False economy

Why can’t we afford these services? The obvious reason would be banking bailouts and the interest cost of our national debt. Even stripping this out, it’s still not affordable. Why is this? Well, looking at taxation revenue as a percentage of GDP, and comparing it to the rest of Europe will give us a clue. We took in €31.93 billion last year on GDP of about €130 billion, that gives us taxation to GDP of nearly 25%. You can get a comparison of that figure to the rest of the OECD here - oecd.org/dataoecd/48/27/41498733.pdf

We are quite clearly under-taxed. When you consider the deficit and the fact that the IMF are here, it truly is incredible that our level of taxation is so low.

Our solution at this stage isn’t decreased services (they’re already at breaking point). The reality is that we need more taxation.

Can we not just pay each person less but have same number so no declince in services or is that too simplistic i.e. if we have budget of 10m and each person is paid 50k each and budget is cut by 10% then cut pay by 10%

More taxation is needed but marginal rate is now 55% so any increases in taxation are going to have primarily be directed at those outside the tax net and include property tax, water rates, increased cost for services, higher thresholds for things like drug payment scheme.

…at the upper echelons.

To get into the top 20% of earners in Ireland you need to earn €50k or more. Are you suggesting we target them?

Eh, taxation amounted to about 50 bn in 2010, excluding payments to the ‘free’ health service, the ‘free’ education service and ‘free’ local government services. State direct spending is 50% of the economy, about 30% too much, I reckon. economic-incentives.blogspot.com … -from.html

GDP was about 150 bn, so that gives a tax:GDP ration of about 33%, a little above the OECD figure for 2007 that you quote. The economy has shrunk, government has increased in size…

The undertaxation that takes place is on lower incomes, inheritances, pension contributions, employment… some of these are changing, some are not. I expect that tax will rise to about 35% of GDP. It doesn’t do much for the requirement to reduce spending.

I don’t like it, but those are the numbers.

Where are you getting €50 billion from? Revenue figures for last year are here and they come in at €31 billion - finance.gov.ie/documents/pub … of2010.pdf

The economy has shrunk, tax revenues have shrunk much, much more. Tax revenue was €47 billion in 2007 - finance.gov.ie/viewdoc.asp?DocID=5129

The problem with the tax system was that like you said, it was/is far too narrow. We either need more taxation to just maintain our existing standard of health/education, or we can leave taxation alone, but it will mean sacking teachers/doctors and closing hospitals/schools. We are well beyond the stage of just sacking a few pencils pushers or instituting a few pay cuts for fat cats.

Stability Program Update.
finance.gov.ie/documents/pub … pr2011.pdf
See p.49

Total revenue 53.279 bn
Total expenditure 103.185 bn
(one-off measures 30.8 bn)
giving a deficit of 19 bn

GDP 153.939 bn

27.790 bn of spending is social spending vs. social contributions of 11.385 bn

The Finance figures are a nonsense. They exclude social insurance contributions.

er, yeah, and tax revenue was 29 bn in 2003… what’s your point? That the bubble inflated tax revenue? Or that 47 bn is somehow a sustainable amount?

I’m sorry, but we need to do both. The current level of spending is unsustainable. Higher taxes won’t fix it.

I stand corrected.

It’s a real problem, though. It gives a false view of the size of the state in the economy. It also gives a false view of where the gap is. If you look at the gap between social insurance contributions and social insurance spending, it is most of the deficit. The Social Contribution thingy goes some way to addressing this, but one problem I see with it is that it is now being lumped in with general tax revenue! Having been fudged one way, the figures are about to be fudged another.

An additional problem is that the health levy comes no-where near to paying for the Health Service. Given the levels of public service available, private healthcare cannot really be seen as a luxury, so if you look at it as an ‘extra’ tax, 2.5 mn people (approx) covered, average 600 per head (made up) = 1.5 bn of other income to Health that is effectively a tax.

Then add in bin charges…

Then subtract defense spending from the other OECD members and Ireland…

What do you get, a low tax economy? I don’t think so.

Ah c’mon lads, what did ye expect the legacy of Charlie mcCreevy, Bertie Ahern, and Brian Cowan as Ministers of Finance would be??? The pear shaped economy is looking more like a … , well like a pear, every day. The quango economy was sustainable only with above average GDP growth, sensational transaction taxes, irrational consumers, overemployment, and tricks and gimmicks with the Double Dutch and what not. As each of these is stripped out the true reality of Ireland’s Tiger Economy is that it has indeed been FALSE for a very long time, I would say since 1997 or so and that is 15 years of every man, woman, and child being led to believe Ireland was in fact successful when it never was other than in stupid GDP terms, it was never sustainable in any way, shape, or form.
Ireland has around 4.3 million people, who the hell knows anymore but it is a small city by any international standards. the whole ponzi scheme was based on that population growing by 25% or so by 2021 (see link from CSO in 2006)
cso.ie/releasespublications/ … 1-2041.pdf
Anyway, as a small island, with virtually any location within 4 hours of another, the country could indeed be run like a city, but no, Ireland needs 100 hospitals instead of 5 good ones, too many universities to count with the integrationof the regional techs, quangos for every which and what, etc.
166 TDS, 60 Senators, 34 Local Authorities, 80 Town Councils, 8 Regional Authorities, 2 Regional Assemblies, and a pleothera of Quangos
environ.ie/en/LocalGovernmen … istration/
360,000 Public Service employees with an average weekly wage of E1,000 (yep, thats the average) so a cool E360million a week in wages (E18.7 billion a year) - thats without overtime and employer PRSI
cso.ie/releasespublications/ … mpearn.pdf
cso.ie/quicktables/GetQuickT … duct=DB_PS

The problem is not too hard to grasp.