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THERE ARE 59 days to the Budget with much debate still to take place between now and 14 October on what the government should spend and cutback on.
But in the second in a series of articles Dr Daragh McGreal, an economic advisor to the independent TD Stephen Donnelly, drills down into the issue of Value Added Tax, which most of us know as VAT, and whether there is scope for cuts or changes to the way it is levied…
ANYONE WHO HAS watched Only Fools and Horses remembers ‘no income tax, no VAT’ from the jingle.
The boys belonged to a grey area of the economy outside the prying eyes of Her Majesty’s Revenue & Customs and were loved for their wheeler dealing. But when you’re not dealing with the Del Boys of this world, VAT is unavoidable.
In Ireland, consumers pay VAT on most goods and services, apart from food and some other exceptions, and its purpose is to raise revenue. At the height of the boom in 2007, we took in €14.5bn through VAT, but this had fallen to €9.7bn by 2011. The recession had hit our wallets and we hadn’t started spending again.
Because of the big budget deficit, the government needed to raise revenue and to show the Troika that Ireland was serious about its deficit. So in early 2012 it changed the standard VAT rate from 21 per cent to 23 per cent.
This change made the rate one of the highest in the world and was the tenth rate change since 2000. As consumers, we face fluctuating rates more often than consumers in any other EU state. This makes consumption more dependent on government decisions and out of the hands of the consumer.
Increasing and decreasing rates can lead to greater or less tax intake, but it is a fine balancing act. Increased revenue can accrue if consumers really need the goods or are prepared to pay more.
When the rate changed in 2012, VAT intake increased from €9.7bn to €10.2bn because people were more prepared to buy the goods than they were put off by the increase in VAT by 2 per cent.
Economists call this inelastic demand.
TASC says that 98 per cent of the taxes paid by the poorest are taken up by taxes such as VAT and excise duties. This is in spite of in-built structures aimed at protecting lower income groups: no VAT is paid on food, as people need to eat; no VAT is paid on children’s clothes, as children need to be clothed; and no VAT is paid on medicines, as people need to be cured.
These goods are ‘zero-rated’ to lighten the load for the less well off. But as the ESRI says that the most recent change to the VAT rate increased spending by the poorest by 1 per cent and by the richest by 0.4 per cent, the system is still weighted in favour of the well-off.
VAT in Ireland is also unusual because of the high number of reduced rates or exemptions. This sets us apart from other EU states. VAT on hairdressing services is charged at 9 per cent, VAT on works of art is charged at 13.5 per cent, and VAT on the supply of greyhounds is charged at 4.8 per cent. This makes the system haphazard and unpredictable.
So how could the Government make VAT fairer and clearer?
The first option could be to reduce the rate again. TASC says the rate could fall to 22 per cent this year, at a cost of €350m, and to 21 per cent in 2016. This would bring Ireland more in line with other EU countries and would ease the financial strain on poorer people.
On the other hand, it would cost the state money at a time when it needs to save, and it wouldn’t address the holes in the system.
The second option could be to increase some of the reduced rates to the standard rate. This would mean more money for the state and could be done progressively. With this stability, the standard rate could be reduced in time.
Alternatively, the state could apply a uniform rate to all goods and service and provide a tax rebate to low income households. VAT would be the same on all products but the poorest would be able to reclaim a portion of the amount they pay.
This would be progressive and would make the system more coherent. But such a system would require greater administration and would need time to be implemented, neither of which solves the immediate budget deficit.
Over the past decade, VAT has accounted for about 30 per cent of total tax intake, despite the messiness of the system and the frequency with which our governments have tinkered with rates. The system could be made more stable.
Dr Daragh Mc Greal is an economist and human rights consultant currently working with Stephen Donnelly TD on Budget 2015 and other policies.
Poll: What would you be in favour of the Government doing? Do we…
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Am I the only one that sees more about Leo being gay than being a minister? It seems to be gay this and gay that and he attended this or that gay event. I don’t care if he is gay. Can he do the job that as a country we need him to do? First impression is not good.
@Gillian Weir Scully:
You seem to care about his sexual preference more than anyone else.
@Gillian Weir Scully: it’s hardly Leo’s fault if the media is obsessed with his sexuality. I’ve never heard Leo court attention for it.
Let’s hope he not calling for hair care advice.
@Gillian Weir Scully: I’m not sure if The Journal has changed the content since you wrote your comment, but I do not see any mention of Leo’s sexual preference in the article… am I missing something?
@Gillian Weir Scully: it’s hardly Leo’s fault that the media mention it. Plus pride was on last Saturday so it was bound to be mentioned. In fact Leo downplayed his sexuality on RTÉ news before. He said it’s part of who he is but doesn’t define him
@Gillian Weir Scully: to be fair to Leo, it was hardly anybody coherent or important on the other end. Seems like trump is being a tad needy.
@Gillian Weir Scully: All I know is that your observation has blasted everyone else out of the water with ‘likes’, and I’m adding my ‘like’ to your comment right now. Well done.
Hi .. Leo Vodka .. Verruca… Veronica..How’s that wall coming on in Doonbeg man.. get it sorted.. SORRY ..have to go now .. my great pal Linda Kenny is on the other line..Chow pal see you on Paddy’s day..
@John O’donnell: *patty’s
@John O’donnell: 9/10… Pattys day would have got you 10/10.
@Gerry Fitz: sorry Gerry .. cheers
@Gulliver Foyle: sorry Gulliver.. your right pal.. thanks
“First” – like there’s going to be many???
@John Flood: well he has to know how the bowl of shamrock is getting on.
@John Flood: probably not but I’m sure there will be more than one, hence the word “first”
@Ruth Corbally: even if there’s only one it’s still the first.
@Dave O Keeffe: it is indeed.
@John Flood:
Leo oversaw a corrupt judicial appointment.
Leo wasn’t actually elected with a mandate.
Leo shook hands with Arlene Foster, an anti-Catholic terrorist and homophobe.
And as for Leo protecting the rights of Irish citizens North and South. .. Well that’s just laughable.
He has no right to act superior to Trump.
And just Leo is gay, doesn’t mask his hypocrisy.
@John Flood: he’ll be so excited he’ll probably have to lye down afterwards and given smelling salts !!!
@T Beckett is back: can you tell us what act of terrorism that Arlene Foster has carried out?
@Barry O’Brien: nah, I am sure Enda left his card with a mobile on it, probably just waiting to see if trump calls to see how he’s doing!
Phone Rings*
Trump: “Hello”.
Leo: “Cuñt”
Phone goes dead*
Trump: “Hello……hello…..”
@Bar Bar Drinks: “I must be on hold” proceeds to fake the phone call because of the watching press
@Bar Bar Drinks: Who forgot to pay the bill?
I like that Varadkar is openly showing some contempt for Trump. Hopefully, we’ll get to know what was spoke about on the phone.
@Darren Bates: You mean like Enda Kenny’s “racist and dangerous” statement that he completely backed tracked on? Leo “Not another red cent” Varadkar is as spineless as Kenny. It’s a prerequisite to joining Fine Gael.
Leo will probably ask about the 2 scoops of ice cream..
@LITTLEONE: he’ll just be asking what shade if red the carpet should be for the visit? Oh maybe it’ll be gold!
Nah Dave. Leo will definitely be excited about the 2 scoops of ice cream.. then trump will have to remind him. That he shouldn’t believe everything that CNN reports after all they have just been exposed again as fake news.. pushing the Russian story that they know is bullshit just for ratings and money.. even admitting on video trump is right. It’s a witch hunt…
https://t.co/TQWte6WWIN?amp=1
@LITTLEONE: see? People can’t even have a little light hearted back and forth with you. Good to see the proven liar and Breitbart protege James O’Keefe still has funding though. Nowhere in the video does the guy being illegally recorded say the Russia story is bullshit. Just that the evidence isn’t public. Trump and anyone else that has seen the evidence have confirmed that it happened. As for collusion, well that’s what the investigation is for. Quite frankly a foreign power interfering in the election should be the biggest story. The fact that you don’t think it even matters is worrying.
@Dave O Keeffe: ah Dave you sound upset…..
Cnn producer….
John Bonifield: It could be bull# (the Russia investigation). I mean, it’s mostly bull# right now. Like, we don’t have any giant proof. Then they say, well there is still an investigation going on. I don’t know, if they were finding something we would know about it. The way these leaks happen, they would leak it. They’d leak. If it was something really good, it’d leak.
- “and so i think the president has a right to say, like, look you’re witch hunting me. you have no smoking gun, you have no real proof.”
Dave… Dear lord the Russians like the Americans have been interfering for years around the world in elections.. nothing new there… Flips sake the CIA were recently exposed doing it in France… No one is denying that the Russians were not interfering… They have done it before and will again… It’s the nonsense fake Russian collusion story that is ridiculous… Beating a dead horse ….
@LITTLEONE: trump attacks President Obama for not doing enough to combat Russian interference into American democracy; ergo trump admits there is and has been ruskie interference and subversion.
@Hurt Stoogie: like i said to Dave… No one denies it happened the Russian interference… It’s the collusion story that’s nonsense… The fact people are trying to tie the 2 together is farcical… There is a difference.. if people are not able to understand the separation of the 2 .. then what can I say.
@LITTLEONE: “no one is denying that the Russians were not interfering” want to try that one again? Also, the collusion story in its entirety was caused by key campaign members lying about their ties to Russia. What is it now? Seven campaign members with suspicious ties? It needs to be investigated. The fact that you feel it should be hushed up and nobody should talk about it is weird. You’ve also given the guy in the video the wrong job title while quoting him as saying that the details aren’t public. By the way, that’s only true of Russian interference so maybe that’s what he was asked about. James O’Keefe has a habit of editing videos to portray the illegally recorded negatively. My guess is there were two conversations, one about Russia, one about collusion and the answers were swapped
@LITTLEONE: OK then, you separate the two for us. You agree Russia interfered with a preference for Trump. You agree that Trump campaign members lied about meetings with Russians state actors. Do you not think whether or not those two facts you’ve acknowledged are linked should be investigated?
@Dave O Keeffe: tell me where your getting your 7 members ties to Russia? Collusion story information? Please share your source for all this evidence?
Dave funny enough you said that about James o Keefe the last time too. But didn’t people have to resign after being exposed when you claimed it was edited…. Also how many people were arrested Dave after being exposed by o Keefe. Luke kukn to name one… Funny that …
@LITTLEONE: 7 members of the campaign with ties to Russia: Manafort, Page, Sessions, Kushner, Stone, Flynn and Gordon. All met Russian officials on the campaign trail, some privately, and some lied about it.
@Dave O Keeffe: so you won’t provide your source for this information? Why not? Still waiting… Was it the dodgy dossier Dave… What because you claim it ? Haha Dave. Please provide where you got your information and the evidence of that?
Dave go on … Outline the contact and how you got this information? Surely it can’t be hard for you… Since your full of conviction on it… You must have gotten the juicy details somewhere….. Now bear in mind. Comey told us the nyt story was fake… Well CNN .. see above… Washington post have lied so much . I have lost count…. But hey you believe it so can’t be hard for you to prove it. I await.. oh I forgot if it’s the dodgy dossier… Don’t forget Christopher Steele is being sued and had to admit under oath… It couldn’t be verified and fusion GPS are stonewalling the senate…. Considering democrats are blocking most of those from testifying under oath … It’s really just the likes of CNN and Washington post pushing these stories with anonymous sources.. which after today we know CNN is bullshit….
@LITTLEONE: funny enough, it hasn’t stopped being true about him. He has paid people to commit voter fraud, he has illegally recorded and inaccurately edited videos of private conversations. He has a proven track record of doing this and you know it but you’ll still gladly swallow it down. Oh someone got arrested, did anyone get convicted? James himself has been arrested because of his videos more than once. The guy lies. He once tried to lure a CNN presenter to a boat filled with sex toys, condoms and video cameras. Luckily she was alerted by one of James’ staff and never showed up. This is a sleazy, fraud of a journalist. You criticise MSM for their methods but this is acceptable journalism to you?
@Dave O Keeffe: so now your changing topic… Ah Dave really.. so you can provide nothing…. No surprise there… Pathetic Dave. . After everything you claim above .? You post 0 … Now if you think I am going to get into your game on o Keefe … Sorry I am not… But just to remind you ..you claimed the last time they were heavily edited but people had to resign and as for the 3 arrests ,. Do catch up Dave…. Now why doesn’t it surprise me your attacking o Keefe for exposing what he did… people that wanted to use acid at an event … Great tactic Dave. Character assassination.. where have I seen that before.. pathetic Dave..
Now Dave if you happen to decide you want to share your sources for your information on the collusion story and 7 people.. I shall check in and see … But won’t hold my breath since you have.. how many times now refused?????
@LITTLEONE: the video jumps back and forward through a conversation. Why do you think it does that? What didn’t the real time recording get that O’Keefe wanted? All you ever do here is insult and attack anyone that disagrees with you. This all started because I made a joke about Leo not being of substance. So which one of us changed subject again?
@LITTLEONE: I’ve never said collusion definitely happened, all I’ve ever said is the investigation is necessary. You saying that I’ve said collusion happened is an outright lie on your part. The investigation is necessary to clear it up or prove it that’s all I’ve ever said.
@LITTLEONE: by the way it’s interesting that your ice cream “fake news” thing and James O’Keefe are both products of Breitbart. The ice-cream thing first of all, is true, it happened. That’s never been denied so how is it fake? It’s newsworthyness is open to debate but the fact that the president demands treatment over and above that of his guests is interesting.
Dave interesting enough your comments are all products of where? ? We do not know because you have refused to say…. Why is that?
@Dave O Keeffe: using that tactic again Dave. Really pathetic.. obviously your not someone that likes hearing things that go against your narrative so you resort to the name calling… Hardly surprising.. seen it all before… Bit pathetic but sure that’s you in a nutshell… As for accusing me of a troll .. real low Dave considering its you that has the obsession with trump articles…
@LITTLEONE: ha, that’s rich coming from you. You’ve been insulting from you’re very first reply today. I comment on a wide range of articles, always have, always will. You still haven’t found a single instance of me saying collusion happened have you? Oh well, keep lying. As for you saying don’t quit my day job…. Those in glass houses.
@LITTLEONE: my comments are products of my reading and listening to many varied sources of news. How do you think I keep finding your sources for you? By the way, for the thousandth time it’s “you’re”. It’s funny how someone telling you rge truth about James O’Keefe made you lash out with insults and lies. Poor little snowflake.
@LITTLEONE: How did you like the video of DT sexually harassing the RTE reporter in the Oval Office??
@LITTLEONE: Project not so Veritas https://www.buzzfeed.com/charliewarzel/a-teacher-is-suing-breitbart-and-project-veritas-for?utm_term=.rtAM5eXkjA#.pk07knplGO
Donald and Leo.
Akin to a super tanker meeting a dinghy on the great ocean of life.
“you’re just like the bad usa president in Love Actually and I’m Hugh Grants character telling you not to grab Teresa May by the Va Jay jay”
this should be rich….no seriously they both represent the 1% they will talk about free trade austerity and privatisation, they can both agree on privatising the gains and socialising the losses. They will throw mud at each other as well to continue the soap opera that keeps the spot light on them and away from the issue of housing crisis’s private bank bailouts and everything else that makes regular workers suffer
Referring to Caitiriona Perry: “We are all over this beautiful Irish press”
Let’s hope Leo keeps things simple and doesn’t use any big words. Anything with more letters than ‘Crayon’ is probably out of bounds
Hello Mr Trump. I’m so so excited to talk to you. It……it……..reminds me of a scene from that romantic drama “The American President”……… watched it last night….. when the president speaks on the phone……. I can’t believe it…….. yay……..
Wow…this reminds me of that scene from House of Cards
Just as long as The Donald doesn’t hand the phone to Mike Pence with the VP trying to convert Leo.Pence is just as weird as his Boss
Pence actually believes in Conversion Therapy for homosexuals!!!
@Jane Waters: No he doesn’t.
“Resources should be directed toward those institutions which provide assistance to those seeking to change their sexual behavior.”
Including benefiting things like safe sex.
His opposition to gay marriage does not equal wanting to kill gay people or convert them. It is most likely following the party line – and something we’re less quick to condemn our own bigots for.
Let’s hope there’s no tapes.
90 seconds on hold… hahaha… who was holding what?? Likely Leo Vodka was wiping the smugness offa his face.
More fake news .. but i could be wrong !!!!!!!!
Lads, this is how politics works. You kiss ass one day and have your ass kissed another.
Hopefully at the end of your term the latter outnumbers the former.
Does this now mean Leo is winning too?
And just what was said regarding the undocumented Irish in the US whom currently face deportation?
@ED:
This important matter will probably by long fingered by President Trump.
Leo therefore needs to press for a workable solution, an amnesty perhaps. It’s too bad that 50,000 Irish citizens continue to be denied free movement home from US for fear of being nabbed by the Feds, when most in fact are upstanding citizens in their adopted homeland and being zero burden on that Nation’s Exchequer.
Make a start Leo!
Varadkar said a lot of stuff before becoming Taoiseach, he will lick the Donalds big fat A** when her arrives, The Donald just came back from licking the Saudi kings A**. Politicians are like junkies nothing is degrading or beyond their morality.
Varadakar could end up being even worse than Kenny, he’s a snivelling Thatcherite, totally right wing, cares nothing about normal working class people and only the elite, I couldn’t care less what someone’s sexuality is don’t be fooled, he’s every bit as bad as the rest of the parasites with their snouts firmly in the trough, of course culchies and D4 types will continue to vote FG and FF and it’ll never change, tragic
Trump thinks the Taoiseach needs him to rubberstamp him???
have your say