Ireland's overall tax-take will remain inadequate in 2020

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Data accompanying Budget 2020 outlines Government’s plans for taxation and spending over the next 5 years (to 2024). Over that period, assuming the policies signalled by Government are followed, overall tax receipts will climb from €58.6bn in 2019 to €72.9bn in 2024.

Despite significant increases in the tax-take from households (both directly and indirectly) over the crisis period, Ireland remains a low tax economy with its tax take among the lowest in the EU. Social Justice Ireland believes that over the next few years policy should focus on increasing Ireland’s tax take.

Over the past year we have researched and proposed a new tax take target set on a per-capita (or per-person) basis; an approach which minimises some of the distortionary effects associated with targets linked to national income. The target we propose is: Ireland’s overall level of taxation should reach a level equivalent to €15,000 per capita in 2017 terms. This target should increase each year in line with growth in GNI*.

In our pre-Budget Budget Choices document we estimated that the yield from such an increase would average €3.2 billion per annum in additional taxation revenue over the period 2018-2020. Increasing overall taxation revenue to meet this new target would represent a small overall increase in taxation levels and one which is unlikely to have any significant negative impact on the economy.

As a policy objective, Ireland should remain a low-tax economy, but not one incapable of adequately supporting necessary economic, social and infrastructural requirements. Judged in that manner the current low tax model is not sustainable and we regret that Budget 2020 did not take greater steps to address this.