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  • irishtimes.com - Posted: March 3, 2009 @ 6:57 pm

    A Mini-Budget By Any Other Name …

    Deaglán de Bréadún

    Today Brian Cowen announced that, by the end of this month, there would be what everyone other than himself and his Government colleagues are calling a “mini-budget”. There is even less money in the State kitty than previously thought. Today’s Cabinet meeting discussed the issue at length and decided to bring in extra revenue-raising measures. The detail won’t be revealed until the day and, in fact, the date of the mini-budget itself has not even been decided.

    What a terrible time! Tax receipts are down €1.8bn compared to this time last year. The answer is obviously to find tax somewhere else but this will reduce the level of spending and perhaps provoke an even worse crisis.

    Meanwhile, I got the following missive from an Australian reader and former visitor to Ireland, who wishes to remain anonymous. It is worth reading in the light of the current state of Irish public opinion (1 Australian Dollar = €0.50 = US$0.63 = UK£0.45):-

    We live in Australia, pay council rates $2000, water rates $2000, Land Tax on everything not our personal home, Capital Gains Tax if we sell anything that is not our personal home.

    We pay car registration which includes roadmaking and that is every year $585.  as well as all the home insurances. Our Tax scales start at $6000 and after that you pay 17% then 25% up to approx $35,000 and then possibly 35% until you get to approx.$80,000 and then $45,000.

    We pay medicare levy on our tax on top of that and then go out and pay private health insurance $2500 for family per year. We do not provide pensions for those who have more capital than $880,000 and you have then to live on your own means or superannuation that you yourself have saved.

    What on earth do the Irish want…when we visited a year ago we found whinging Irish everywhere…they pay so little for everything. The rich can be multi-millionaires and still get the Irish Pension. 

    No wonder your country is in a mess. Make the rich pull their weight.  One man said his wife died but was happy to have her govt.pension as well as his own and he lived in a huge mansion … he was a man of considerable wealth owning so much public housing.
    What is wrong with your government…it is always the rich who lead the march….let them share their wealth with the poor.

    Signed…Concerned Visitor to Ireland 

    • Tom Humes says:

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      Tom Humes

    • Peter B says:

      The answer to your Australian pal’s question is yes, the Irish do expect to pay “so little” for everything. In my view our entire taxation system needs a complete overhaul, from start to finish. To have earnings up to €18,000 per annum exempted from tax might seem like a high threshold but one has to remember that the cost of living in Ireland has spiralled since 2001 and taxing earnings below this amount risks people falling into the poverty trap.

      As personal taxation decreased, the cost of living increased, because the tax reductions (McCreevy’s madness) increased disposable income beyond what was necessary and the result was inflationary. At present the Irish financial system is totally out of balance – taxation rates are too low, tax reliefs and allowances are too high. In actual and relative terms expenditure on public services is high, while prices and the cost of living are excessive. In relation to the latter all one has to do is cross the border and compare the prices of grocery and electrical items – the difference cannot be justified.

      All of the foregoing renders Ireland very uncompetitive in terms of positioning within the global economy. Higher levels of direct and indirect tax and the elimination of stupid tax breaks such as tax relief on excessive pension contributions will reduce disposable incomes and eventually prices and the cost of living will have to fall into line – there will be pain while this adjustment is taking place but it is a very necessary adjustment. I think in Irish society there is a certain immaturity when it comes to understanding the link between maintaining a good society and tax contributions.

    • James Horan says:

      It’s €1.8 billion, is it not? If it were just €1.8 million, we’ve be having Government-sponsored week-long street parties!!

    • Deaglán says:

      You’re right, James, billion it is and I have corrected the original above. Thanks for that.

      Peter B:
      I take your point about low taxes generating high disposable income which in turn facilitates high prices. But the taxes are going up very fast – or will be at the end of the month – and I wonder will prices go down at the same rate. Not in this rip-off society, some would say. Maybe a very strict price control regime would be the answer.

      If the taxes are too high nobody will be spending anything. I notice restaurants in town are now offering “Early Bird” menus all night in the early part of the week. I watched a learned discussion on Prime Time last night about the variety of ways in which tax could be raised but I didn’t notice that anyone mentioned trying to generate some extra income to be taxed, which should be a factor at this time too.

      P.S. As I write this, a portly pigeon is plodding through my garden, looking for scraps. Should I warn him about the Recession?

    • LiamK says:

      On the RTE news last night they were suggesting that the “additional” 2 billion hole that has now appeared could still be a best case scenario by the end of the year. Six billion was mentioned a possible end of year figure – we could be having mini-budgets every couple of months.

      Your Aussie correspondent (and indeed Garret FitzGerald on a regular basis in your paper) have it right. Taxes have been cut consistently over the last 15 years to the point where there simply isn’t enough money coming in to run the country, and now, at the worst possible time, we are going to have to increase them dramatically. I’ve got a very bad feeling about this….

    • Marjorie says:

      From : Concerned Australian Visitor

      Glad to know that you like my letter. By the way,our cost of living is just as high as yours and our water costs us as a family $1200 alone without other costs…our telephone bill is $160 per month…this includes…1 local connection, split line so as to add computer broadband…plus husband and wife dual mobiles…free cost but all other calls paid for.

      Milk,bread, same cost: meat high, petrol expensive, electricity and gas thru the roof. Because of fires in Victoria we had massive drives for public money and Australian people’s hearts opened up to the tune of $200m contribution. People rally together in this country.

      How about a good Irish Rally from the rich and poor alike to fix up economy. From the once in a lifetime traveller to Ireland.
      Not enough money to come again but not whinging. Marjorie.

    • Peter B says:

      Deaglán, based on my understanding of economics, prices will either have to reduce or the demand won’t be there and businesses will close down. Business is a competition for custom – Irish businesses seem to have forgotten this. Why can one drive for an hour, cross the border and buy household and electrical goods at up to 50% less? It does not make sense and would suggest that businesses are still being greedy. Then again, because the price of each factor of production is too high, the price of the end-product is also too high. The cost-base and prices have to come down if Ireland is to have any chance of regaining its competitiveness. The question is how can this be achieved? The early bird menus I have tried are poor quality and miserable – i.e. not value for money. I watched Prime Time last night and was aghast at the former Assistant Secretary from the Department of Finance.

    • Peter B says:

      Marjorie, I have a good friend from Perth who never fails to be stunned at the prices charged for food and services in Ireland and the dreadful customer service. She is clear that the cost of living in Australia is much lower than here. I hate to admit it, but I think the Celtic Tiger has made Irish people very self centred and quite greedy.

    • Deaglán says:

      And what did he say that left you aghast? I noticed that he was in favour of a bar on recruitment for five years which can’t be very encouraging for newly-minted college grads.

    • Peter B says:

      What he said had limited relevance and he displayed very poor understanding of what needed to be done to address the current crisis. He was babbling on about ‘a prior question’ and seemed quite opposed to using taxation as a means of dealing with the deficit. Sure our income tax rates might be above euro zone averages, but so too is our cost base. Instead of a bar on recruitment to the Civil Service, it would be better to eliminate the vast amount of deadwood and bring in some new, well- educated graduates.

    • Marjorie says:

      Cannot understand what the lady from Perth said, people in Victoria do not find cost of living low. If your country is finding it hard to find ways to balance budget I suggest they means test the pension. I am sure the wealthy can be self funded..for that is the way it is in Australia..also council rates in your country are tiny…just paying for garbage lifts or for rubbish tin lifts. No property value taxes or road taxes.

      We have layered taxes on income starting at $5000 which in your country is equal to 3000 euro, from there 17% not including medicare levy for govt.hospitals $6000-$34000, 30% $34,000-$80,000 not.incl.medicare levy $80,000-$180000 is 40% not incl.medicare levy greater than $180,000 is 45% tax not including medicare levy.

      Most families pay another health insurance to guarantee private hospital cover and Drs as there is always a huge waiting list, this is $2400 per year.

      Our Water Board Charges last year were $1400 and we have a 2500-litre tank besides to water garden, council rates on our home is as follows = $2008..covers parks and gardens maintenance of shire facilities, pay for bins on loan l rubbish,1 green waste,1 recyclable goods, Insurance on home $650. for fire…. Car registration = $560 per car….towards road maintenance 3/4 party insurance…. general accident on road, Car insurance approx. $500 per car for personal car accident insurance.

      This should give you a bit of a picture on how we live in this country. Marj.

    • Marjorie says:

      From Aussie Marjorie,
      By the way hubby and I are retired on very modest means and we still face charges/pension tests and price hikes.

    • Peter B says:

      Marjorie I’m sure that the cost of living in Australia is high, relative to disposable incomes. In Ireland the cost of living is high relative to everywhere else! There was significant price/cost inflation over the past decade and Ireland is one of the most costly countries in the European Union.

      Irish people pay Pay-Related Social Insurance (PRSI). This confers entitlement to a contributory old age pension of €220 per week. If one is not entitled to this, a pension is means -ested. All pension payments are subject to tax like any other income.

      Tax rates are: up to €36,800 @ 20%, balance @ 41%, PRSI 6%, Levies 1-3%. There are small tax credits and those earning €18,000 or less are exempt from taxation.

      These rates are clearly too low and will be increased shortly.

    • Joe Bell says:

      Seamus Wolfe!
      If you see this, PLEASE send me a mail!

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