Policy issues concerning Taxation

The Government announced yesterday (19th April 2021) the establishment of the Commission on Taxation and Welfare to look at "how best to support economic activity while ensuring sufficient resources available to meet costs of public services". While Social Justice Ireland welcomes the establishment of a Commission to consider how best to structure Ireland's taxation system to support the provision of Decent Services and Infrastructure, we are concerned that too much focus will be placed on employment activation, rather than delivering Just Taxation and functioning welfare system to support the eradication of poverty. 

The need for a wider tax base is a lesson painfully learnt by Ireland during the last economic crisis. A disastrous combination of a naïve housing policy, a failed regulatory system, and foolish fiscal policy and economic planning caused a collapse in exchequer revenues. It is only through a strategic and determined effort to reform Ireland’s taxation system that these mistakes can avoided in the future.

The past fifty years has been a period of falling taxes on the rich in developed economies.  A report by the London School of Economics and Political Science has found that reducing taxes on the rich leads to higher income inequality and has little or no impact on economic growth or unemployment.  The report finds major tax cuts for the rich since the 1980s have increased income inequality without any offsetting gains in economic performance.   It concludes that governments seeking to restore public finances following the COVID-19 crisis should therefore not be concerned about the economic consequences of higher taxes on the rich.
 

The Department of Finance recently published an update to Ireland’s Corporation Tax Roadmap.  The update reaffirms Ireland’s commitment to a multilateral approach via the OECD/G20 Inclusive Framework to address the tax challenges posed by the digitalisation of the economy.  It also contains a welcome recognition that a multilateral approach will require compromises and trade-offs.  A minimum effective corporate tax rate must be a policy instrument for consideration in light of the ever-changing global context and our commitment to the OECD/G20 Inclusive Framework.