Letters

Taxation policy and income

An opportunity for reform

Sat Aug 05 2023 - 00:08

Sir, – Most people assume that income tax collected from workers resembles a pyramid. In this pyramid, there are a large number of people at the bottom paying a comparatively small sum of money per person. Although it may represent a significant percentage of their income, it is in truth the very large number of people at the base that meant that this part of the pyramid provided a stable foundation for the tax system and the services that the most vulnerable in society are dependent on. Meanwhile as you move up the income levels, a progressively smaller number of people pay much more money per person as they earn far more income. That’s the model people believe is operating, everyone is paying something but those with most are paying most.

Unfortunately, this is no longer the case. Those on the lowest incomes pay either nothing or next to nothing in income tax. This means the foundation of the income tax pyramid has been utterly undermined, increasing the level of instability in the public finances. While many on the political left in Ireland wish to borrow from the Nordic model, what they never mention is that the lowest income earners in Nordic countries pay a significantly larger amount of their income in tax than is the case here. Between twice and three times what the lowest quartile of income earners pay in Ireland.

Moving people out of the income tax net was done for populist electoral reasons and is now likely to be politically impossible to reverse. However, discussion of this fact should not be avoided. Especially when the projected surpluses might afford us a once in a generation opportunity to reform the tax system so that those on the top and bottom on incomes pay a reasonable minimum in income tax while receiving some specific services such as healthcare or income protection to be directly funded from those taxes. – Yours, etc,

DANIEL K SULLIVAN,

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Dublin 3.