The independent progressive think-tank, TASC, has focused its pre-budget analysis on sustainable tax revenue and has said that it’s possible to create a more equal society while managing the public finances prudently and promoting job creation. TASC has warned that inequitable tax cuts for high earners will undermine health, social housing and other vital public services.

TASC’s analysis shows that, contrary to what is widely reported, Ireland is a low-tax country, with only three-quarters of the European average tax take, making it harder for Ireland to provide quality health, education, housing and other services.

TASC research director, Dr Nat O'Connor said "Budget 2015 offers an opportunity for Ireland to move in the direction of the competitive, highly productive economies of North-West Europe, but to do so we need to maintain and build on quality public services and public investment.

"Ireland's tax and social charges are just three-quarters of the EU average level, and we have the highest level of pre-tax inequality among all OECD countries, so we need to maintain the integrity of our progressive income tax system to maintain social cohesion” he said.

TASC’s analysis shows that:

• Cuts to the higher income tax rate will only benefit the top one-in-six earners
• The highest anyone pays in income tax is 30%, nowhere near the 41% marginal rate
• Government should prioritise funding for necessities over tax cuts in Budget 2015

IBEC tax claims challenged

The employer’s body, IBEC, published a paper last month, ‘Debunking Irish income tax myths’, which has been challenged by TASC in a response paper. 

In the analysis TASC demonstrates:

• Ireland has the fifth lowest implicit tax on labour, which is Eurostat's standard measure of taxes on labour incomes. It is incorrect to claim that Ireland is a high tax country for labour incomes.
• Ireland has effectively the lowest level of social insurance in Europe, which reduces taxation on labour incomes. Social security contributions are 4.4% GDP in Ireland versus 11.1% on average across the EU.
• IBEC's claim that 'half' of income tax payers would benefit is false, and is based contorting the relevant data. At most 607,000 people might benefit, which is 32 per cent of the 1.9 million people at work.

"The weight of evidence suggests that cutting the 41% higher income tax rate will only benefit higher earners, without any boost to the economy or job creation as a result. On the contrary, IMF staff papers among other sources demonstrate that public investment has a greater impact on economic growth than cuts to income taxation." Dr O'Connor concluded.

IBEC’s paper has also been challenged by Unite research officer Michael Taft in his blog, and says that IBEC’s claims are misleading, selective and ultimately disingenuous arguments. “They don’t want any focus on the low levels of social contributions that employers make.  While workers are carrying their weight compared to workers in other countries, Irish employers contribute very little. That’s the real story behind a document that purports to debunk myths but actually perpetuates” he said.

TASC’s pre-budget analysis is available HERE.