I’m delighted to hear the words ‘a balanced budget’, but average workers still squeezed
WHEN it comes to taxes, so much of what we do rests on the shoulders of workers and, to a lesser extent, all consumers in the country.
This is because out of the €56bn that is raised in taxation, more than €21bn is income taxes. The problem with that is that almost 40pc of our workers contribute next to nothing to income taxes; that’s almost a million people who aren’t putting income tax into the system.
The next biggest tax we take in is VAT, and apart from some companies that are VAT exempt, such as banks, this tax is paid by you when you consume anything from clothing to food and energy – things you can’t avoid buying.
The fourth biggest tax is excise, at €5.6bn, and that is paid when you buy any fuel, alcohol or tobacco – again, something that is often paid by regular people.
Despite this, we still have a long-running tendency to outspend what we have, and that is a mistake. This is why personally I’m delighted to hear Paschal Donohoe mention those near forbidden words in Irish politics of ‘balanced budget’.
The State has many mechanisms for separating you from wealth – one of them is death. When a person dies, the assets that they bought with after-tax income and for which they often paid taxes for while owning it – such as local property tax on houses – can become taxable again.
Certain lobby groups, such as farmers, have been very successful in getting special treatment on passing on assets such as land.
Others, like regular people who own a home, have not fared so well.
In the capital and our large cities, a fairly modest home, depending on location, can mean that a home transferring to a child will be taxed to the tune of 33pc over the value of €320,000 after this Finance Act.
What is remarkable is that the allowance only went up 3pc from €310,000 despite the fact house prices nationally have been rising in double-digit percentages.
Another strange thing is giving people on welfare more money – €5 a week – at a time when businesses are struggling to find workers. That is simply bad timing.
Paschal didn’t forget average workers, though. He raised the tax threshold from €34,550 to €35,300 in the case of a single worker.
This is done to make it seem like you are getting a better deal for earning an average income. A longrunning problem in Ireland, at least from the perspective of a person working here, is that the average wage in Ireland, according to the CSO, is €38,000 a year.
This means you become a high rate of pay taxpayer while earning below the average wage. It’s a logical paradox.
The measure today will put about €150 back in your pocket, which is the difference between paying 20pc and 40pc on the €750 uplift. That’s about
The State has many mechanisms for separating you from wealth – one of them is death
€12 a month, or a 0.39pc difference to your finances.
The minimum wage is now up from €9.55 to €9.80 and in order to make sure entrylevel workers only get the shock of our tax system after they have integrated up the earnings chain, the entry point to Universal Social Charge has also risen and the USC you face will drop from 4.75pc to 4.5pc.
Personally, I have no gripe with treating the lower paid like sacred cows, except that in countries with the types of services we say we aspire to – usual examples being Nordic/Continental nations – people enter the tax net even when they are low paid. In France if you earn €15,000 a year, you’ll be paying about 15pc tax; in Ireland it’s zero.
On the upside, the newspaper you just bought will still deliver good value, having kept its 9pc VAT rate, but don’t get your hopes up for much beyond that if you are an average worker.