Friday, July 31, 2009

Sinn Féin must support tax increases.

Below is a piece from this weeks An Phoblacht concerning why Sinn Féin needs to support increases in taxes, an issue Sinn Féin has kept way from in the past.


Tax rises will be necessary
by Eoin Ó Broin

THE Commission on Taxation is due to complete its work later this week. Established in February 2008, its remit was to “review the structure, efficiency and appropriateness of the Irish taxation system”. Its report was expected to help the government set the framework for tax reform for the coming decade.

Its terms of reference included a commitment to “keep the overall tax burden low” and a “guarantee that the 12.5% Corporation Tax rate will remain”. Sources close to the commission indicate that, while the report will go some way to simplifying the notoriously complex system currently in place, it will keep its word on keeping the tax-take low.

If this proves to be the case, should we welcome the report? Absolutely not!

One of the great myths of our time is that low-tax economies are more competitive. Of course, there is no evidence to support this claim.

A quick look at the World Competitiveness Scoreboard for any recent year demonstrates that there are more high-tax countries in the top ten than there are low-tax countries. In particular, Norway, Sweden and Finland always feature prominently as amongst the world most competitive economies despite their relatively high-tax-takes.

The real determinants of competitiveness are science, technology, education and affordable health and childcare, all of which require investment by the state. And where does the state get the cash to invest? It gets it from taxation, of course. And here’s our problem.

The 26 Counties has one of the lowest tax-takes of any the EU’s 27 member states. In 2007, the total tax revenue as a percentage of GDP was 31%. Only Latvia, Slovakia, Lithuania and Romania took less.

At the other end of the scale, world leaders in competitiveness (such as Sweden, Denmark and Finland) had tax revenues at 44% to 51% of GDP.

You don’t have to be an economist to conclude that if you have Latvian levels of taxation you cannot have Scandinavian levels of investment in job creation or public services.

In the same year, the 26 Counties has the third-lowest level of government expenditure as a percentage of GDP in the EU. Only Lithuania and Estonia fared worse. Again, at the top end of the spectrum, the Scandinavian countries ranged from 49% to 54%.

There is also a clear link between a country’s total tax-take and the levels of inequality. The larger a country’s tax-take, the more money it has to invest in various forms of social protection and wealth redistribution. In 2008, the 26 Counties spent 18% of GDP on social protections compared to Sweden’s 32%.

So what does all of this tell us?

If you want greater competitiveness and less inequality you need to have enough money to invest in research and development, education, job creation, public services and social protection.

If you don’t, then your economy will be weak and your society crippled with inequality.It is time to start making the argument to raise taxes, for the good of the economy and the good of society. If the report from the Commission on Taxation fails to do this then it should be thrown in the bin.


  1. Eoin posted the same article as a guest on progressive economy. There are some comments there as well that might be typical of the feedback good and negative that this proposal might face.

    I think he is right. Look at the US where they had low taxes for so many years and now their infrastructure is falling to pieces - levess, bridges etc

    Still we should be pushing for decent services and folks paying their far share in a reformed and more progressive tax system. Thats what we ultimately. I'd be cautious about saying we want higher taxes. Nobody will want higher taxes but they do want better services.

    So i think the approach should be if we want better services then we need more taxes as a result. We'll have to be able to prove we can tackle waste in the public sector as well a la the budget submission.

    People are reluctant to pay higer taxes because they believe its only wasted.


  2. Why do they believe they are wasted? One of the main reasons is that's what the welathy tell them.

    The free market does not work well when it comes to the provision of goods and services for those with a limited ability to pay. Nor does it work well in meeting the overall needs long term needs of a healthy society. Compare the US with Germany, Denmark, Sweden etc. Which society is healthier.

    The figures on tax take as a percentage of GDP are there to be seen.

    We should not be afraid to say we want the wealthy to pay more to help create a fairer society and we should not be afraid to say taxes must increase. Let's be honest, there is no alternative.

  3. I am a Berlin guy when it comes to the Boston or Berlin debate. The continent and the nordic countries are much better. spent some time in a high tax country and you get what you pay for. I agree that a higher tax rate is needed to pay for that type of services.

    I agree with your point on the market failing too many people. Following the economic crisis we are now in no one will ever be able to stand up and say the market knows all. They'll rightfully be told whats what.

    Ronan Lyons had some amazing figures on income tax here

    adds a lot of weight to the argument that taxes need to be raised.

    Waste in the public sector is not a myth though SP. The HSE is probably the finest example. No matter how much money has gone into that mess the services have gotten worse.

    I agree that the taxes must go up and that the rich have to pay their fair share.

    This needs to be argued for though with severral elements not just saying we need higher taxes.

    If we argue for higher taxes we have to tie it into a broader message and say:

    - public services cost money and if we want good services them we must each pay a our fair share,

    - we argue building our economy requires investement in facilities, transport, education etc Our taxes are our investment as a nation in our future

    - we argue for reform of the tax system, removing the tax loops, and coming down hard on the over-reliance on tranactional taxes like stamp and vat etc. We say we need a new tax system. People think the current system is unfair.

    -we tie in our wage cap measures and say if taxes go higher then we spend it on schools, urban transport, industrial development areas etc. To make that certain we say drop the over inflated wages at the top of the public sectors. Our line could be "higher taxes shouldn't go to pay Bertie's 3 or 4 pensions"

    - we tie in our pre-budget proposals again and say why should the state be paying Consultants over the odds etc, we cut out waste and face up to the ineffciencies.

    - we also tie it in with the NAMA arguments and say that taxes are going up and thats Fianna Fail's doing. What Sinn Fein is going to do is ensure that we get good services, ensure Brian Cowen and Bertie dont take your taxes, and we are going to push for efficient services paid by all in accordance with how much they can pay. The golden circle is over, charlie mcCreevy is gone and everyone will pay their fair share.

    If we build a bg message behind raising taxes then the first journalist or tv head that comes out with "well sinn fein is only about raising taxes anyway" will get such a comprehensive smack down that they'll never make such a stupid statement again and ordinary people will look on and think Sinn Fein's really got this all tied together rightt and i like what i hear. they are really standing up for workers with proper ideas that'll work.

    high taxes are only means to an end. we need t push the end.


  4. People are concerned about higher taxes because:
    They think they already pay too much for what they get.
    They see tax money wasted at an incredible rate.
    They don't trust the politicians to use it for the good of the people.
    Services are poor and many have to pay for the basics, additional tax burdens will increase their difficulty in this regard (paying for visits to the GP, prescriptions, etc).
    Political parties habitually make empty promises and lie as a matter of course.

    We need to specify exactly what we will do with the extra revenue, but also identify changes we will make to the current system while transforming it to a more equitable one.
    A proper costing of our objectives - a health service which is free at the point of delivery, appropriate provision for an equitable and free education system, etc - and a comparison to existing spend. We may find that change is less expensive than it might appear when the savings associated with the abolition of existing support props (VHI, support funding for the private sector, allocation of state resources to private practice etc) are taken into consideration. This needs to be clearly spelled out so that people can take us seriously and understand that society does not have to be inherently unequal.
    We also need to be prepared to tackle vested interests and take the flak for this. Innovative approaches are required, risks need to be taken. Privileged groups have been established and nurtured in this society, to the detriment of the ordinary people.
    If we give people proof that a better life is possible, perhaps we won't have to work so hard for every vote.