TAXES HAVE been rising since 2008, and taxpayers have tolerated this with some equanimity. The calm acceptance of a greater tax burden is testament to a mature collective understanding that sacrifices must be made in trying times.
But the announcement on Tuesday of a new levy on pension funds has been greeted with less stoicism than tax increases heretofore. There is good reason for this. Retrospectively taxing monies that have been carefully saved – as distinct from income, including income generated from investments into which savings have been placed – is inherently unjust. Let there be no doubt: this is a radical new departure. But such departures can be justified in extreme circumstances. The national and societal imperative of reducing mass unemployment is such a circumstance.
The imposition of this levy, however, has consequences far beyond issues of justice and jobs. Most fundamentally, it raises concerns that the Government will resort to such measures again, and that they may be more serious in the future. Arbitrary acts of expropriation by government are grave. The right to private property is enshrined in our Constitution. Along with freedom of speech and religion, property rights are central tenets of individual liberty. It would be no surprise if the pension levy ends up before the courts.
The transfer – by government fiat – of large amounts of wealth from one group within society to another also risks undermining social cohesion. When governments take private property to fund policy initiatives – no matter how worthy such initiatives may be – those who lose out may come to resent those to whom their resources are being transferred.
The levy also amounts to a sharp and sudden U-turn in the long-standing public policy position of successive governments to encourage people to provide for their old age. In the much shorter term it risks further undermining faith in Ireland’s battered financial system. Could other types of savings be subject to the unwanted attention of the State in the future? If citizens conclude that this is a real risk they may move more money out of the State.
If the levy is truly a one-off measure, taken in dire circumstances while under the constraints of the EU-IMF bailout, then the Government should say so with greater clarity and urgency. Assurances are needed. If a Rubicon has not been crossed, the Government should underscore that it does not intend to target in the future private savings, in whatever form they may be. Not to do so could undermine faith in the even-handedness of the State, erode social cohesion, discourage prudent provision for old age and undermine the habit to save.
There is deathly inevitability about taxes. There is no such inevitability about government dipping into peoples savings. Greater clarity of intent on future actions from the Government is needed to ensure that Tuesday’s announcement aimed at generating jobs does not end up doing much more harm than good.