Government should take integrated approach to Budget 2010 as Ireland's total tax-take plummets towards record low

In its Policy Briefing on Budget Choices Social Justice Ireland has urged Government to take an integrated approach to addressing Budget 2010 as Ireland's total tax-take plummets towards a record low.  As Ireland faces a range of interrelated crises and Government prepares its Budget for 2010 it is important to realise that:
·        Ireland is not a poor country;
·        Ireland’s total tax-take is one of the lowest in the developed world and continues to fall as a percentage of GDP;
·        15.8% of people are at risk of poverty with incomes below €12,000 for a single person or €28,000 for a family of four;
·        31% of all the households at risk of poverty today are headed by a person with a job. 
·        A further 50% are headed by a person outside the labour force (i.e. older people and people who are ill, have a serious disability or are in caring roles) and are totally dependent on social welfare.
·        It is both essential and possible to protect the vulnerable in the choices Government makes;
·        An integrated approach to tackling the country’s current problems is essential if they are to be addressed successfully.

 An integrated approach requires Government to
1.      Increase the over-all tax take while keeping Ireland a low-tax country and without raising income tax rates;
2.      Secure better value for money in the delivery of our public services;
3.      Reform the public sector;
4.      Target expenditure cuts where required but ensure that vulnerable people are protected. A good starting point would be the elimination of waste identified in the Comptroller and Auditor General’s recent report;
5.      Focus expenditure on the common good to provide required infrastructure and public services.
 
On protecting the vulnerable
In practice giving priority to the vulnerable would mean:
·        No cuts in social welfare rates;
·        No cut in the minimum wage;
·        Compensating those on lowest incomes for any increases in living costs associated with initiatives such as the introduction of a carbon tax;
·        Giving priority in education to funding primary education;
·        Giving priority in health to primary care teams;
·        Giving priority in housing to social housing programmes;
·        Giving priority to the unemployed, especially the long-term unemployed.
·        Increasing the tax-take fairly.
 
In this Policy Briefing Social Justice Ireland elaborates on all of these proposals. 
 
On Taxation
Despite significant increases in the tax-take from the PAYE sector in the last two Budgets, the scale of collapse in Ireland’s tax revenues has been dramatic. National taxes (those announced in the Budget and collected centrally) have fallen by over €13b since 2007 with the largest fall in areas such as capital gains taxes, stamp duties, corporation taxes and VAT. Despite the new income levies, the total income tax take has fallen from €13.6b to €12.4b. Overall, Ireland’s tax take as a percentage of national income will decline to 27.41% of GDP in 2009. These figures represent the lowest tax take for Ireland since Eurostat commenced compiling this data.
While a proportion of the tax decline is related to the recession, a large part is structural and requires attention. Budget 2010 should start that process. Over the next few years policy should focus on increasing Ireland’s tax take to 34.9% of GDP, a figure defined by Eurostat as ‘low-tax’ but a level sufficient to ensure that Ireland delivers appropriate public services. While Ireland should remain a low-tax economy, Irish society cannot expect to have efficient European style public services unless we collect sufficient taxation.
Current crises require integrated response
Ireland is at a critical moment in its development and Government decisions in Budget 2010 will have a huge impact on the future. It is essential that the vulnerable are protected.