Removefiannafail

But for how long.?

"Nobody should underestimate the importance of our low Corporation-tax regime  in helping to generate and sustain wealth in Ireland. (Editorial ;"Irish Independent")

Ireland has become an expensive and hostile environment for its own citizens.It is ,in effect ,a threathening aircraft carrier, lying off the coast of Europe and crewed by minimum waged foreign workers and overtaxed irish citizens who pay the bill for a free lunch, for foreign  multinational corporations. Imported jobs are stolen from our european partners.Increasing stealth taxes are directed at the low paid, and wages continue to diminish in much of the private sector.

State employees,and politicians,lawyers, builders,and farmers benefit, while the quality of life for the vast majority,has deteriorated enormously.

An article in the business section of the Irish Independent argued that the maintainance of Ireland,s low corporation tax rate must be fought for in Europe, where our co partners in the E.E.U. are irritated by our thieving companies,and jobs, from as far away as the U.S.A.

What wealth has this policy brought to the average worker.? A few citizens have become obscenely wealthy as property and land prices soar beyond credulity.The benefits for ordinary people are less obvious.Crippling mortgages.Traffic chaos.Price inflation across all service sectors, fuelled by high taxation,such as V.A.T. Indirect taxation by stealth across the board.

A massive influx of low paid foreign job seekers, puts pressure on our already shambolic public health service.Companies like Irish Ferries race to capitalize on the availibility of cheap labour.

Wealthy Fianna Fail sponsored developers, hurry to rezone much of the countryside for development. They build and rent office accomodation to cater for a chaotic  government sponsored decentralization scheme,which will double the cost of our Civil Service wage bill within a few years. Many speculators,with offshore registered companies, continue to pay nothing of their profits back to the state.

21% V.A.T. is levied on all essential services such as waste collection ; Electricity; Telephony; home gas and heating oil.etc. Stealth taxes heaped upon overpriced essential services such as Electricity, and natural Gas, by ill-managed state companies, such as "An Bord Gas".  A  wave of new private sector buccaneers, such as Larry Goodman, emerge from the shadows of Charles Haughey's coffin,  to cater for the sick,and the old. 

 Private hospitals, and incinerators .Toll roads and decentralized civil servants accomodation alike; all are sponsored by cronies  of Fianna Fail's new "Public -Private Partnership- in reality the prelude to wholesale plunder by corporate interests, and punitive taxation, for decades to come. 

Once again, ordinary working folk pay dearly for the corporate sector's free lunch, and the farming communities life "pensions" from the "Common Agricultural Fund", much of which is reinvested in the aforementioned scams.

A LANDMARK European court case could greatly reduce Ireland’s ability to attract foreign direct investment.

The European Court of Justice will in December 2005 adjudicate on a dispute between Cadbury Schweppes and the British Inland Revenue on whether the company can avail of a lower tax rate on profits in Ireland.

According to the Inland Revenue, the confectionery giant set up two subsidiaries in Ireland purely to avail of the lower corporation rate.
The case, which is scheduled to be heard next Tuesday, could have huge implications for Ireland. The low corporation tax rate has not only attracted a large number of multinational companies setting up in Ireland creating jobs, but also in the development of the International Financial Services Centre in Dublin. Many foreign subsidiaries are set up in Ireland, and the IFSC in particular, to provide finance operations to their parent companies. This allows them to avail of the low corporate tax.

However, other countries with higher tax rates have moved to clamp down on this perceived disadvantage by introducing laws to ensure that companies are liable to pay tax on the difference.

Cadbury Schweppes set up to subsidiaries in the IFSC Cadbury Schweppes Treasury Services (CSTS) and Cadbury Schweppes Treasury International (CSTI) to provide intra-group finance to the companies various operations. These were subject to the then Irish corporation tax rate of 10% (now 12.5%) and not the 30% in Britain.

Some years ago Britain decided to close down loopholes in its tax code and ensure that companies were not using low tax countries.

The British Inland Revenue went after Cadbury Schweppes for the tax, worth around 13 million in 2000. Cadburys appealed this to the Special Commissioners (which presides over tax disputes). The Special Commissioners determined that the reason for incorporating CSTS and CSTI as tax resident indirect subsidiaries in Ireland was solely for the purpose of ensuring that the profits arising from their intra-group lending treasury activities could benefit from the International Financial Services Centre tax regime for group treasury companies in Ireland and would not be taxed in Britain.

The case was then referred to the European Court of Justice (ECJ), which will have to decide whether the Special Commissioners' decision breached EU guideline's on freedom of establishment.

If the ECJ decides that the Inland Revenue were right in pursuing Cadbury, the case could have major ramifications for Ireland. It would mean that many hundreds of companies here could face similar claims, and hitting the attractiveness of Ireland as a place to do business.

Is so expect more and more bin taxes...

THE Government is dipping into your pocket more regularly now than at any time in the past 10 years. While trumpeting the merits of Ireland's low-tax economy, the Government has in fact been shifting and gradually increasing the tax burden, rather than reducing it.

No matter how the figures are spun, we will hand over more of our incomes in tax this year than we did when the Fianna Fail/Progressive Democrats coalition came to power in 1997.

Indirect taxes are the new monster, replacing income tax as the main income source for the Government. The combination of the two is taking more tax out of every household than historic levels of high income tax.

Last year, the Government's income from VAT and stamp duty matched the total amount of tax raised from all sources in 1997, bringing in more than €17bn between them. It has been a startling transformation. Since the Government's first year in office the amount of money generated by indirect taxes has quadrupled, while income tax receipts, despite the creation of hundreds of thousands of new jobs in the private and public sectors, have only doubled over the same period.

The headline policy of tax reduction has actually been one of tax replacement, and the impact has been an increase in the tax burden borne by every household. Since 2002, the average amount of tax paid by every household has risen by almost 40 per cent to €27,644, and the percentage of personal income spent on tax by each household has risen from 31.6 per cent to more than 38 per cent, with the vast bulk of that increase coming from indirect taxes.

Not surprisingly, the total tax burden - the amount of tax paid expressed as percentage of the total national output - has also risen, climbing above 38 per cent. So how does the Government pick your pocket while claiming to reduce taxes? One of the simplest examples is the cost of buying and running a car. A relatively modest new car will cost €22,000, and a three-year car loan will cost in the region of €650 a month. The Government's take, in VAT and registration tax, is €7,400 - taxes that will cost you about €260 a month to fund over the three years.

Drive a modest 16,000kms a year and you will give the Government a further €1,000 for your fuel, as well as another €400 for your tax disc. In three years, the Government will take more than €12,000 from your pocket, and that's before you have paid for a single service, or insured the car (and it will take its slice of those costs, as well).

If, of course, it happens to be a company car, the Government will take all of that, and then some, because benefit-in-kind taxation will kick in on top of the other taxes that have already been paid.

Buying a house? If it's new, the Government's average take in taxes and charges will be €100,000, and then you may have to pay stamp duty on those taxes if the total cost of your new home exceeds the thresholds.

Building an extension? The Government will take 13.5 per cent of the cost. With a few exceptions - food and childrens' clothes being the most prominent - the Government takes its bite from every item of expenditure, and not surprisingly the lowest earners in society are hit proportionately much harder than the highest earners.

Ireland's VAT rates are also among the highest in Europe. Whether it's the price of cut flowers (we pay 13.5 per cent VAT, the French just 5.5 per cent), or mineral water (we pay 21 per cent, the French 5.5 per cent), or pay TV (we pay 21 per cent, the French 5.5 per cent), our VAT rates are high, and often punitive.

The top rate, after a brief reduction to 20 per cent, was restored to 21 per cent in 2002, while the lower rate was increased from 12.5 per cent to 13.5 per cent the same year. The flow of money from indirect taxes was already swelling, so the increases were as unnecessary as they were inflationary. On went the extra percentage point, and in poured the cash. Yet increases in indirect taxes sneak beneath the political radar, while decreases in income tax grab the headlines, even though their benefits are far outweighed by the additional costs imposed by indirect taxes  'Since 2002, the average amount of tax paid by every household has risen by almost 40 per cent'

There is, of course, sound logic to the shift from direct taxation of income to indirect taxation of consumption, because the more disposable income we have, the more we are likely to spend and save for future spending. By boosting our consumption, we boost the economy. It is a virtuous circle, or at least it has been for the past 10 years. The booming economy has delivered every greater tax receipts, and that, in turn, has funded ever greater Government spending, which, in turn, has boosted the economy.

The problem, though, is that the Government has gone out of its way to take more of our money, while claiming that it has been committed to lower taxes. And as Michael McDowell, the Tanaiste and leader of the Progressive Democrats, said last year, the Government is taking more money than it actually needs.

How has it managed to get away with it? The answer is stealth. Classic stealth taxes are not new charges, snuck in among the budget small print, but old ones left unchanged, even though circumstances have changed dramatically. Stamp duty is a classic stealth tax: by keeping out-of-date thresholds, the Government swept more and more house buyers into its net, and into the higher level of stamp duty.

Since 1997, total stamp duty receipts have soared from €500m to last year's €3.7bn, and no one noticed for nine of those 10 years. Stealth tax theory also applies to income taxes: if tax bands are not adjusted in line with wage inflation, more and more people get caught in the higher tax bracket, and since 2002 about a quarter of a million more people are paying tax at the 42 per cent rate.

Stealth has played a role in all the main areas of tax buoyancy: receipts from capital acquisitions tax (death duties by any other name) and capital gains tax have climbed because thresholds have not kept pace with asset price inflation. Increases from excise duties and customs have been much more muted, because they attract headlines.

So by consciously doing nothing Charlie McCreevy and then Brian Cowen, the ministers for finance, could ensure that money kept on rolling into the Department of Finance in ever greater amounts, and all the while claim that Ireland was a low-tax economy.

Stealth, though, does not just apply to the conscious decision to leave thresholds unchanged. By failing to recognise lifestyle changes that have been forced on people because of our economic growth, the Government also accrues cash by stealth. Ten years ago the two-car family would have been an indulgent luxury: now it is a prerequisite for working families who have to commute to work from far-flung suburbs and dormitory towns. Reform of taxes on car ownership is not only resisted: the burden is likely to increase further as environmental taxes arrive to punish owners more heavily, even though ownership is a necessity, not a luxury, in a country bereft of adequate public transport.

Politicians, though, remain wedded to the easy concept of marginal reductions in income tax when setting out their stall for taxation reform. A point or two off the top rate of tax and another point or two off the standard rate are dangled in front of voters with the disingenuous message that they are all committed to lower taxes.

Beneath the surface, though, the gouging continues unabated. There are a few exceptions - the outcry about the level of stamp duties has prodded a number of parties into tinkering with a system that is badly in need of total overhaul - but significant reform of the indirect tax burden is hardly mentioned.

The imbalance between direct and indirect taxes will prove problematic for any government once the economy slows - revenues will dry up just as fast as they grew in the first place - but it is the scale of the burden that remains the core problem. By continuing to take more money than it needed, by increasing its tax take by stealth, this Government has allowed itself to fritter money away.

Billions of euro have been poured into health, education and roads without any sense of accountability: as fast as the money came in, out it went again.

Government spending has been unrestrained by any sense of prudence or long-term planning: it opened its wrists ahead of the last election, bloating the public service pay bill in a hiring binge and announcing scores of capital projects, knowing that the cash to pay for its profligacy could be extracted painlessly from a mute population.

As well as allowing indirect taxation to rise and rise, the Government has thrown in a range of extra charges - on prescription drugs, by raising the allowance, on third level registration fees, on hospital charges - that have contributed to a significant increase in the cost of Government services. According to figures compiled by Richard Bruton, the Fine Gael spokesman on finance: "Prices for services directly controlled by Government have increased by 52 per cent since the end of 2001 - 10 times the rate of price increase for goods in the same period, and well over three times that of private services."

The combination is a potent one: higher service costs, higher utility costs and higher indirect taxation, as people are forced into a lifestyle that exposes their spending to the Government's tax net. A rising proportion of income is spent on tax, and then the Government wastes the proceeds.

The monster must be tamed, and the first place to start is with legislative restraints on Government spending. Cap the outflow of funds and focus will shift inexorably to the inflow - forcing governments to trim the overall tax burden, rather than letting it swell out of proportion. Tight spending limits would enforce greater efficiency and productivity on the public sector and, by extension, would start repairing the damage caused to our competitiveness, by the rising costs of labour, goods and services.

Lower indirect taxes would ease inflationary pressure, and might also prove as much a spur to the economy as the initial fall in income taxes did more than a decade ago. Above all, though, this Government should stop perpetuating the myth that it has created a low-tax economy. Each year the tax burden rises rather than falls, with more, not less, of our money is picked from our pockets. The balance of our tax system has changed, but not its reach.

Alan Ruddock(Sunday Independent)

Saturday October 06 2007

By Martin Frawley
DELIVERING his last budget in January 1997 before Bertie Ahern took over as Taoiseach, the then finance minister, Labour’s Ruairi Quinn, issued the words nobody who had lived through the bleak decades of the ’70s and ’80s ever thought they would hear. With bated breath Quinn said his “target for 1997 is a budget surplus of 193m”.

“This is the first time ever that a Minister for Finance has planned for a significant budget surplus, ” Quinn proudly announced before losing office in the general election four months later.

The following year the new Minister for Finance, Charles McCreevy, said he was operating with a current budget surplus of 1,109m. The boom was well and truly underway.

This week, finance minister Brian Cowen will officially announce the end of the golden years when he is expected to return to a budget deficit.

So have successive governments wisely invested the billions that have poured into the economy over the last decade in much needed infrastructural projects like hospitals, schools, railways, roads etc? Or have they frittered the money away on shiny showcase projects like the Luas which, like so many projects, was completed late and way over budget?

Has the government missed the ‘10-year window’ to invest in the country’s future? Below we list the many lowlights and few highlights.

1. Transport Although Luas is the obvious success story here, minus points must be awarded for the project coming in years late and at a final cost of 800m. This was almost triple the original budget of 288m. Detractors also complain about the decision to build two lines that don’t intersect. Joining them up is a project which is only now on the drawing board at an estimated cost of 100m.

Vital transport projects which were promised years ago but are still not built include the Metro at an estimated cost of 2.5bn and the new terminal at Dublin Airport, which has already soared from a 2005 estimated cost of 270m to 395m.

Investment in our railways has been non-existent with not one extra yard of rail added in 10 years despite promises about the Western corridor and the proposed line to Navan. Even new engines are rare and while new carriages are on the way, Iarnrod Eireann still has to lug around boxcars that you wouldn’t put cattle into.

There has been a similar lack of investment in buses, despite the surge in population in our cities, particularly in the greater Dublin area. Of the 510 new buses purchased by Dublin Bus under the National Development Plan (2000-06), 417 were replacement buses and even then the exchequer only paid for half of them. Similarly, of 421 new buses bought by Bus Eireann, 356 were replacements.

Painting ‘Lana Bus’ on the side of the road hardly constitutes investment in public transport.

2. Roads, Bridges and Tunnels The Port Tunnel is the trophy project here. Like the Luas it opened over three years late and, at a final cost of 725m, it was three times the government’s original estimate of 260m.

Investment in roads has been far better with 527km of roads built under the NDP at cost of over 8bn. But of the 527km of roads, just 173 were motorways. Vast tracts of the country, particularly in the north west, remain effectively unreachable by any mode of transport. Also, with the huge increase in the number of cars on the road over the boom period, the National Roads Authority appears to be working frantically just to stand still. The M50 took so long to complete it was almost irrelevant as soon as it opened.

3. Public Services The government’s own Junior Minister of Trade and Commerce, John McGuinness, lashed out last week at the so-called public sector reform describing it as “the elephant in the room that no one looks at for fear Liberty Hall will fall on top of them”.

In the 10 years since the first budget surplus, the number of public servants has soared from 218,000 to almost 300,000 today while the paybill has more than doubled from 7.4bn in 1998 to 18bn today. But despite the billions invested, the service remains largely unreformed to such an extent that Taoiseach Bertie Ahern has called in the Paris-based economic think tank, the OECD, to do a root and branch review and see if we can get any value for money. Very poor return on such a large investment.

4. Health and Hospitals Even ignoring the operational quagmire that is the HSE at the moment, there has been no real investment in much needed major acute hospitals. Tallaght was the last major public hospital to be opened in 1998.

In effect, the 3,000 beds taken out of the system by Charles Haughey’s government in the 1980s have never really been put back in.

Proposals put forward in the Hanly report in 2003 remain unimplemented.

These include an extra 1,0001,500 hospital consultants.

The Children’s Hospital, promised years ago, is today the subject of a political turf war.

5. Sport Despite the desperate eforts of Bertie Ahern and the FAI, Ireland is still without a national stadium. While poorer countries like Portugal can manage to build four stadia to host the European Championships in 2004, the Irish soccer team recently faced the embarrassing prospect of having to play ‘home’ international matches in England.

The GAA saved faces by deigning to open the gates of Croke Park. And although Cowen chose Croker to launch the next National Development Plan up to 2013, the venue is not a national stadium. Lansdowne Road is expected to be completed in two to three years but the government has only agreed to part-fund it, with the FAI and IRFU putting up half the money.

Elsewhere, the National Aquatic Centre and Campus Stadium Ireland has been a disaster. And while the government speaks of cashing in on the London Olympics in 2012 by attracting athletes to acclimatise here, a recent report concluded that the athletic facilities we have would be nowhere near adequate enough for professional athletes. Nor, presumably, for Irish athletes.

6. The Arts No real investment in the arts to speak of, with the allocation to the Arts Council just about keeping pace with inflation.

The National Theatre, the Abbey, is still awaiting a new home despite promises made years ago. So is the National Concert Hall. Both projects will now cost an estimated 288m with no firm dates for completion.

Yet the government continues to allow generous tax reliefs to art collectors who donate their works to the state while it only last year managed to close off the tax loophole which allowed impoverished artists such as Bono to avoid paying tax on their artistic work.

Earlier this year, part of the roof of the National Library fell in on startled readers. A few months later, the stone stairs in the Natural History Museum collapsed.

7. The Young, the Old and the Pensioner The 2006 budget move to provide an early childcare supplement of 1,000 a year was a classic case of ‘too little, too late’. According to a National Children’s Nurseries Association survey this year, parents pay an average of 802 a month to send their child to a creche.

On nursing home care for the elderly, the government has effectively passed off its responsibility to private sector homes which charge up to 1,000 a week for a room. The government’s response has been to tighten up on its subvention grants for such nursing home care. It also suffered the embarrassment of having to return an estimated 1bn it levied on the elderly for care in state homes.

Despite firm proposals 10 years ago, nothing concrete has been done to defuse the ‘pensions timebomb’ in which half of all workers and almost two out of three private sector workers have no private pension and will instead rely on the state pension currently worth around 200 a week.

After 10 years, the best we have managed is a Green Paper.

Charlie McCreevy did start up the National Pensions Reserve Fund in 2001 . . . a government-funded savings account which will help pay for state and public service pensions in about 20 years’ time when costs will be at their height. While this is a sound investment, the government has still not stated how much of this ‘rainy day’ fund, which now stands at almost 20bn, will be used to pay out state pensions for all citizens and how much will be used to pay the vastly superior public service pensions.

8. Education Some progress here with 57 new primary schools and 19 new post-primary schools delivered under the 20002006 NDP. But more will be needed to keep pace with the influx of immigrant children into the system and in particular the requirement for English language teachers.

University heads have been highly critical of the lack of investment in the academic side of universities as opposed to research or business grants. They claim that Ireland’s universities have plummeted down the world league as a result.

9. Information Technology In 1998, Ennis in Co Clare was chosen by the then state owned Telecom Eireann to be the first Information Age town in Ireland, with all businesses, houses and schools kitted out with the latest IT technology. The idea was that Ennis was to be the first of many such towns in Ireland.

Today, nobody mentions Ennis or the Information Age town project.

In 2005 Media Lab Europe, the anchor tenant in the government’s much trumpeted flagship Digital Hub project in the Liberties area of Dublin collapsed leaving taxpayers to pick up the 35m tab.

And government efforts to roll out broadband are still well short of targets, largely as a result of the decision to offload Telecom Eireann, which it could have kept in state hands and used to roll out the urgently required broadband. Considering that successive cabinets spent 160m on a sophisticated payroll system for the health service that doesn’t work and 50m worth of voting machines that are dumped in warehouses around the country, perhaps it’s not surprising they haven’t exactly been on top of IT investment.

10 Jobs Leaving the best and perhaps the only bottle of wine until last, the government’s record on job creation over the last decade or so has been a spectacular success, creating over 600,000 additional jobs in the last 10 years. The numbers at work passed the two million barrier earlier this year . . . a figure which amounts to almost half the population.

It is this jobs growth which has been at the heart of the boom, generating millions extra in taxes for the Exchequer as well as restoring a salary and dignity to the thousands who were unemployed during the ’80s.

But a note of caution needs to be added. With the economy heading into more difficult times and unemployment starting to creep up, particularly in the construction sector, the next few years will tell whether those extra 600,000 jobs . . . almost half of which were taken up by immigrant workers . . . were indeed ’sustainable’ jobs or whether they will be blown away by the first chill winds of the economic downturn.