receive basic services. So we need a cut in the wage bill and that can be achieved through wage cuts rather than layoffs.

Flat rate tax of 15% on all income, be it PAYE, Self employed, Corporations Profits, Rents,
Capital Gains, Inheritance, whatever. Vat rate of 15% on all consumption except food, and childrens clothing and footwear.

Carbon tax of 50%.

Financed by:

Scrapping of all tax reliefs, except on R and D in Green technologies.

Simply the whole tax system, no credits, no reliefs, no discrimination against single income families, slash Public sector spending outside of Health, and Education. Cut pay bill by 10%.

Kill off all quanoges except NTMA and Criminal Assets Bureau.

Because of the simplification of the tax systrmn surplus revenue staff to be offered redundancy or transferted to social welfare due the temporary increase in unemployment.

Minimum wage of 350 euro per week to be exempt from tax, Social welfare payments to be capped at 250 euro and to be taxed at 15%. To prevent social welfare/tax wedge.

Child benefit also to be taxed at 15%

This would kick start the economy, improve competitiveness, reduce taxation red tape, and incentivize enterprise and labour.

Flat rate property tax of 15% on rental yield on second properties, whether rented out or not, market rents to be used to determine potential rental yield. This would set a tax on idle assets such as holiday homes. Tax paid either way. Pay for the luxury of the second home, or allow mobile labour to use it, gain rent but still pay 15%.