October 30th, 1985
FROM THE ARCHIVES:As the Fine Gael-Labour government limbered up for its 1986 budget, in which the national debt worked out at 114 per cent of GDP, Maev-Ann Wren looked at the prospects for taxpayers. – JOE JOYCE
FOR MOST Irish taxpayers, 1985 has been quite a good year – by the standards of the recent past. Personal incomes just about stood still. Depending on each person’s particular tax circumstances, some did a little better, some did a little worse. By the standards of 1984, 1983, and the two disastrous years for personal incomes of 1982 and 1981, things were better.
But that is not much consolation unfortunately. Despite the stabilisation people have been feeling the pinch more than ever. At least when incomes dropped precipitately in 1980 onwards there was the fat of the late 1970s to live off. Now, with the living standards of most families some 10 to 15 per cent below the average of the late 1970s, the average Irish family paying their tax through PAYE has reached a point where previous spending patterns are being increasing [sic] financed by debt.
The key to this falling income level has been the rising percentage of income taken in income taxes, through PAYE and through the special income levies.
Because tax is so important, the 1986 budget will again play a key determining role in the Irish standard of living in 1986.
Due to the continuing dire straits of the Government finances, there can be no real boost to incomes through generalised tax cuts, even though these were promised for next year in the Government’s plan “Building on Reality.” The real question at issue is the extent to which the Government spreads around or concentrates the impact of whatever tax cuts or income stimuli are introduced next year.
Because the budget handouts will be financed elsewhere, it is inevitable that the largesse will be paid for by new spending cuts, or indeed, tax increases in certain areas. The 1986 budget will follow the pattern in this respect of the special package of measures costing £25 million announced by the Taoiseach [Garret FitzGerald] when the Dáil opened last week.
The grants for old house improvement are just about the most widely applicable measure in the package.
It is notable that activity has been flourishing in sectors where people have been able to shelter their income from tax in Ireland in recent years. In general self employment has been growing compared with PAYE, because of the opportunities afforded individuals to write off expenses of their work against tax. Specifically tax sheltered areas such as for example author income and stallion fees have contributed to an extent to notable developments in both book publishing and the thoroughbred breeding industry.
Given that there is no scope for increasing the Budget deficit in 1986 there is very little on hand to offer. The problem for the politicians is an old one — the smaller the pie, the more hectic the scramble to obtain a bit of it.