We’ve all been good — but we’re going to have to pay more taxes

WHEN the Covid-19 death toll eases, we will certainly have to pay more taxes. How will the move towards being a higher-taxed economy affect politics and governance?

“In this world nothing can be said to be certain, except death and taxes,” wrote Benjamin Franklin from Philadelphia. That city had just experienced outbreaks of yellow fever which killed more than 10pc of the population, necessitating very similar official disease control measures to those we are experiencing today.

A very common reaction to a crisis is to wait ‘for things to get back to normal’. This is a misuse of time and energy — the change has already happened and the ‘old world’ is not coming back. Society, business and behaviour will never be the same — not better or worse, just different. The biggest difference is that we have experienced much more government interference in our lives and it worked.

John Lennon wisely counselled about the mistake of waiting in his lyric, “Life is what happens to you while you’re busy making other plans”. There is nothing to wait for, the reality is that we are all living post-Covid-19 lives already. One of the changes has been that we now see ourselves differently. We have discovered we are a highly disciplined and careful country, well-governed and well-managed. This experience makes a mockery of so much of the anti-Government slogans of the last election.

Even more remarkable has been the realisation of the degree to which we are self-governing, by a consensus of common sense and compassion for each other.

In Ireland we have seen the State, for the first time, rapidly and extensively deploy its full financial and legal assets, almost as though in a time of war. Though the lives of every citizen have been profoundly affected, the process has been characterised by discipline and trust in authority. This, in turn, has been earned by good leadership and effective administration, based on openness and expertise. The gold harp on the green background at Government briefings has never seemed more reassuring.

Neither our behaviour nor our governance are new. Only our self-awareness has changed, as a result of the hard collision between the implacable virus and the new shouty world of online opinion which has cultivated a sense of entitlement unmoored by reality.

The words of Mr Justice Charles Meenan, have provided a sudden and welcome breakthrough in the online world of opinions and entitlements in the dismissal of John Waters and Gemma O’Doherty’s legal challenge against laws introduced by the State due to the coronavirus pandemic. The judgment provided an overdue and articulate delineation of the differences between “unsubstantiated opinions, speeches, empty rhetoric and a bogus historical parallel” and hard facts.

It is a fact taxes will have to increase to recoup the cost of Government initiatives and to make up shortfalls from traditional types of taxes. Yet taxation isn’t being talked about much, by anybody.

Last week, for example, Ibec launched a post-Covid-19 roadmap, called ‘Reboot and Reimagine’. It consists of 239 pages outlining why business should be given more free money, pay fewer taxes and have fewer regulations while being provided with €19.3bn of more Government support — all without much mention of the resultant need for increased taxation.

In Ireland’s case, tax increases should mostly involve a widening of tax bands so most people pay at least some tax. Currently most don’t. The top 11pc of earners are estimated to pay 80pc of all income tax. This is the limit of what can be sustained.

Personal income tax, consumption taxes, and Vat account for around 85pc of tax revenues and it will be vital this money-pump resumes circulation as soon as possible — to replenish tax income.

Contrary to most predictions, there will in fact be an explosive re-start to consumer spending, increasing to nearly twice the normal level for the quarter following the end of lockdown. This is what has been observed after the easing of lockdown in Asian markets.

It is surprising there is so little commentary on the profound difference between this and most previous recessions, this being created by a collapse of supply not demand.

After the initial very rapid re-blooming of the economy, there will be a need and demand for more good government, which will need more taxes. The quality of the resultant goodness will need solid foundations in the equitable gathering and effective spending of these taxes.

Each week sees publications of what to do next. Most proposals, like Ibec’s, are about supporting enterprises. There is not enough commentary on addressing taxation, nor is enough consideration being given to changing sentiment and expectations. Successfully addressing these issues will be key.

Increased taxation will lead to increased scrutiny of how and where this money is spent on public servants and public services. These are not the same thing. Currently, we in Ireland have by far the lowest Government expenditure on general public services, which is one of the reasons citizens often feel little connection between Government actions and their daily lives.

Whether the recovery is quick or slow, it has already changed the relationship between the citizen and the State. Entrenched Government-versus-the-people colonial-era sentiments have withered when exposed to the experiences of a population which has trusted and been well-served by measurably good governance.

This experience opens new possibilities for what we can achieve as a country. It allows us to glimpse more ambitious futures which could be possible in a country more actively governed than before.

Ambition always comes with the price tag of taxation. Until now, we have thrived on a model of little State intervention and low taxes. The first part of our previous model has gone and will never come back. The second part, a lowtax economy, will soon follow.

Higher taxes — specifically a widening of the tax net so more of the population pay taxes — will further change the relationship between the citizen and the State. This will be difficult, though not impossible if the habit of trust-earning openness and good communications is continued.

Increasing taxes, improving accountability, sustaining trust and maintaining open communications are the real challenges for the incoming Government.

‘The reality is we are already living postCovid-19 lives’