Close the Tax Loopholes
25 May 2005
In its submission to the Government on the many tax loopholes, the Irish Congress of Trade Unions called on the Government to terminate virtually all of them - immediately.
David Begg, General Secretary of Congress said that these tax breaks should have been abolished when the Irish economic boom was clearly established. That was over ten years ago in 1994 (as the graph in our submission shows). Economic growth soared and averaged a staggering 8.5 per cent for 9 years.
It was a serious error of government's not to abolish most tax breaks years ago, especially for property investment. Tax breaks are the same as handouts of taxpayers' money to wealthy investors, unless they add economic activity. In many cases they only displaced other activity and pushed up inflation. The study by the Revenue of high earners[1] revealed a number of the alarming statistics, for example that 12.5% or 50 of the top 400 earners in Ireland paid income tax at an effective rate of less than 10 per cent. When tax rates were reduced, the loopholes and exemptions should simultaneously have been abolished.
It was the tax subsidies on property investment which fuelled much of the construction inflation. These tax breaks have placed a huge burden on the shoulders of young first time home buyers and give subsidies to the wealthy.
The hotel tax breaks are particularly pernicious and anti-productive. High income earners can write off hotel investment over 7 years in depreciation. In reality, the value of hotels has been rapidly appreciating.
Congress welcome the studies of the tax breaks and looks forward to finding out their cost to other taxpayers, the benefits accrued by the wealthy, and any economic gains generated. Most of all we look forward to seeing most of them ended and the additional millions being ploughed into the health service.
[1] Revenue Commissioners' Study, Effective tax rates of top 400 earners: report for the tax year 2001