European Tribune - Community, Politics & Progress.

How come Ireland's public finances are so bad?

by Colman
Thu Nov 26th, 2009 at 09:34:19 AM EST

Something I don't understand: we're constantly told here that our public finances are unsustainable, while at the same time we're extremely heavily taxed. Apparently our public services are terribly wasteful, though we spend less than most EU countries do on them. How does this work?

Turns out, that despite the rhetoric, Ireland has the lowest tax burden in the EU, only slightly higher than the US.:

Now, that's probably slightly distorted by the huge drop in property transaction taxes due to the depression, but still.

And we're still being told that the economy can't survive higher taxes.

This is why we can never have nice things: the conventional wisdom is nonsense.

. Home
. About
. Contact
. New User Guide
. FAQ
. ET Editorial Guidelines
. Search
. Search (Google)

Username:
Password:

. Make a new account
. Reset password

How come Ireland's public finances are so bad? | 24 comments (24 topical, 0 editorial, 0 hidden)

Re: How come Ireland's public finances are so bad? (none / 1)

The Dublin Consensus is bunk.

by Colman (colman at eurotrib.com) on Thu Nov 26th, 2009 at 09:37:04 AM EST

Re: How come Ireland's public finances are so bad? (none / 1)

Mind you, people are a bit distracted right now, since the West of the country is mostly under water.

by Colman (colman at eurotrib.com) on Thu Nov 26th, 2009 at 09:41:30 AM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (4.00 / 2)

But not to worry, there might be an election and then we could have a Fine Gael government.

That'd be just great:

In advance of the 2010 budget, the party has proposed a permanent €900m tax cut for business, financed by matching tax hikes for workers. This is not a tax cut `targeted at the most vulnerable jobs' as they suggest; it is a tax cut that will boost corporate profits with only minimal and incidental job creation. The net effect would be a significant and regressive re-distribution of wealth.

[...]

Make no mistake, this big business tax cut is a Trojan horse for slashing welfare and public services. Fine Gael want to cut the 2010 budget deficit by €4bn, €3.8bn of which would come from cuts to current spending. This would take slash-and-burn economics to a level that even the Fianna Fáil government considers to be beyond the pale.

by Colman (colman at eurotrib.com) on Thu Nov 26th, 2009 at 09:47:12 AM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (4.00 / 4)

Your problem is you have no choice between shitty political parties. As opposed to...

No, forget it.

When locusts move on, they leave nothing behind

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Nov 26th, 2009 at 10:00:03 AM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (4.00 / 3)

Tax burdens falling in OECD economies as crisis takes its toll

Lower revenues from income taxes, property taxes and taxes on goods and services pushed tax-to-GDP ratios down ... to 28.3% [2008] from 30.8% [2007] in Ireland.

From the OECD report summary. In 2007 Ireland was just a little higher in the table, above Slovakia, Switzerland, and Japan before the same final four as in 2008.

I thought the conventional wisdom was that Ireland had low taxes, but I'm not there paying them, so what would I know?

(How much of GDP escapes tax because of breaks for foreign corporations?)

When locusts move on, they leave nothing behind

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Nov 26th, 2009 at 09:58:30 AM EST

Re: How come Ireland's public finances are so bad? (none / 1)

The conventional wisdom internally is that we can't raise taxes, especially on the rich, because it would wreck the economy.

I imagine the story is different externally.

We actually need a complete reform of the tax system, which was obvious during the good times and should have been done then. Of course it wasn't.

by Colman (colman at eurotrib.com) on Thu Nov 26th, 2009 at 10:02:36 AM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (4.00 / 2)

The most "business friendly" and "lowest taxed" countries in EU are probably Latvia and Lithuania. They also have the worst public finances...

by das monde on Thu Nov 26th, 2009 at 08:32:11 PM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (4.00 / 3)

What really annoys me is that in most such comparisons only taxes are considered and not other "net-income of poor working blokes like me decreasing" things like social security payments which makes such lists totally useless. And it doesn't differentiate who pays (i.e. employed workers' income, company profits, property transactions, consumption (e.g. VAT)), etc...

I live and work in Germany and if I look at my payslip every month there are a lot of things which are deducted which are NOT (income) tax. And to be fair some of those things are also paid by my employer, though in the end that amounts to tax on work, but that's a whole other story...

Anyway, just my two cents...

by crankykarsten (mr dot moeller at gmx dot Germany) on Thu Nov 26th, 2009 at 11:19:40 AM EST

Re: How come Ireland's public finances are so bad? (none / 1)

Well, in this one they look at:

Tax burdens falling in OECD economies as crisis takes its toll

Aggregate tax burdens in OECD economies, calculated as the ratio of tax revenues to gross domestic product

So any VAT, taxes payed by employer and such are included. And if you want to look at ""net-income of poor working blokes like me decreasing" things" I think you should add ""net-income of poor working blokes like me increasing" things". But then you are looking at something else.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Thu Nov 26th, 2009 at 12:24:26 PM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (4.00 / 2)

But the point nevertheless stands.

Suppose that a country runs a public pension system, paid out of income taxes. Suppose said country decides to slash public pensions in favour of a scheme where the employer pays a percentage of payroll into a pension fund (that invests in said country's sovereign debt), and then lowers income taxes correspondingly.

The "tax burden" of this hypothetical country goes down during this exercise. But there has been no change in the aggregate cash flows involved. There has been a regressive distributional change, but that does not show up (immediately) in the aggregate flows.

(I need to write something on the micro- and macroeconomic similarity between private pension contributions and taxes...)

But then again, the harder I look at most of these macroeconomic accounting conventions, the more obvious insanity I encounter. For instance, the conventional assumption in evaluating the value of goods and services provided free of charge is that their value is equal to the cost of providing them. In other words, the public sector and most nonprofits earn no return on their capital plant.

This seems like a more or less sensible convention, until you realise that it means that a railway or a hospital that performs precisely the same functions using precisely the same supplies and manpower produces goods and services of a different value depending on whether it sells those goods and services for profit or not.

(A more sensible convention would be that capital used in the free provision of goods and services earns a return on investment comparable to that of the private sector, and then booking this return as a direct non-monetary transfer to the users, in the same way that the operational cost is booked as a direct non-monetary transfer to the users. That would ensure consistency across the (artificial) public-private divide.)

- Jake

It is necessary to distinguish between the virtue and the vice of liquidity. (With apologies to Lemuel K. Washburn)

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Nov 26th, 2009 at 09:02:50 PM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (4.00 / 2)

Where are these figures coming from?

The US with a 25% tax burden? That doesn't tell the whole story.

The medium rate is 28%. But that doesn't include Medicare and Social Security. I don't know if any of the other countries include this in the tax rate.

Then there's the state tax system, which is variable, of course. In my state, I pay 15% in taxes. The state tax is deductible from the federal tax (i.e. 28% of the state tax can be deducted from the federal). That's a 2 or 3% deduction.

So, 40% to the Feds and State combined, and again that doesn't count social security and medicare. When all is said and done, taxes in the USA approach 60% of income in many states.

by Upstate NY on Thu Nov 26th, 2009 at 11:26:59 AM EST

Re: How come Ireland's public finances are so bad? (none / 1)

Upstate NY:

Where are these figures coming from?

OECD.

Tax burdens falling in OECD economies as crisis takes its toll

The OECD's annual Revenue Statistics publication provides a long series of historic data for the 30 member countries of the OECD. It provides data not just on aggregate tax burdens but on breakdowns between different taxes. By bringing all these cross-country data together, it provides analysts and commentators with a platform for understanding and interpreting more recent developments in tax receipts.

Revenue Statistics 1965-2008, 2009 Edition

How to obtain this publication
Readers can access the full version of Revenue Statistics 1965-2008, 2009 Edition as follows:
Subscribers and readers at subscribing institutions can access the online edition via SourceOECD, our online library.
Non-subscribers can purchase the PDF e-book and/or paper copy via our Online Bookshop.
Government officials with accounts (subscribe) can go to the "Books" tab on OLIS.
Access by password for accredited journalists.

Can we get someone accredited?

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Thu Nov 26th, 2009 at 12:27:12 PM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (none / 0)

Unfortunately not. We're not press, we're not journalists (and even then they probably choose whom they accredit).

So it's €120...

When locusts move on, they leave nothing behind

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Nov 26th, 2009 at 12:32:29 PM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (none / 0)

I have thought about investing in a Press pass, as leverage to question and a foot in the door for events.

Capitalism without bankruptcy is like Christianity without hell. Frank Borman

by ceebs (ceebs (at) eurotrib (dot) com) on Thu Nov 26th, 2009 at 12:41:33 PM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (none / 0)

we're not journalists

We aren't? Says who?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid (arvid.hallen at gmail.com) on Thu Nov 26th, 2009 at 02:07:05 PM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (none / 1)

We are certainly are journalists, but unaccredited. That situation will change, firstly by the growing importance of user-created reviews of products and services, and secondly that politics is also in the 'advertising' business and they have to allow access to the Fourth Estate - which imho not only includes blogs and other online commentary, but also that it is just these online newcomers who are preserving the ancient role of being the checking and balancing Fourth Estate.

The new accreditation will not be thrown around freely, but I would have thought it fairly easy to demonstrate that ET would be a worthy candidate with a visible track record.

You can't be me, I'm taken

by Sven Triloqvist on Thu Nov 26th, 2009 at 02:34:44 PM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (none / 1)

National rules on accredited press organisations. ET is not officially registered anywhere as a press org.

But I'll give the OECD accreditation procedure a try. It can do no worse than fail.

When locusts move on, they leave nothing behind

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Nov 27th, 2009 at 05:59:01 AM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (none / 0)

Well, I seem to be registered. But I haven't got into the site yet. Patience...

When locusts move on, they leave nothing behind

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 30th, 2009 at 11:06:54 AM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (none / 0)

OK, it works. I have this report and can access others.

Kudos to the OECD for openness.

When locusts move on, they leave nothing behind

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Dec 2nd, 2009 at 07:19:13 AM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (4.00 / 4)

Revenue Statistics 1965-2008, 2009 Edition

The tax revenues are primarily grouped into the following high level categories essentially representing the different bases on which taxes are charged:
Taxes on income, profits and capital gains
Social security contributions
Taxes on payroll and workforce
Taxes on property               &n bsp;
Taxes on goods and services
Other taxes                 ;               &nbsp
(Category 1000)
(Category 2000)
(Category 3000)
(Category 4000)
(Category 5000)
(Category 6000)

And here's a breakdown of the shares of each kind of tax (total = 100%):

When locusts move on, they leave nothing behind

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Nov 26th, 2009 at 12:51:28 PM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (none / 1)

It's missing state income taxes, and I think I know why.

These are variable.

Also missing are medicare taxes.

by Upstate NY on Mon Nov 30th, 2009 at 09:36:15 AM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (none / 1)

Beware the meaning of "social security", though. In the US it refers to old-age pensions, while here it probably broadly covers social contributions including public health insurance as well as pensions.

When locusts move on, they leave nothing behind

by afew (afew(a in a circle)eurotrib_dot_com) on Mon Nov 30th, 2009 at 11:01:15 AM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (4.00 / 2)

Isn't it total tax take as %GDP, not just income tax?

by Colman (colman at eurotrib.com) on Fri Nov 27th, 2009 at 06:01:41 AM EST
[ Parent ]

Re: How come Ireland's public finances are so bad? (none / 0)

I see. Thanks.

by Upstate NY on Fri Nov 27th, 2009 at 11:47:39 AM EST
[ Parent ]

How come Ireland's public finances are so bad? | 24 comments (24 topical, 0 editorial, 0 hidden)

Go to: [ European Tribune Homepage : Top of page : Top of comments ]