Sir, - Ireland is one of the lesser taxed economies in the EU owing to a relatively low tax take from the corporate and capital sectors. The Government is already committed to slashing the corporate tax rate to a miserly 12.5 per cent. It has already slashed capital gains tax. We are clearly in danger of squandering our economic success on becoming a tax haven for wealthy and corporate interests.
In contrast, the Labour Party leader, Ruairi Quinn, has proposed a decade of investment in our physical and social infrastructure in order to eliminate poverty and unemployment, raise national living standards and sustain future economic growth. This is a direct challenge to the tax-slashing agenda of the present government which has now promised further reductions in income tax.
SIPTU's general president, Jimmy Somers, has taken issue (July 22nd) with my assertion that raising personal allowances and extending the standard rate tax band is just another way of providing tax subsidies to upper income groups. Yet, this is demonstrably the case.
For every £100 increase in personal allowances, standard rate taxpayers get £24 in cash benefit while those on the higher rate get £46. I do not understand, therefore, how Jimmy can claim that raising personal allowances is like "giving flat-rate pay increases" since those on higher pay get nearly twice as much.
Extending the standard rate tax band similarly benefits upper income groups disproportionately since no single person on less than £13,950 or a couple on less than £27,100 benefit. It is not a measure that targets the low-paid.
Jimmy is correct when he points out that low- and middle-income PAYE workers carry too high a tax burden. He is also correct when he points out that raising personal allowances will remove the low-paid from the tax net. So how do we achieve progressive tax relief while maintaining a high level of investment and social spending? Tax reform, not simplistic tax cuts. Standard rate personal allowances could be reformed (just like mortgage interest and VHI relief) so that all taxpayers get the same cash benefit. This would raise an additional £400 million. This is just one small example of a more wide-ranging tax reform programme that would shift the tax burden on to shareholders, landowners, farmers, the self-employed and property developers - groups who are clearly not paying their way. By extending the tax base we can pay for PAYE tax relief without harming social and capital spending, while at the same time bringing equity into the tax system.
When the trade union movement was debating entry into Partnership 2000 I pointed out that a simple tax-cutting programme was inherently regressive and, while seemingly painless in the short-term, would starve the economy of much needed investment in the long-term. Trade unionists must now adopt a more creative and radical tax agenda based on reform and equality. We should not be parroting the simplistic demands for tax cuts made by right-wing politicians, which can only play into the hands of corporate and wealthy interest groups. - Yours, etc., Michael O'Reilly,
Regional Secretary, Amalgamated Transport and General Workers Union,
Middle Abbey Street, Dublin 1.