Thursday, 11 April 2019
Finance (Office of Tax Simplification) Bill 2018: Second Stage [Private Members]
I welcome Deputy Michael McGrath's Bill. The tax system has become far more convoluted in recent years as a result of the introduction of USC and its interaction with other tax rates. The average worker’s payslip now has PRSI, USC and income tax, and that is before we get into credits and reliefs. The worker might be confused but he or she has every right to be more confused about what is coming down the line. Fine Gael’s "Abolish the USC" posters may have led some naive people to believe it intended to abolish the USC without any plan at all as to what to replace it. Thankfully for our public services, that was only an election promise and was never meant to be followed through on. Then, the Taoiseach, Deputy Varadkar, won an election on a promise to merge USC and PRSI, something we have heard exactly zero about since. They are two fundamentally different taxes on different bases, and while it might have made for a clever sounding policy, it was in fact meaningless. At the most recent Fine Gael Ard-Fheis, we had a new policy out of the blue, namely, to increase the higher rate threshold to €50,000. I am not sure what the policy is this week, so it is no wonder the tax system causes some confusion.
We support the Bill and especially the concept of a time-limited mandate. Five years is a significant amount of time and I am unsure as to how the office of tax simplification, OTS, would work because tax could change significantly at each budget. There could be extremely significant changes coming down the line in our corporate tax system in regard to international developments. The Government gambit of waiting for the OECD to bring forward proposals might actually be called in sooner rather than later, and it has been estimated that the mooted changes could mean €2 billion less in corporation tax receipts each year for the State. That would be a very significant challenge, although current corporation tax receipts have exceeded projections by billions, so long-term planning should accommodate the drop, if it happens. The impact might be more felt by the Department of Health when it goes looking for its annual bailout.
In terms of income tax, Sinn Féin has shown how a progressive tapering out of credits for high earners can bring in revenue in a fair way. Crucially, the Revenue Commissioners now provide individual incomes, allowing for individual taxation. This type of transparency and granularity, allowing for better tax policies, is coming about simply because of Sinn Féin pressure.
What do the figures tell us? The top 10% of earners take home a third of all income, while the top 1% of earners now take home 11% of income. Overall, the highest earning 10,000 citizens in the State took home €5.6 billion between them. That means that, on average, 10,000 people took home more than €500,000 each in gross pay. That is the scale of inequality. Yes, there are progressive parts to the tax system but it should be more progressive. I am also deeply concerned at the planned ending of the flat-rate expenses scheme for thousands of workers next year. At the stroke a pen, thousands of workers will lose the automatic entitlement to a relief. Yet, when we try to curb the tax relief under section 110 or for vulture funds and REITs, it is incredibly difficult to do so. The tax system still favours the capital class; there is no doubt about that.
I wonder if Deputy Michael McGrath’s proposed OTS should have its mandate extended to include reports on the transparency of the tax system to see if it can shed light on dark places, like the tax affairs of multinationals or on the investment bodies buying up so much of our housing supply. That would be a very worthwhile exercise. I reiterate our support for the Bill. We look forward to working with Deputy Michael McGrath.