How to fix a rich but unequal country

If the top earners paid 43 per cent of their income in taxes and levies, a further €3.2bn could be raised, writes VINCENT BROWNE 

JUST A few random facts, not that facts are much in use nowadays. Certainly not facts that contradict the line of the economic and political establishments.

Fact One: Ireland is a very rich country, one of the richest countries in the world. Even allowing for a deeper contraction in the economy here in 2009 than elsewhere in the EU, our per capita income is still at least 10 per cent above the EU average. We are better off than countries such as France, Italy, Spain, Portugal and Greece and very much better off than all the 12 new member states.

Fact Two: There are only 10 countries in the world richer than the rich counties of the EU. They are three oil sheikhdoms (Qatar, Kuwait and UAE), and Liechtenstein, Switzerland, USA, Norway, Luxembourg and Japan. Perhaps now Australia and Canada are richer than Ireland, but, excluding the tax havens and the oil sheikhdoms, Ireland is probably the 16th richest country in the world. Ireland is 110 times richer than the Democratic Republic of Congo, where the per capita annual income is less than $298 (€199). The latter data is from the 2009 United Nations Development Programme report.

Fact Three: Ireland has one of the lowest tax takes – as a percentage of gross domestic product (GDP) in the EU. In 2007 our tax take was 32.5 per cent of GDP, as compared with an EU average of 40.9 per cent. Only Latvia, Lithuania, Romania and Slovakia were lower than us. Denmark had a tax take of 49.5 per cent, Sweden 48.9, Belgium 46.1, France, Italy 43.3 and Germany 40.8. Even with the levies, our tax take now would be among the lowest in Europe. (Data from Eurostat.)

Fact Four: It is true, those earning over €100,000 (this includes couples who file their taxes jointly) pay almost 50 per of all income tax revenues. This is not surprising since this cohort, who comprise only 6 per cent of all earners, get 28 per cent of all income.

Fact Five: Those who earn less than €30,000, who comprise 46 per cent of all earners, get on average less than €15,000 a year and they take just 15 per cent of total income. So 6 per cent of all earners get almost twice the income share as 46 per cent of all earners. (All this basic data on income and tax is available from the Revenue Commissioners, the analysis is mine.)

Fact Six: The 168,627 earners getting more than €100,000 per year got a total income in 2009, according to the Revenue Commissioners, of €32.3 billion. This works out at an average income of €189,770 per year. They are projected to pay a total of €8.7 billion in income tax, which is just 27 per cent of their income.

Fact Seven: Assuming that these top earners (those earning over €100,000) pay the levies that were announced for 2010, they will pay a further 6 per cent of their income in tax. This will bring their total income tax and levy to 33 per cent of their income.

Fact Eight: If the top earners were obliged to pay 43 per cent of their income in taxes and levies, a further €3.2 billion could be raised in income tax and levies (this is a simple calculation: 10 per cent of €32.3 billion).

Fact Nine: Even if the double earners who earn less than €160,000 were excluded from these additional taxes and levies and were allowed to contribute at a lower rate, the additional taxes could certainly net €2.5 billion.

Fact 10: 44 per cent of all public servants earn less than €30,000 (this information was supplied in a written answer to a Dáil question on November 3rd and the data relates to the income tax year 2007).

Fact 11: 75 per cent of all public servants earn €50,000 or less. Since these income figures come from the Revenue Commissioners and apply to total earnings, they include all allowances and bonuses.

Fact 12: Ireland is one of the most unequal societies in the developed world. The OECD calculated in its report Growing Unequal that Ireland was the 23rd most unequal of 29 developed countries.

Fact 13: A consequence of this inequality is that over 5,000 people die prematurely here every year because of this inequality (see the report Inequalities in Mortality by the Institute of Public Health).

Fact 14: Research on inequality, drawn from around the world and, in particular, the US, shows that the more income inequality there is in societies, the more prevalent is an array of social problems from obesity to imprisonment rates, violence, poor health, welfare dependency and low literacy.

Reflection: The Government, aided and abetted by the main Opposition parties and the hordes of economists, refuses to see any relevance in any of the above in devising policies to fix the hole in the public finances.

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