The Commission on Taxation

It would probably take an accountant to make sense of the report of the Commission on Taxation. The Commission’s Report has made many recommendations to broaden the tax base. New property taxes, a carbon tax, taxing child benefit etc. On balance it set out not to increase the overall take in taxes but to swap one set of taxes for another, to lower taxes on anything that encourages economic activity and job creation and to increase taxes on anything that hinders economic activity. What will it achieve? Well I suppose that remains to be seen.
But there are some issues that the Commission did not address and in fairness they were outside their terms of reference. They stressed that they wanted to keep Ireland a low tax economy. There are consequences to this. Many are now having second thoughts about the achievements of our economy during the boom years. We are realising that decisions were made which brought short term benefits but in the long run led us into the predicament we are in now. One of those decisions was to go down the road of low taxation. Low tax means less public services. Public services are not just some abstract economic formula. They are schools, hospitals, childcare and so on. It would have been interesting to have seen a debate in the report about the consequences of a low tax regime and the benefits of increasing tax.

The Commission was also given the task of finding ways to broaden the tax base. They understood this to mean finding new taxes, perhaps broadening the tax bands and reviewing the status of tax exiles. However as far as I can gather from the report there was no consideration to widening the tax base to bring in those who now pay little or no tax, certain sections of the farming community and some of the self employed. There is no doubt that at the moment many farmers are having a tough time and probably do not have incomes that would take them into the taxation system. Fair enough. The same goes for many of the self employed. However there are others particularly in businesses that generate cash that are quite simply not paying their fair share. At the same time they are using public services. Look at those whose children go on to third level education. There are a disproportionate number of the farming community and the self employed compared to the contribution they make to the tax take.

The third issue and probably the most important one is the capacity of the tax system to re-distribute the wealth of society. This was also outside the terms of reference of the Commission. One of the consequences of our recent economic success was a growing disparity in our society. One sixth of Irish children live in poverty. There are huge consequences for unequal societies. Everyone is unhealthier, live shorter lives and suffers more from mental illness and alcoholism and there is more crime. (see The Spirit Level: Why More Equal Societies Almost Always Do Better by Richard Wilkinson and Kate Pickett). It would have been interesting for the Commission to open a debate on using the tax system to redress inequalities in society.

Having waited thirty years or so for a Commission on Taxation it is a pity it was so limited in its scope.