(New taxes after tax adjustments: €2.758billion. Tax carry-over €220million)
Sinn Féin has consistently called for the Revenue to be properly staffed to target black market activity and increase auditing. The Minister for Finance Michael Noonan revealed in October that the Revenue, as part of its Comprehensive Review of Expenditure, has identified how revenue could be increased through hiring 125 qualified revenue staff to bring in an additional €100million per annum. In our expenditure section, we allow for the lifting of the government recruitment embargo on staff. 125 trained revenue officials would cost €6.5million.
Sinn Féin would increase the tax paid on income over €100,000 by 7 cent in each euro. The effective rate of tax in this state is quite low. Information from the Department of Finance reveals that an income earner of €100,000 pays an effective tax rate of 20.7%. Someone earning €150,000 pays 24.4%. An income earner of just over €1million pays an effective rate of 26.7%. This is because of the large number of tax reliefs applicable in this jurisdiction.
In an effort to save €89million the Minister for Social Protection has proposed transferring responsibility for the first four weeks of illness benefit directly onto employers in the form of statutory sick pay. This is a blunt proposal which has no regard to the ability of employers to absorb the cost without precipitating job losses and wage cuts for low and middle earners. Irish employers’ PRSI rates are starkly low by international standards. In Ireland, most employers pay 10.75% PRSI.
However, now is not the time to transfer additional costs onto employers in any blanket move. Instead of the statutory sick pay proposal, an enhanced PRSI contribution should be sought from those employers that can afford it. Taking the ongoing payment of high wages as an indication of an employer’s ability to absorb a PRSI increase, we recommend that a third band of employer’s PRSI contributions should be introduced on income exceeding €100,000 at a rate of 15.75%.
Sinn Féin’s proposal is to introduce a 1% tax on all assets over €1million net of all liabilities, including mortgage and other debts. The tax would not be levied on 20% of the family home, the capital sum in pension funds, business assets or agricultural
land.
It would apply to the global assets of those domiciled or ordinarily resident in the state and domestic assets only for those who are resident in the state for tax purposes.
Our proposal is modelled on both the French and Norwegian wealth taxes and would seek to bring in up to 0.5% of GDP in a full tax year.
France, Norway, Sweden and Iceland are among the several OECD countries currently operating wealth taxes. The Spanish government has recently reintroduced a wealth tax, the Liberal Democrats in Britain advocate one, while countries such as
France are strengthening theirs. The main opposition party in Germany is committed to introducing such a tax when in government.
The government does not collect detailed data on personal wealth, although the CSO plans to collate such data from 2014 onwards. However, in a Dáil debate in 2011, Minister for Finance Michael Noonan estimated that a French-type wealth tax implemented here would raise between €400million and €500million in a full tax year.
Based on a number of data sources, including the Central Bank, the CSO and Capgemini World Wealth Report, Sinn Féin has estimated that a wealth tax could bring in up to 0.5% of GDP or €800million in a full tax year.
The full detail of our Wealth Tax proposals, including a Comprehensive Asset (Wealth) Tax Bill, explanatory memorandum and memorandum estimating potential yields from a wealth tax, will be available soon at www.sinnfein.ie
Sinn Féin is opposed to a property tax. The government wants to raise €500 million from a property tax, which will mean a bill of on average €300 per home. We have issues with this tax for a number of reasons, among them:
A wealth tax taxes all assets above a certain net wealth. Our proposal is to levy a 1% wealth tax on all net wealth over €1 million with certain exclusions. Because it is net wealth, it takes into account mortgages/loans. Because it has a high value, it protects struggling families. And because it is aimed at high net worth individuals, it is dealt with by people used to engaging with the revenue system, who very often have tax accountants dealing with the system on their behalf. We believe the tax could raise in the region of €800 million per annum or 0.5% of GDP.
We would not cut the Local Government fund. Local government must be funded in a way that enables it to adequately provide services for citizens and businesses which have already paid their taxes. Where there are savings to be made in local government – such as through capping high pay - we will implement those policies.
An increase in Capital Gains Tax (CGT) from 30% to 40% would bring in €160million. 40% was the rate of CGT before it was cut by Charlie McCreevy in 1998. The tax applies to gains.
Capital Acquisitions Tax (CAT) is a tax on gifts and inheritance. We would raise the rate of CAT from 30% to 40% and reduce the family and ‘other’ thresholds by 25%, raising €150million. No threshold applies to married couples as CAT is not applied
to spouses. There are a number of other exemptions, including exemptions for compensation, or for children inheriting houses if it is their main residence and they don’t have an interest in another house. The new threshold for children is above the average house price in the 26 Counties, which was €185,000 in Q1 2012 at the highest estimate (myhome.ie).
Under this proposal, all discretionary tax reliefs would remain in place, but they would all be paid at 20%, regardless of income (excluding tax reliefs for charitable donations, which would continue to be paid at the marginal rate). It is our view that tax reliefs should have ‘sunset’ clauses built in, at which point they would be evaluated to see if they are still performing a service to the economy. Tax reliefs have been shown to be availed of predominantly by higher earners and in that regard are inherently unfair. A 2012 ESRI report into the use of pension tax reliefs revealed that the top 20% of earners were availing of 80% of all the reliefs (ESRI 2012: Analysing pensions: Modelling and policy issues). It is our view that while the state is at a stage where it is struggling to pay the state pension, tax reliefs cannot be used to the benefit of those who can afford to save for higher pensions.
Landlords
Reduce mortgage interest deduction allowable against rental income from 75% to 40%: Raises €157million
This measure would reduce the level at which individuals can claim mortgage interest repayments against rental income for tax liability purposes, from 75% to 40%. The rate was reduced to 75% from 100% in the 2009 Finance Act. It effectively means asking those earning rent from rental properties and declaring that rent to pay more tax on that rental income – and not be able to write off 75% of their mortgage interest repayments against their tax bill. We ultimately see the phasing out of mortgage interest repayment claims for landlords.
Apply PRSI to rental income: Raises €20million
This treats rental income as income which shouldn’t be exempt from taxation, where the rent is a second income. We proposed this measure last year and it was contained in the government’s budget but has not been enacted.
Special pension vehicles called ARFs – Approved Retirement Funds, and PRSAs – Personal Retirement Savings Accounts, allow people to hold their excess pension lump sum wealth in managed vehicles, without drawing down the full pension and having it taxed at PAYE rates. Recent budgets have seen imputed distribution percentages of 5% on ARFs and PRSAs under €2million and 6% over €2million introduced. This means at least 5% or 6% of the value of the ARF/PRSA has to be drawn down per year by the individual and taxed at PAYE rates. We would increase the imputed distribution rate to 8% for both vehicles, under and over €2million. The government has only provided a figure for ARFs being increased (€13million).
The current ‘earnings cap’ recognises €115,000 per annum (whatever the salary is) as the maximum salary against which percentages are calculated for investment in pensions. These investments are then given tax relief. The percentage of the €115,000 which can be invested depends on age: eg, aged 30-40 can invest 20%, aged 55-60 can invest 35%. People can invest more in their pensions but can’t claim tax reliefs for anything invested over these percentages. We would reduce the maximum earnings cap to €75,000.
Gambling is an activity that has remained relatively untouched by this crisis in tax terms. This is despite the fact that up to a short number of years ago, gambling taxes were the norm for consumers. The government is working on legislation for online tax of 1%. We believe that gambling taxes should be introduced for consumers. We would tax online gamblers at 5% (€100million), in-shop gamblers at 5% (€135million) and on course gamblers at 5% (€8.5million). This is still a low level of tax compared to historical levels (10% and more in the ‘90s). Under Sinn Féin’s proposals, we would be the first jurisdiction to apply the gambling tax online on consumers, but the application would ensure that shop and course betting agents don’t lose out to online/remote agents. We envisage this policy being implemented online via Point of Consumption software and it will have to written into all online gambling licences issued by the state. We would want a portion of this tax ringfenced for the costs associated with treating gambling addicts.
This adjustment is to allow for the net savings to the state from capping civil, public and hospital consultant salaries. The adjustment is based on a calculation provided by the Department of Finance which estimates that 60% of income over €100,000 is returned to the Exchequer.
The cost of fuel has become a major drain on many families in the last number of years, particularly in rural areas where cars are an essential because of the lack of public transport. In April 2012 the Automobile Association (AA) calculated that an average family’s fuel bill had risen from €142 a month in January 2009 to €300 in January 2012 for the same amount of fuel. This proposal would reduce the excise by 5 cent on both petrol and diesel.
The Universal Social Charge (USC) threshold was increased to €10,036 in Budget 2012, but it is still levied on all those earning the minimum wage. This means that people earning as low as between €193 and €337 per week, pay USC on their gross wage (2% on first €10,036, 4% on next €5,980 and 7% on the rest). This measure will have a positive impact on reducing poverty in families and increasing disposable income.
This is the full-year effect of last year’s tax measures carried through to Budget 2013. When a government makes tax changes in a budget, those tax measures only have a partial effect in the year they are introduced – ie. budget tax proposals introduced in 2011 only had a partial return in 2012, to allow for their introduction, establishment, etc. The ‘full year’ effect is the amount they bring in over 12 months, so there is usually a ‘carry-over’ into the next budget’s accounting.
In 2011, in a parliamentary response to Sinn Féin, the Minister for Finance stated that the effective rate of tax paid by businesses in Ireland was 11.9% - a figure cited in a study by a World Bank and PriceWaterHouseCooper report. This response came after a study undertaken by Trinity academics, using sources presented to the United States Congress, concluded that the actual effective tax for some multinationals in Ireland
was as low as 2.5%. Figures provided by the Oireachtas in October 2012 show that the effective tax that was paid in 2010 by businesses averaged at approximately 6.5% (€3.9billion paid on taxable profits of €61billion).
The headline tax rate of 12.5% on profits made by companies in Ireland is fiercely protected by the Department of Finance, where officials say the rate has become so entrenched it would be difficult to move it up or down. Sinn Féin believes that the 12.5% must be protected, but also that the issue of the effective tax rate has to be addressed. In an Autumn 2012 report, the economic and social think tank TASC outlined a series of reliefs and loopholes availed of by multinational companies based in Ireland, including well-reported schemes such as the ‘Double Irish, Dutch sandwich’, where profits are transferred to foreign subsidiaries as royalties to avoid paying the full corporation tax on them as profits. A CSO study revealed this year that
from 2007 to 2010, reported profits in companies based here increased from €26.5billion to €27.8billion. In the same period, royalties transferred out of the state increased from €18.6billion to €28.5billion.
Companies have a myriad of ways to lessen their taxable profits in Ireland, including the ones available in most jurisdictions, such as counting back losses and carrying them forward, moving losses around group members in holding companies, as well as transferring losses/profits out of the jurisdiction. They can also avail of a series of generous reliefs under such headings as R&D, intellectual property and capital allowances. Reports in 2011 showed that Google, which bases its headquarters in
Dublin, had a turnover in excess of €10billion, but only paid €5.6million in corporation tax that year in Ireland. One of the reasons cited for lower ‘profits’ from its high turnover was the higher than usual transfer of royalties out of the jurisdiction. Domestic companies, such as the huge number of SMEs responsible for the majority of jobs in the state, cannot avail of the same kind of tax treatments.
We have put a series of questions to the Minister for Finance asking for assistance in identifying effective tax rates per profit band and the amount of reliefs availed of by various sized companies. The lack of data on corporation tax is an obstacle to providing figures around increasing the effective tax rate of businesses. In addition, the Minister for Jobs, Enterprise and Innovation has already come out in defence of the current tax regime for business, claiming that any move would have an impact on jobs. Sinn Féin’s priority is to protect and create jobs in this recession – and we produced a comprehensive jobs plan in October 2012 which outlined our proposals in this area. This looked at the range of costs and policies currently impeding companies and suggested a variety of proposals to make doing business in Ireland easier.
Sinn Féin supports the 12.5% corporation tax rate. We do not want to change it and we are not asking struggling companies to pay more tax. However, the effective rate of tax on profits must be addressed. In an economic crisis of this magnitude it is unconscionable that the area of business taxation would be ignored by any government.
Sinn Féin proposes:
This measure, proposed by Sinn Féin in 2012, has the potential to yield a one-off control saving of €55million. An amnesty should be offered so those who get over-payments can tell the Department of Social Protection and have their benefits corrected without penalties. We have published a bill which provides for the amnesty. While fraud and error accounted for 3.4% of the welfare budget, the majority of the over-payments involved were down to error. Less than one third of the 3.4% is as a result of fraud and this
percentage is dropping every year. Our Social Welfare Amnesty Bill will give people the chance to put things right without fearing the consequences. It would be a one-off amnesty with a four-week application period, ideally in February 2013 for department budget purposes, preceded by a public information campaign in January.
If an employer is found by the Employment Appeals Tribunal (EAT) to have wrongfully dismissed a former member of staff, the state should be able to recoup the social welfare payment paid out to the employee from the time of dismissal to the date upon which the order was made. Recouping from employers’ social transfers paid to wrongfully dismissed employees has the potential to save €12million.
This is a policy the government has said it will pursue. According to the Department of Health, in order to control the level of private activity in publicly funded hospitals and to help ensure equitable access for public patients to services in these facilities, a system of bed designation is operated in public hospitals. The regulations underpinning this system stipulate that hospitals can only apply charges to private patients when they are treated in designated private or semi-private beds. Approximately 20% of public hospital beds are designated as private. The Comptroller and Auditor General has previously found that charges are not raised in respect of about half of all private patients because they are not occupying private designated beds. While applying the full economic costs of private beds would have an impact on private health insurance, at a time when public services are being cut the subsidy of private health care through the public budget is not one that can continue.
The cost of medicines in the health service is approximately €2.16billion – roughly 16% of the total budget of €13.1billion. The cost of branded medicines in this state remains exorbitant, despite the deal signed earlier this year with the Irish Pharmaceutical Healthcare Association (IPHA). We propose further savings on branded medicines, of approximately 20%, by benchmarking our ex-factory price on the lowest rather than the average of nine European countries. In addition, the Health (Pricing and Supply of Medical Goods) Bill 2012, which aims to introduce reference pricing and generic substitution, will deliver savings in the drugs bill. This is a longstanding policy for Sinn Féin. The policy will save money for the health budget but will also make over the counter prescriptions cheaper for the public. However, we want the government to go further than planned and maximise potential savings. The current cost of generic equivalents can be as high as 96%-98% of originator medicines, extremely high by international comparisons.
In last year’s budget, €316million was cut from education spending. This included cuts to primary school transport, to DEIS schools and capital grants and an increase in college fees. The education budget faces more cuts this year. Schools have taken successive hits to capitation grants, equipment provision, special needs assistants and language support and have seen refurbishment needs ignored. Parents are increasingly asked to foot the bill for school needs. Meanwhile, the state pays the teachers in private schools, where parents have chosen to pay huge fees to send their children. The public subsidy amounts to €109million per annum - €102million of this is salaries, the rest consists of capital expenditure and assistive technology. Sinn Féin does not believe in a two-tier education system any more than a two-tier health system. If people want to educate their children privately, that is their prerogative, but the state cannot and should not subsidise that decision. This policy would phase out the private subsidy over the course of five years. We would examine the issue of minority faith schools to see how they could be protected without retaining the fee-paying/public subsidy dynamic.
Despite being two years into a Troika programme, and having gone back several times to the pay of middle and lower income earners in the public sector, pay at the top of our civil and public service remains disproportionately high compared to European standards. Conditions too are considerably more generous – for example the TLAC terms for most current Secretary Generals, which allows for ten years to be added to service and half a yearly salary added to a severance package, makes top civil service jobs more appealing than some of the top private sector jobs. The Minister for Public Expenditure and Reform has withdrawn these terms for new entrants, but existing top civil servants will still avail of them on retirement. This proposal places an emergency levy on all those civil and public servants earning in excess of €100,000 p/a. We do not include semi-state bodies in our savings figures as these bodies have a commercial status and are dealt with differently in pay terms – but we would initiate cost savings in those bodies. Our emergency proposals would be implemented for a period of 3 years, in line with the period of time needed to reach the deficit target, at which point the cap would be reviewed as part of a wider review of remuneration for high paid civil and public servants.
Despite the government’s supposed pay ‘cap’ of €200,000 on public service employees, it was reported earlier in 2012 that in the region of 500 hospital consultants were earning in excess of €200,000 per annum from the HSE, with many earning much more from private health insurers. The government recently announced cuts to new entry consultants, bringing their public pay to €120,000. By any standard, and compared to similar economies, our consultants were overpaid even at the height of the boom. In the depths of a recession, there can be no moral justification for breaching a government-set pay cap. Consultants are recognised experts and invaluable to the health service but the state cannot be strong-armed by any group of professionals who refuse to recognise the economic reality of the day. This cap would also be reviewed after 3 years.
Appointments to state boards remain as politically charged as ever and, while average stipends have been reduced in recent years, there are still savings to be made. Most board members receive a minimum basic payment of €5,000 per year for 12 meetings and expenses on top. Sinn Féin believes the number of boards, the numbers on boards and how posts are advertised and filled all need to be examined. We want to derail the boardroom gravy train.
The government has made €16.9million worth of cuts to home-help hours, reducing in some instances, home help care to 15-minute slots. The government claims harsh cuts are necessary in a crisis such as this. Yet Enda Kenny continues to earn €200,000 per annum and Ministers earn €169,275 per annum. Enda Kenny earns more than the Dutch, British, Swedish, Finnish and Spanish prime ministers – and that’s just within Europe. This is before expenses. (Salaries table of heads of state, 2011)
This proposal abolishes the following allowances, which are paid to TDs and Senators on top of their basic salaries.
Chairpersons of Oireachtas Committees receive base payments of €9,500, mobile phone payments of €1,100 and ‘hospitality’ payments of €2,539. These are additional payments made on top of a TD’s salary and allowances.
The Commission is made up of the Ceann Chomhairle, Leas Ceann Chomhairle, the clerk of the Dáil and eight members of the Oireachtas (TDs & senators from Fianna Fáil, Fine Gael and Labour). They are each paid a stipend to sit on the Commission, with the exception of the three ex-officio members. We would abolish the stipend.
This would remove the just over €17,000 paid to each of the two ‘super’ junior ministers created by this government. The payments currently go to Jan O’Sullivan and Paul Kehoe. The junior minister basic salary already stands at €130,042.
Controversy arose this year when it was revealed in a parliamentary response to Mary Lou McDonald that six ministers – Joan Burton, Brendan Howlin, Pat Rabbitte, Richard Bruton, Leo Varadkar and Simon Coveney – had breached the government-set limit of €92,000 for special advisors to ministers. Brendan Howlin, Minister for Public Expenditure and Reform, paid his advisor €114,000. Other ministers were found to also be breaching the pay cap – the Health Minister paid one of his advisors €160,000. This measure reduces the pay to a new cap, with no exceptions.
The current system allows TDs to claim up to €750 every 18 months for new phones/car kits.
Over nine months last year, the government jet was used over 60 times, amounting to a cost of just over €1.1million. A round trip from Baldonnel to Brussels costs the state over €11,000. A round trip to Brussels with Aer Lingus has a last-minute cost of €300. One trip, taken by An Taoiseach just before St Patrick’s Day, involved several stops in the United States, at a cost of over €66,000.
In 2011 at least €133million was spent on professional fees – this includes consultancy, advertising, legal and auditing fees.
As an example of how these fees work, we just have to look at consultancy. In 2012, the net voted expenditure for consultancy costs amounted to almost €17million. So far this year, examples of consultancy spend include €130,536 by Minister for the Environment Phil Hogan on a PriceWaterhouseCoopers report recommending the establishment of a new and separate water authority. The government has now decided to contract Bord Gáis to run the Water Authority. Accenture won a contract from the Department of Public Expenditure and Reform to assist with the establishment of a human resources “shared service centre” for the Civil Service. The consultants received €353,960 for phase one. Deloitte & Touche provided services valued at almost €500,000 to four government departments. Minister for Health James Reilly spent €300,080 for a report from Goodbody Stockbrokers on the capitalisation, authorisation and sale of health insurer VHI, which the government subsequently decided not to sell. The value for money of these consultancy reports – when the government has an entire civil service at its disposal – is clearly lacking.
Telecommunications across the departments amounted to over €22.9million in 2011. This includes landline use, paying for people’s mobiles, broadband, maintenance and support. Given the size of the state’s contract, we believe this area can produce targeted savings of 10% by negotiating with providers.
Former government ministers and senior civil servants are still receiving shamefully high annual pension payments. Fianna Fáil’s Pat ‘the Cope’ Gallagher is an elected MEP paid €95,000p/a and yet is still in receipt of a ministerial pension of over €70,000. Alan Dukes, former leader of Fine Gael, receives a pension of €95,000 plus a salary of €150,000 from his role as chairman of IBRC. The Labour Party’s Dick Spring receives an annual pension of €120,000 as well as his fee as a public interest director in AIB (€59,000 in 2011). Former Secretary General to the government and the Department of An Taoiseach Dermot McCarthy gets a whopping €142,000. Yet the majority of public and private service pensions are €30,000 a year or less. Despite the promise of a democratic revolution, this government, like the last, continues to protect a coterie of people at the top of the public sector when it comes to pay and pensions entitlements. Enda Kenny recently told the Dáil that there is a legal impediment to introducing a levy to recoup some of the super pension payments paid from the public purse. However, the government has already introduced levies on public and private sector pensions. Sinn Féin’s Financial Emergency Measures in the Public Interest (Amendment) Bill 2012 proposed increases in the Public Service Pension Levy rates for retired public servants in receipt of excessive pensions. This is just one example of the options open to government to tackle pension inequality.
Proposal
Sinn Féin would protect pensions under €60,000, however those in excess of €60,000 annual pensions would incur an additional levy. We would introduce a scaled increase in the Public Section Pension Reduction band rates on annual public sector pensions in excess of €60,000.
Ireland’s offshore oil and gas reserves have the long-term potential to be a significant source of revenue for the economy. According to a 2006 report carried out by the Department of Communications, Energy and Natural Resources, there is approximately 10billion barrels of oil equivalent off our western coast, composed of 6.5billion barrels of oil and 20 trillion cu. ft. of gas. At current oil prices, this equates to a value of approximately €540billion. While it is true that the actual amount of oil and gas brought ashore has been small, reserves exist.
As new technologies emerge and develop, along with the rising price of oil and gas, reserves that were previously dismissed are now becoming commercially viable.
Under the 1992 and 2007 Licencing Terms, a 25% tax on the net profits of oil and gas is applicable. However, oil and gas companies can write off 100% of costs against tax, including costs incurred up to 25 years before field production begins and including the cost of any unsuccessful wells the company has drilled anywhere in Irish waters in that 25-year period. Under the 2007 Licencing Terms a Profit Resource Rent Tax (PRRT) was introduced. PRRT is payable on a profit ratio calculated by the cumulative after tax profits on the specific field divided by the cumulative level of capital investment on the specific field. Oil and gas companies may be subject to pay PRRT on after-tax profits of between 5% and 15%, theoretically.
Compared to international standards, Ireland’s licencing terms are extremely generous to oil and gas companies. A report carried out in 2007 by the U.S. Government Accountability Office studied the licencing terms of 142 fiscal systems. The report found that Ireland has the second lowest government take of all the countries studied. In the United States there is a minimum government take of 42% and in Norway the government take amounts to 75%.
Ireland’s licencing terms do not afford the state with fuel security. When the government awards an oil and gas company with a licence, ownership and control of Irish oil and gas is transferred to that company. Under the current licencing terms, the government cannot guarantee that the oil and gas will be sold to the Irish market, that the oil and gas will be landed in Ireland, or that the company uses Irish workers. Irish consumers must pay in full the international price for oil and gas found off Ireland’s coast. We also have no control over how those resources are extracted and landed – as has been highlighted with the Corrib situation. In a period when the world is nearing peak oil production, it is imperative that Ireland secures its fuel supply. The government refused to cost the proposals outlined below on the basis that it has no plans to change policy in this area. We believe the potential non-tax revenue that could be raised from these policies cannot be ignored and that the continued refusal of Irish governments to deal with the giveaway of our natural resources is one of the greatest economic scandals of our time.
Sinn Féin proposes:
