FOREIGN OBSERVERS MARVEL at the passivity of the Irish response to three years of Troika imposed austerity.
No street fighting, no riots. Two hundred and sixty diktats from the EU/ECB/IMF implemented without a backlash. Organised labour bought off cheaply with a commitment not to raise the two basic income tax rates and not to reduce the size of income tax bands.
Public servants, firstly cleaned out in 2010 with pay cuts and pension charges, thereafter enervated by the promise of no compulsory redundancies under deals which rejoice in the titles “Croke Park Deal” and “Haddington Road Agreement”.
Painless? Absolutely not. Go through that hidden portal in the attic of the Department of Finance in Merrion Street and you enter a parallel universe in which a completely different reality prevails.
This is the world of the “Local” Property Tax which is not local at all, of the Universal “Social” Charge which is not even remotely social. Of the College “Registration” Fee or “Student Service Charge” which is not a fee. Of “full cost recovery” for private beds in public hospitals which has caused 170,000 people to abandon private health cover altogether. Of DIRT tax that has doubled since 2008, when it stood at 20 per cent. And of the oncoming Water Tax to be imposed by a government that has cut public investment in water quality from €973m in 2008 to €400m in 2013.
This is a labyrinth of new taxes, overt and covert.
Taxes under any other name
Noonan says that the Universal Social Charge is now bringing in €4bn a year, up from €3.1bn in 2011. This is money which simply disappears into the maw of the exchequer. It was originally depicted as a temporary or emergency measure, a sort of social solidarity tax in a period of crisis, but is now becoming a permanent fixture on the tax landscape.
It is a uniquely customised form of taxation: the basic rate is 7 per cent but there is a special rate of 10 per cent which is paid by high-rollers earning over €100k gross a year except where those high rollers are employees. Who are such people? Well they’re people like departmental secretaries and assistant secretaries, people like government spin doctors.
The current take from PRSI is difficult to determine. But PRSI brought in €7.426bn in 2011. It will have grown since and the charge is now to be applied to unearned income such as dividends, rents and deposit interest.
The Local Property Tax, long demanded by the Troika, is expected to yield up to €550m in a full calendar year. It’s only a start on the road to a wider tax base. But the basic principle has been established and the typical yield from property taxes in OECD countries is 1.8 per cent of GDP, which in the case of Ireland would be circa €3bn a year. Stand by for further tightening of the screw in future years?
The Department of Finance has become so blasé about its austerity policy that it has even published documents setting out the impact of six years of tough budgets on disposable incomes. These show typical families experiencing estimated reductions of 10 to 15 per cent in their bottom line with reductions of up to 23 per cent for the families of some public servants.
With fearful taxpayers saving huge amounts, it’s little wonder that domestic demand has been flattened. We are still waiting for the growth that will lift all boats. It certainly has not happened in 2013 when the economy grew by perhaps a quarter of one per cent.
Slow change in how – and when – people pay
The latest exchanges over the timing of LPT payments for 2014 underline how confident the bureaucracy is that the citizens will accept further privation, regardless of the form it takes. The Revenue know that 53 per cent of people have paid their LPT by credit card or debit card and that a further 31 per cent paid it in one lump by single direct debit or by cheque.
Even with a shuffling what are called the “filing dates”, the majority of taxpayers will now pay the LPT either before the year in which it falls due or in the very early part of the year in which it falls due. An important precedent has been set. And it could spread to other areas.
Schedule D taxpayers who had grown used to a mid-November deadline for their online returns of income tax may soon see greatly accelerated payment dates. This will improve the government’s cash flow at precisely the same time as small businesses cannot get credit from a banking system that is largely government-owned.
These changes will be justified on the grounds that earlier payment permits more accurate estimation of tax revenue by the Department of Finance.
The decision of Standard & Poor’s to downgrade the credit rating of France on Friday underlines what can happen to a once very prosperous country when you allow it to succumb to the thoughtless orthodoxies of the Eurozone. Here is a G7 country, a former imperial power, being crucified by its own ruinous acceptance of the common currency and the austerity that must be accepted in order to sustain that foreign exchange regime.
If France cannot hack it, how stands a small country like ours?
The final, final deadline
When you go through the Department of Finance’s looking glass you see for yourself the damage that is being done to Ireland. Like little Alice the people are being offered “twopence a week and jam every other day”.
Writing under the title Economic Possibilities for our Grandchildren the economist John Maynard Keynes borrowed an analogy from the White Queen.
Keynes wrote that in this self-imposed world of personal and public austerity, the so-called man of purpose was like a man “who does not love his cat but his cat’s kittens; nor, in truth, the kittens but the kittens’ kittens and so forward to the end of cat-dom. For him, jam is not jam unless it is a case of jam tomorrow and never jam today”.
Independence Day is being scheduled by the Dublin government for 15 December. That’s sixteen days before the day most people see as the “final, final” deadline for paying their second property tax payment of 2013.
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