Overall tax take needs to increase by €3bn to fund a fair and equal society

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Social Justice Ireland publishes its annual Socio-Economic Review today, and calls for an increase in Ireland's overall tax take of €3bn. This must be the first step on the path to funding a fairer and more equal society. The Government needs to raise additional annual tax revenue far in excess of current levels if we are to acheive this.

Tax is a dirty word in Ireland. The legitimacy of Ireland’s tax system is at stake as the richest entities in the world use it to pay lower tax bills. Raising taxes or creating new taxes is politically toxic, even if it is to fund vital and ageing public infrastructure; while cutting taxes is a popular political tool, often used in the run up to elections and nearly always regressive in nature. The problem with this is that Ireland needs more tax revenue, not less.

Social Justice Ireland argues that Ireland needs to increase and broaden its tax base by €3bn to keep exchequer funds safe through uncertain economic times, fund decent public services, upgrade ageing national infrastructure, and to ensure Ireland becomes a fairer and more equal society in the future. It argues that the money can be raised from measures such as:

• A minimum effective corporate tax rate of 10%;
• A financial transactions tax;
• Increased environmentally friendly taxes; and
• Increasing the minimum effective tax rates on high earners.

These are just some of the ways that this can be done, though in truth, Government has an even wider range of options open to it. The proposals in Social Justice Matters are just part of a thorough analysis and guide to issues of social justice in Ireland, published in this unique 300-page review. This book is the most comprehensive guide to social justice in Ireland and challenges citizens, opinion formers and policy makers to imagine how a fairer society can be achieved.

This book is about charting a course to a better Ireland. At the foundation of that is how we raise taxes and how much tax we raise. We are a low revenue economy, yet we are one of the richest countries in the world. It should be a priority to find those additional resources, not to squander the resources we have. We need to collect sufficient tax to ensure full participation in society for all through a fair tax system in which those who have more pay more, while those who have less pay less. With this book, policymakers have a guide for how that can be done.

Key Policy Priorities on Taxation must be to increase the overall tax-take; adopt policies to broaden the tax base; and develop a fairer taxation system.

Increasing the overall tax-take

Move towards increasing the total tax-take so that sufficient revenue is collected to provide redistribution and public services at European-average levels.

Broadening the tax base

• Continue to reform the area of tax expenditures and put in place procedures within the Department of Finance and the Revenue Commissioners to monitor on an on-going basis the cost and benefits of all current and new tax expenditures;
• Continue to increase the minimum effective tax rates on very high earners (those with incomes in excess of €125,000) so that these rates are consistent with the levels faced by PAYE workers;
• Move to negotiate an EU wide agreement on minimum corporate taxation rates (a rate of 17.5 per cent would seem fair in this situation);
• Adopt policies to ensure that corporations based in Ireland pay a minimum effective corporate tax rate of 10 per cent. As an interim measure introduce a 6 per cent rate in the next Budget;
• Impose charges so that those who construct or purchase second homes pay the full infrastructural costs of these dwellings;
• Restore the 80 per cent windfall tax on the profits generated from all land re-zonings;
• Join with other EU member states to adopt a financial transactions tax (FTT);
• Adopt policies which further shift the burden of taxation from income tax to eco-taxes on the consumption of fuel and fertilisers, waste taxes, and a land rent tax. In doing this, government should avoid any negative impact on people with low incomes.

Developing a fairer taxation system

• Apply only the standard rate of tax to all discretionary tax expenditures;
• Adjust tax credits and the USC so that the minimum wage returns to falling outside the tax net;
• Make tax credits refundable;
• Accept that where reductions in income taxes are being implemented, they should favour fair options which do not skew the benefits towards higher earners;
• Ensure that individualisation in the income tax system is done in a fair and equitable manner;
• Integrate the taxation and social welfare systems;
• Begin to monitor and report tax levels (personal and corporate) in terms of effective tax rates;
• Develop policies which allow taxation on wealth to be increased;
• Ensure that the distribution of all changes in indirect taxes discriminate positively in favour of those with lower incomes;
• Adopt policies to simplify the taxation system;
• Poverty-proof all budget tax packages to ensure that tax changes do not further widen the gap between those with low income and the better off.

You can access the full text of Socio-Economic Review 2018 here.