Congress calls for Tax Reforms to Reward Productivity and Promote Social Equity as Part of Pay Talks
9 Jul 2008
The General Secretary of the Irish Congress of Trade Unions, David Begg, has called on the Government to address the major imbalance in the way workers are treated by the tax system compared with speculators and other free loaders who have been the main beneficiaries of the boom. He was speaking at the launch of the ICTU document 'Rewarding Productivity and Promoting Social Equity - Tax Reform in the context of a New National Agreement', today.
Mr Begg said Congress "believes that taxation policy should be grounded in the concept of equity. The Government and the social partners now fully accept that economic and social concerns must have parity in policy decisions. This means that tax equity should have parity with the economic/incentive objectives of taxation policy."
He called for income from all sources to be taxed in the same way, "in so far as is feasible. Unfortunately the current system taxes income from work and enterprise at much higher levels than income based on gains from speculation, inheritances, capital etc.
"Taxation should encourage economic activity that promotes the efficient use of the nation's resources to promote our overall well being, but many tax incentives have become diffuse, ineffective, costly and have outlived their usefulness", he said. "In contrast money used to pay for public services is referred to as 'a burden'. Congress rejects this paradigm. We regard taxation as the legitimate way of funding public services. If some public spending is ineffective, that is a different matter from ensuring adequate funding for public services.
"There may be difficulties maintaining public services in a slower growing economy but these can be overcome if the tax base is broadened by the elimination of tax breaks and tax exemptions that are regressive, disproportionately benefit the rich or allow high earners to minimise their tax bill."
ICTU is proposing that any new national agreement must include objectives such as:
- Pass emergency legislation giving the National Consumer Agency powers to tackle traders who fail to pass on price cuts due to currency exchange movements
- Halt the over-reliance on indirect taxes and local charges that are fuelling inflation, including a reduction in VAT rates
- Accelerate the winding up of expensive tax breaks, for example those to builders which cost the exchequer €2 billion to mid-2007 and which benefited stallion owners to the tune of €22.5 million in 2006
- Ensure taxes on carbon emissions and pollution generally are targeted at those producing waste rather than vulnerable low income groups, especially those facing serious fuel poverty this winter
- Reintroduce the Bank Levy which was abolished although banks have seen their Corporation Tax rate fall from 50 per cent to 12.5 per cent
- Introduce independent vetting of tax breaks to avoid a repetition of the Business Expansion Scheme fiasco, which saw limits on tax write-offs increased from €31,000 to €150,000, against advice from the Government's own consultants.
- Ensure that plans to raise the PRSI ceiling are accompanied by reductions in the rates levied in order to protect workers on middle incomes
- Cap the amounts companies can set against tax in pay packages to senior executives at €640,000
- Develop a strategy to protect the living standards and quality of life for older people by improving pensions, elder and health care, housing and employment conditions
- Introduce mandatory pensions for all employees and, recognising the failure of the private annuity market, set up a State Annuity Scheme as a matter or urgency
- Modernise the governance structures of the Social Insurance Fund and make a majority of trustees employee representatives
- Protect defined benefit schemes and ensure increases in state pensions are no longer used by some employers to reduce 'integrated' occupational pensions
- Develop a long term sustainable strategy with other EU member states to co-ordinate Corporation Tax reform so that Ireland can continue to operate within a broad range of tax rates
- Introduce more effective regulation of financial markets
- End tax breaks on loans taken out by private equity firms for leveraged takeovers of companies
- Grant local authorities greater powers to raise funds from measures such as taxes on beneficiaries of land rezonings and tourists
- Base central funding for local authorities on the real costs of providing services rather than the Consumer Price Index.
- Local authorities should be fully reimbursed for costs arising from Government policy decisions
- Standardise waivers for domestic charges across local authorities and grant them through the national tax and benefits system
- Crack down on tax exiles by reducing the time limits they can avail of to spend time in their Irish 'trophy homes' without paying income tax
- Allow tax relief on all charitable donations by PAYE workers and remove the current €250 theshold, but clamp down on endowments to elite educational, health and other enterprises that promote a two tier society.
Mr Begg concluded by stating that, "The growing inequality in how wealth is generated and distributed in Ireland cannot continue if we are to become a society, where people are rewarded decently for their efforts and we are to have reasonably equal opportunities for all.
"Development of a sustainable modern economy cannot be left to the devices of a privileged wealthy elite whose only objective is to make themselves even richer. Political legitimacy in Ireland and internationally is being undermined by this new breed of super rich people who demand tax breaks wherever they go but do not want to pay tax anywhere.
"Social partnership has the potential to deal with the problem effectively, but only if all concerned put their shoulders to the wheel."
Read Congress Briefing Paper Rewarding Productivity and Promoting Social Equaity - Tax Reform to underpin a New National Agreement, and also Congress Submission to the Commission on Taxation.
Contact: Padraig Yeates, PYE Comm, 087 260 5297 and 828 4510
Deirdre Keogh, ICTU, 889 7777