Taxation measures which are fair and sustainable
Sinn Féin is not a high tax party; we are a fair tax party. Taxing the very wealthy during the boom would have left the state with the resources it needed to cope during the bust. Instead, Fianna Fail broke the tax system. The opportunities to correct Fianna Fáil policy have been ignored by Fine Gael and Labour. The current Government is choosing to levy flat taxes at the most economically vulnerable, taxes like household charges and water rates. Sinn Féin’s proposals would see a reduced tax burden for those on low and middle incomes, increased taxes for those who can afford it and the closing of loopholes, which are still used to avoid paying tax.
The point at which you can close a deficit through taxation and not deflate the economy is sensitive and the only way to reach it correctly is by targeting tax from those who can afford to pay it. Taxing those already struggling just redirects their diminishing disposable income away from essential services in their community and contributes to the economic contraction, job losses and human suffering.
Abolition of the Universal Social Charge
In Budget 2011 the Government replaced the Income and Health Contribution levies with a new Universal Social Charge. The Income and Health levies weren’t perfect, but the USC was introduced with highly regressive features - a greater burden has been imposed on low-income earners, while higher earners have seen their burden post the income levy lessoned. Sinn Féin is not opposed to a system that integrates all social contributions (PRSI, health levy etc.) However, such a move must be progressive in nature. We would abolish the USC and in the interim replace it with the health levy and the income levy. We would reduce the income levy on income up to €75,000 from 2% to 1%. This would have a net cost of €1.019 billion which we cater for with our total tax proposals package.
Our proposals would take approximately 500,000 people out of the tax net. Effective tax rates after our proposals are implemented will be 45.4% on income between €100k to €175 k, and 51% on income in excess of €175k.
In the longer-term, Sinn Féin wants to see a move away from indirect and consumption taxation which disproportionately hits low-earners. An ICTU study last year showed that for every €100 paid in income tax, a further €147 is paid by everyone, including children, on spending taxes. These spending taxes are not progressive - but income tax and wealth taxes are.
Sinn Féin also supports the introduction of a Europe-wide Tobin Tax (Financial Transactions Tax) to compensate for the level of assistance given to the EU’s ﬁnancial institutions in the recent crisis.
Sinn Féin proposals -
Net total €3.263 billion:
- Introduce a new third rate of tax of 48% on income earned by individuals in excess of €100,000. Raises: €410 million
- Adjust PRSI exemption for share options, shared based remuneration and capital gains. Raises: €97 million
- Abolish the USC. Costs: €4.1 billion
- Pending reform of the social security system reintroduce the health levy (raises €2.018 billion in full year) and reintroduce the income levy but adjust it on income up to €75,000 to 1% (raises €1.1 billion). Raises: €3.118 billion
- Introduce a wealth tax of 1% on all assets in excess of €1 million, excluding working farmland, business assets, and the first 20% of value of primary residences worth in excess of €1 million. The Department of Finance to examine an inability to pay clause for asset rich, cash poor individuals. Raises: €800 million (see appendix 2)
- Increase Capital Gains Tax from 25% to 40%. 40% was the rate applied to CGT up to 1998. Raises: €195 million
- Increase Capitals Acquisitions Tax from 25% to 35% and reduce the thresholds by 25%: Raises €165 million
Tax reliefs and loopholes
- Place an earnings cap of €80,000 on pension contributions and grant relief at 20%. Raises: €550 million
- Abolish the ability of incorporated bodies to claim trading losses against profits made in previous years for tax return purposes. This is a once off measure which should save over €100 million in the year it is introduced, but once abolished as a measure it would obviously not return money the following year. We would not change the ability to carry losses forward. Raises: €108 million (based on 2009 figures)
- Halve mortgage interest relief for landlords. We would simultaneously look at proposals to cap rents so that landlords cannot pass rent increases onto their tenants. Where there is genuine hardship for landlords this should be dealt with through measures other than interest relief. In 2013 this measure in its complete abolition would save the state another €385 million. Raises: €400 million
- Standardise discretionary tax reliefs, excluding donations to charity. Raises: €628.3 million
- Abolish ‘Group relief’ availed of by companies to transfer losses to profitable companies and write down tax receipts. Raises: €450.3 million
- Abolish legacy property reliefs. Raises: €341.8 million
- Introduce 5% tax on online gambling. Raises: €100 million
- Target the retail goods and services black market. Business groups estimate that up to €5 billion is lost per annum through black market activity in VAT and excise returns. We propose hiring 200 new revenue and custom officials to target a reduction in that €5 billion figure of a very conservative 5%. The cost of hiring 200 new revenue and customs officials would be in the region of €15 million per annum. A 5% reduction in black market activity could raise €250 million for the state. This measure has the potential to raise €235 million by 2013. We do not include this figure in our calculations above as it may not be achieved in 2012.