With all this talk about taxation and Budget 2015 (and one of the few doing any plain talking is Fr. Peter McVerry – calling tax cuts for high-income earners ‘outrageous’) there are ‘taxes’ that people pay that the Government will do little, if anything, to address. Indeed, the budget will be framed in a way that undermines the Government’s ability to provide relief against these ‘taxes’. What am I talking about?
We automatically assume that ‘taxes’ are something the Government levies. Therefore, when we discuss ‘tax relief’ or ‘tax cuts’, we refer to reductions in things like income tax, USC, PRSI or VAT, though the latter doesn’t feature much.
However, there are ‘taxes’ that people pay when the Government fails to provide the services and income supports it should – if one accepts that we are a modern European state. We can call these ‘taxes on living standards’.
Take, for instance, childcare: in Ireland, a household can pay up to €800 a month and more for a childcare place. In most other continental countries, childcare can cost as little as €150 per month and even less for the low-paid. Why the difference? In other European countries, childcare is financed through the public sector, usually local authorities. In Ireland, people are forced on to the private market. This is quite ‘taxing’ for these households.
If the Government rolled out affordable childcare, households with children could expect reductions of up to €500 to €600 a month – or thousands of Euros a year. This reduction in childcare fees (‘taxes’ for those in need of this vital service) would be greater than any income tax cut.
Or take another example – public transport. In other countries, public transport receives a high level of public subvention, or subsidy. This ensures expanded services and affordable fares. In Ireland, public transport receives an extremely small subvention.
If the Government doubled the subvention to Dublin bus services (this would still leave us short of continental cities), half could go to expanded services and half could go to reducing bus fares. This would mean a reduction of €350 per year (based on a monthly pass) for bus users. This, again, is more than any tax cut would achieve for the low-paid using public transport.
Here’s the last specific example: subsidies for prescription medicines. In Ireland, if you don’t have a medical card, you can get relief of 20 percent on medical expenses, meaning that you have to pay 80 percent of the full cost for prescription medicines. This can be quite a burden on households and doctors report that in many cases, people do without medicine because they can’t afford it. What’s it like in other countries?
- Austria: €5.40 per item, with many medicines provided free
- Belgium: a staggered system which subsidises medicine form 27 percent to 86 percent with many medicines free. Patients in hospital pay 62 cents per day.
- Finland: 35 percent of medicine costs are refunded with no one paying more than €610 per year, many medicines free
- Sweden: Subsidies of between 50 and 90 percent with many medicines free. No one pays more than €600 per year.
It’s not possible to make direct comparisons but in these countries, the cost of prescription medicine is heavily subsidised. Many Irish households would receive a substantial reduction in costs if we adopted measures that apply in other countries. Instead, we ‘tax’ these households through lack of support.
You get the picture. There are, however, some big ticket items:
- For the tens of thousands without a house – either through homelessness or waiting years on the waiting list – this is particularly taxing.
- For the hundreds of thousands of houses that have inadequate conservation – people are taxed through higher energy bills or cold.
- Being unemployed, or under-employed (precarious work) or only able to take up casual work, falling in and out of work – that is really taxing.
- Or being one of the 450,000 who are at risk of food poverty (or hunger), or being one of the 1.2 million who are officially categorised as ‘deprived’ – what kind of tax would you call that?
- Crowded classrooms, school transport fees, school books costs – these are all ‘taxing’ on parents; taxes that don’t exist in many European countries (or are well below our levels).
What do we need to do reduce these types of taxation? Increase investment in our public services, our capital programme (in particular, social housing and building conservation) and income supports. In, other words, we need more expenditure.
Will cutting the taxes that the Government levies help? Just the opposite – it will undermine the Government’s ability to reduce the very high levels of real-world taxes people pay through loss of support.
We have this debate over how many people will get €2 per week, €5 per week or whatever. It is a skewered debate that conveniently side-lines the real taxes on people’s living standards. It is a debate that assumes that the only way you can provide relief to people is through tax cuts when in fact much greater relief can be given through stronger public services and income supports. It is a debate that says ‘here’s couple of Euro, now don’t go be asking for anymore help’. People’s living standards are under extreme pressure and all they can look forward to is a few cents a day.
As Fr. McVerry said: outrageous.