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Social Justice Ireland challenges Ireland’s benchmarking of itself beside Romania, Slovakia, Latvia, Lithuania and Estonia
Producing a fair budget and working for a fairer future requires that Ireland stop benchmarking itself with Romania, Slovakia, Latvia, Lithuania and Estonia.
Social Justice Ireland has pointed out that Ireland and these countries take the lowest proportion of national income in tax in the EU, have the lowest total-Government expenditure and have the lowest social expenditure in the EU. In fact Ireland’s total tax take has fallen as a proportion of GDP since the start of the present economic crisis – from 31.4% to 27.4% of GDP and is now among the lowest in the EU.
Social Justice Ireland also pointed out that:
o It is not possible to develop a country with EU-average levels of social services (e.g. health, education, social welfare) and infrastructure (e.g. social housing, public transport) while having a total tax-take that is far below the EU-average.
o If we are going to have Romanian levels of taxation then we have to be prepared to accept Romanian levels of social services and infrastructure as well as Romanian levels of salaries. (Romania is simply used as an example here; the question could just as well be asked with other countries listed above.)
o Social Justice Ireland believes that Irish people do not want to settle for these low levels of services and infrastructure.
Government could raise Ireland’s total tax-take to 34.9% of GDP and still be a low-tax economy according to Eurostat. Social Justice Ireland believes that this should be adopted as a target by Government to be achieved over a number of years by developing a fairer tax system.
In presenting an alternative Budget Social Justice Ireland proposed that in Budget 2010 Government should:
o Increase taxation by €1,869m
o Have a net reduction in current expenditure of €1,507m
o Reduce capital expenditure by €750m.
The details of Social Justice Ireland’s proposals for Budget 2010 include:
On Taxation (details are provided in Table 8 of the main paper)
- All the recommendations of the Commission on Taxation on tax expenditures should be implemented with the exception of its proposal to tax child benefit.
- The ceiling should be removed from employees’ PRSI.
- A carbon tax should be introduced but care should be taken to provide the supports required to ensure people on low-income do not suffer as a result of the introduction of a carbon tax.
- Excise duties on alcohol and tobacco should be increased because of factors such as health outcomes and public order issues.
- A levy of 1% should be introduced on corporation profits.
- The capital gains tax rate should be raised to 40%.
- The tax and welfare systems should be integrated. This cannot be done in 2010 but the detailed preparatory work and structural adjustments required should be put in place during the coming year.
- A Site Value Tax should be introduced on non-agricultural land. Again, this cannot be done in 2010 but the preparatory structural, registration and related work should be completed within a year.
On Expenditure (details are provided in Tables 9 and 10 of the main paper)
- Introduce a range of adjustments proposed in the McCarthy Report.
- Increase charges for private facilities in public hospitals by 20%.
- Introduce a new job support programme to place 60,000 people who are currently in receipt of unemployment payments (and other related payments) in supported employment.
- Provide funding for 200 Primary Care Teams.
- Increase the allocation for adult literacy programmes by €10m
- Increase the allocation to Overseas Development Assistance (Third World Aid) by €100m.
- Reduce the public Sector Pay Bill by €520m.
- Make 1,000 employees of Anglo-Irish Bank redundant.
- Suspend payments to the National Pension Reserve Fund until Ireland’s fiscal problems have been addressed successfully.
A fair budget that protects the vulnerable and the economy is possible. However, this requires Government to commit to increasing Ireland’s total tax-take to a level closer to the EU average. This can be done while keeping Ireland a low-tax economy.