THIS WEEK, most households across Ireland will receive notification as to the total amount of income the new Local Property Tax (LPT) will take from their pockets. In Mandate Trade Union, the union representing retail and bar workers, we are very concerned about the impact this tax will have on consumer spending and jobs in the Irish domestic economy.
You will not be surprised to hear that the retail sector is struggling badly. After five austerity budgets, the domestic economy has shrunk by more than 25 per cent, retail sales by volume continued its decline in January, and tens of thousands of retail workers have had their hours/incomes reduced or lost their jobs.
Why? Because consumers don’t have enough money to spend in their local shops.
1.8 million people have under €100 per month after essentials
A recent survey by the Irish League of Credit Unions estimates that 1.8 million people have less than €100 per month to spend after paying essential bills. The Irish Central Bank says almost 95,000 mortgages across the country are in arrears and the Central Bank governor, Patrick Honohan, is stating publicly that household financial distress is at “unprecedented levels.”
The property tax will come into effect in July and with the average house price across the country coming to €151,000 it will take €315 per year from the spending power of the average household. In parts of Dublin, the average house value is €333,828 – meaning it will reduce the average household spending in areas of the capital by €585 per year.
To put this in context, last month the Central Statistics Office released the Survey on Income and Living Conditions (SILC) report for 2011 and it showed that disposable income has reduced from a high in 2008 of 24,380 per individual to 21,440 in 2011, almost a €3,000 or 12 per cent decline.
During the same period, employment in the retail and wholesale sector reduced by approximately 40,300 (CSO). This, coincidently, is a 12.8 per cent reduction in jobs and shows a clear link between disposable income reductions and job losses in the local economy.
Retail is it is the primary source of income
Bear in mind that these figures do not take account of the loss of hours that many workers have experienced in the domestic economy, particularly the retail sector, with the effective result being a cut in spending power. This is something many companies have pursued vigorously and Mandate has highlighted through their Decent Work? The impact of the recession on low paid workers document.
The retail sector employs approximately 250,000 workers and is vitally important when it comes to employment, particularly for women and young workers. In the past it was the secondary income for most families, but now it is the primary source of income for thousands of families throughout the country. The recent job loss announcements and closures at B&Q, HMV, La Senza, Monsoon, Superquinn – to name but a few – are just the tip of the iceberg. The reality in retail is that the whole sector is in crisis, with most companies, large and small, hanging on the edge of survival.
The failure of the property tax to factor in the ability of households to pay is something Mandate is very concerned about. It seems absurd that those living on the minimum wage or on social welfare, or those who are already struggling to pay crippling bank debts and bills, should have to pay this tax when the vast majority of their income is already spent in the local economy helping to protect domestic jobs.
Option to defer payment fails to grasp the severity of the problem
Offering citizens the facility to defer payment of the property tax for three years fails to grasp the severity of the problem, which is that “middle Ireland”, the largest group of consumers, cannot afford to pay either now or in three years’ time. And those who do manage to pay will do so from already meagre disposable incomes, which in turn will lead to a further reduction in consumer spending, more job losses, more people on welfare and the downward cycle will continue.
Mandate has written today to all members of the Oireachtas to seek a deferral of the introduction of the property tax in July 2013 and that the government consider other revenue raising measures which will be less damaging to the domestic economy and already hard-pressed citizens.
To say that “there is no alternative” (TINA) is to attempt to deceive the Irish public. There are plenty of other ways to raise this type of revenue through a fairer taxation system and there are plenty of individuals and businesses that can absorb the cost of that increased taxation without impacting on jobs and the domestic economy.
John Douglas is General Secretary of Mandate Trade Union, the union for retail, bar and administrative workers. Mandate is the third biggest union in Ireland representing over 45,000 members. For more on Mandate Trade Union please go to www.mandate.ie, follow on Twitter or Facebook.