Monday 20 March 2017
RTÉ Radio One | This Week
The IMF and EU Raise Concern That Ireland is Again Narrowing its Tax Base
Ronan Daly Jermyn Tax Partner and President of the Irish Tax Institute, Mark Barrett, spoke with Brian Dowling on RTÉ Radio 1 about the volatility of the tax base.
Click here to listen to the interview.
Brian Dowling: Now we all remember the damage caused by our past reliance on Property Related Taxes. Our Tax Base had narrowed so much, that when the Banking and Financial Crash hit hard, Property Taxes collapsed, leaving the State desperately short of cash. And ultimately ending up in a Bailout. Recently both the IMF and the EU have raise concerns that we are again in danger of narrowing our Tax Base. I spoke this weekend with Mark Barrett, President of the Irish Tax Institute, and I began by asking him what are their main concerns?
Mark Barrett (President, Irish Tax Institute): When we look at the number of Taxpayers in the Corporate Sector who contribute to the overall Tax Take, the figures are pretty stark. The top ten payers contribute 40% of the overall Tax Revenue. So as a country, when we are dependent on that few Taxpayers to contribute to the overall Tax Take, it leaves us, as the IMF have said, a very concentrated Tax Base, and we're very vulnerable to any changes or any impact on those Taxpayers. In addition to the top ten, the top fifty companies account for 46% of the Corporation Tax Take in Ireland. And like any business, it's great to have big clients. And when times are good they contribute significantly to your revenue. But there's no quicker way to go out of business if anything happens to one of those taxpayers.
Brian Dowling: And would this be a particular vulnerability if one looks at what's happening internationally in relation to Corporation Tax, and the kind of policies that are expected, perhaps from the Trump Administration?
Mark Barrett (President, Irish Tax Institute): Over the last number of years, our dependence on Corporation Tax, our revenue from Corporation Tax has increased from 12% to 15%. So it's putting us at the higher end, internationally, of reliance on Corporation Tax. And that in itself would be a worry.
Brian Dowling: Is there concern then that we are running the risk of repeating past mistakes like our overreliance on Property Taxes, which contributed to the Financial Crash?
Mark Barrett (President, Irish Tax Institute): Well that's exactly it. And nothing has changed to, I suppose, reduce our vulnerability in that regard. Insofar as we were very vulnerable, and we paid the price for being exposed in relation to Capital Gains Tax, Stamp Duty and Transaction Taxes. We have now moved our Base, and have focused almost exclusively in areas to compensate for the reduction in those taxes. We've compensated by focusing on Income Tax and Corporate Tax. And just to stick to the Corporate Tax for a minute, not only as I said that we're concentrated on a small number of companies, or a relatively small number of companies, for our Tax Take, we're also concentrated on a small number of Sectors. So our top five Sectors account for almost 70% of our Tax Take. And the top two Sectors being Finance, Insurance and Pharmaceutical Manufacturing, accounts for 44% of our Tax Take.
Brian Dowling: And Mark, what's the position in relation to the Personal Taxation side of the equation?
Mark Barrett (President, Irish Tax Institute): Brian it's a similar picture. The Income Tax position is quite similar to the Corporate Tax position. It's expected that in 2017, 3.3% of the Income Tax Yield will come from 50% of Taxpayers, while the other 50% will pay 96.7% of our Tax Yield. So it can be seen that there is a drastic difference between those who are earning up to about €30,000, where they contribute a relatively small portion to the overall Income Tax Take. And there is a concentration on the Higher Earners. And one statistic which again brings this home is that the top 1% of Taxpayers, pay 22% of all Income Taxes.
Brian Dowling: Is part of the difficulty that perhaps we don't have an overarching Long Term Tax Strategy Plan, and that we simply go from one budget to the next budget, making adjustments?
Mark Barrett (President, Irish Tax Institute): Unquestionably in our view in the Institute, that has been a feature of budgets for the last six or seven years. There is tinkering around the edges. The USC threshold gets increased, it takes people out of the new. But there is no looking at the bigger picture.