Joan Burton (Dublin West, Labour) | Oireachtas source

I would have thought €90,000, which is slightly more than what a Deputy earns, was an attractive salary. I note the proposed changes would apply to salaries of more than €100,000. I presume the Deputy was referring to those who earn less than €100,000 when he spoke of people being much poorer.

From the 1960s until the 1980s, Ireland had very high levels of income tax. This was the reason for some of the bugs which have since plagued the tax system, specifically, the ability of very wealthy people to avoid their liabilities by moving offshore, as we have seen in recent times, and employing accountants and experts to mitigate their tax. This means that people who do not have sufficient income to employ accountants are placed at a serious disadvantage and end up paying proportionately much more of their income in tax than those who can afford to pay for tax advice. While, on the face of it, proposing to increase income tax to 50%, 55% and 60% may seem reasonable, a public servant would also pay PRSI at 4.5% and approximately 6% of salary as a pension contribution. Automatically, therefore, we must add approximately 10% to the rate stated in the amendment to arrive at the effective rate. Given that we parcel out additional charges - some we allocate to PRSI for particular reasons while we allocate others to areas such as pension contributions for people in retirement - these are exceptionally high rates and I do not know how people could be persuaded to accept them.

The amendment has been tabled for propaganda purposes. It is not intended for any real purpose. Members of the trade unions marcheden masseagainst very high marginal tax rates in the 1980s because people on relatively low incomes, including public servants on average salaries, inevitably ended up paying the bulk of tax. While it may have been the intention to catch only the very wealthy, in practice many wealthy people were able to avoid tax offshore while those who lived and worked here and contributed to the economy could not do so. In some ways, the drafters of the amendment should be careful what they wish for because while they may be sufficiently well off to be able to avoid these tax rates, others may not be able to do so.

While this is a difficult statement to make, we must also recognise that we live in a highly globalised economy. The impact of this is that people look across the water to the United Kingdom, the United States and many other countries and compare the average tax rates and contributions people pay here with those that they might pay if they were to move elsewhere. People make economic choices in a globalised world based on information about how Ireland compares with other countries. The OECD makes a number of points in this regard. It has noted for some time, for example, that the social welfare system lifts more people out of the risk of poverty than almost any other European Union member state. Ireland's tax code is also dysfunctional in one area which presents a growing difficulty, namely, the element which makes it possible to pay no tax in certain corporate structures. This applies to companies rather than individuals. We must address this issue and introduce fair and efficient taxes which treat people in roughly the same manner. We must enable companies to generate employment while requiring them to make a fair contribution. We must seek fairness, efficiency and effectiveness in the tax system to ensure we raise enough money to do what citizens want to be done in the areas of health, education, social services and public services in general. We must have a debate and reach an agreement on what are the approximate and fair levels of tax.

When one adds the other taxes and levies that people have to pay to the tax rates proposed in the amendment, the figure approaches the confiscatory. The people with the types of salaries listed in the amendment would avoid paying these rates in any case, which means the burden would fall back on people on middle incomes, particularly those who work in public services because all of their income is accounted for and they do not have loopholes that allow them to avoid paying tax. Incidentally, I am not aware of anyone in the public service who is clamouring for such loopholes. We have, by and large, a social contract in which people are willing to pay a fair share of tax, if not an excessive amount, that would allow us to create the type of society we want. Those are Labour Party principles which I stand by because they make sense. Based on these principles, people approaching retirement age will have been able to provide for their retirement and their employers will also, I hope, have made a contribution to that.

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