Mick Clifford: Juvenile approach to tax serves no one

Over the preceding weeks, Fine Gael had outdone the main party of government in promising to cut taxes and boost spending. And now, at the witching hour, the Soldiers of Destiny were letting you know that when the curtain comes up, it is they you can trust to apply fewer taxes.

This week, we had a little reprise of such theatre, except these days the two parties are joined in a coalition. Three junior Fine Gael ministers penned a joint piece calling for a €1,000 reduction in tax for middle-income earners. These were members of a government stamping their feet six months before their government delivers a budget. Why didn’t they just knock on Michael McGrath’s door and throw a few shapes his way?

Some in Fianna Fáil were outraged, not at the proposal itself but the strategy of airing it in order to claim credit down the line should it come to pass. McGrath dismissed the antics. Simon Coveney said there was no intention to “upset” anybody by it. (Were you upset? I couldn’t stop crying).

The whole palaver was juvenile, silly and indicative of a desperate attempt in Fine Gael to find something to call their own. If this is all that the party has to offer ahead of the next general election, they are in serious trouble.

Some day there will have to be a grown-up conversation about tax. 

Last year, the Commission of Taxation and Welfare read the runes and declared that the country faces major sustainability challenges. “Over time, the overall level of taxation as a share of national income will have to increase,” it stated.

In particular, the commission believes that there will have to be serious hikes in property and wealth taxes, including inherited wealth. This is simply to ensure that at a time of an ageing population and a creaking planet, we will be able to maintain stability and a modicum of social solidarity.

On barstools around the country, there is a notion that we are already overtaxed in this country. The facts beg to differ.

An analysis conducted by the Parliamentary Budget Office in the Oireachtas last August found that Ireland is a “relatively low-tax country”. Based on the percentage of gross income paid in direct taxes by households, Ireland ranked 18th-highest of 19 countries. 

Here, households paid 11.4% of gross income in taxes, compared to 38.4% in Denmark, 32.4% in Greece and 28.4% in Germany. This included a large cohort of workers who don’t pay tax.

The analysis found that low earners pay an effective rate of 16.7%, average earners 26.66% and high earners 36.02%. 

Ireland is not a high-tax country and conversation about taxation should begin to centre around how it should be designed to best suit the public interest now and into the future.

'Head in the sand' approach

One small example of the prevailing ‘head in the sand’ approach to these matters is inheritance tax. This is charged at 33% which is a reasonable toll. 

However, it doesn’t kick in for the first €335,000. Take an average family of four who inherit their parents’ wealth, which, for the majority, if not large majority, would centre on the family home. 

Said home would have to have a market value in excess of €1.34m before a cent would be due in tax. 

Take into account also that the same home would have gone through a huge uplift in value in recent years on the basis of the property market and nothing else.

Is that fair in a country where so many can’t afford to even think of owning a home? 

Is it fair that our four inheritors are likely to be in their 40s, if not 50s, and among the demographic that is doing relatively well in the current environment?

Yet very few want to talk about such unfairness. At one end, Fine Gael would characterise any move to lower the threshold as the march of communism. 

At the other end of the political spectrum, the comrades in People Before Profit believe the current arrangement to maximise intergenerational wealth is fine and dandy. 

Fianna Fáil and Sinn Féin won’t touch it because any such move would be unpopular among a small cohort which could make a loud noise.

The tax that dares not speak its name did get a rare outing at the Labour Party conference last March when councillor Darragh Moriarty told the gathering that the current regime was unfair and even rotten.

“Nobody looks at the state of Ireland’s public services, housing, health care, transport, and thinks we need less investment,” he said. “Looking at inheritance tax as something to be evaded in some ways is wrong in my opinion.” 

His observations are merely common sense. Intergenerational wealth is one of the great dividers in society so why shouldn’t there at least be some fairness in the taxing of such wealth?

In grown-up countries, there is an acceptance that tax is not a dirty word but a means to fund the requirements of democratic societies. Not so here. 

The local area property tax is another obvious example. It is a pittance compared to equivalent taxes in other democracies. We are experiencing a housing crisis in which one of the big divides is between those who own their own home and those who may never do so.

Yet instead of a proper debate on how to fairly set rates for the tax, the only time it gets mentioned is in attempts to have it abolished.

That is what Sinn Féin is promising to do whenever the party ascends to power. Is fairness to be determined exclusively in terms of how small sections of the electorate — or even social media — will react if genuine attempts are made to fashion a fairer society through the redistribution of wealth?

Instead of any such conversation, we have the juvenile faffing about of junior ministers attempting to show their leader that they are the best boys and girls in the class. 

As with specific areas, such as third-level education and climate change, the approach to properly fund the state going into the future is merely viewed as something to be addressed after the next election. 

The problem with the never-never is that one day it will arrive, but today’s politicians are secure in the knowledge that when the dreaded day arrives it will then be somebody else’s problem.