Friday, November 6, 2009

A Solution to Ireland's Economic Woes?

Oy! It's not enough that the Irish economy is a mess (unemployment over 12 percent, the government tax take down almost 50 percent vs two years ago; significant increases in total government borrowings), but now that very same government is talking about an imposition of even more taxes and pay cuts upon its already over-stretched public.

I state this due to a comment made in a recent blog in which an erstwhile visitor noted that she didn't realize the good people of Ireland pay loads of taxes. So...and without further ado - and just to make you realize how lucky you are to possibly live in a country with more reasonable tax burdens (if only for the moment) - then take a look at the following.

Here's what we pay in Ireland:

  • VAT - 21.5 percent Value Added Tax. This tax is added - like a sales tax - to almost anything that moves: food, clothes, cars, you name it.

  • Stamp Duty - we pay a 'Stamp Duty' on many items: credit cards, housing, insurance products...don't worry, if you use it or buy it, the government will tax it.

  • Salaries - many of us pay two types of taxes on salaries: PAYE (sort of like Income Tax) and PRSI (sort of like Social Security). We're all taxed in 'bands' that start at 20 percent, then soar to over 40 percent. Many people on higher incomes may soon pay over 50 percent of their total salaries in assorted income taxes.

  • Automobile VRT - this bombshell of a tax can put another 20 percent (or more) onto the cost of purchasing a new car in Ireland. We pay VRT in addition to VAT on new cars.

  • Fuel Taxes - the cost of gasoline (petrol) over here currently runs about 3 times what a person might be paying in the US. Seventy percent (or so) of that cost is government tax.

  • TV Licence Fees - anyone who owns a television in this country has to pay 170 euro per annum for accessing the wonderful local programming that courses through the air.

I could go on and on, but I won't. Now don't get me wrong: we do receive services for these crazed taxes: a reasonably good, almost free medical system ensures that you won't go broke should you need your head replacing; free public school systems; an almost free university system (which, it seems, might no longer be free in the near future); a pension when you retire; unemployment benefits if you lose your job; a children's allowance payable to any family - regardless of income - of 166 euro per month for one child; 332 for 2; 535 for 3, and up to 1,550 euro per month for 8 children (makes one want to have lots of kiddies, doesn't it?) Too, many people - almost 50 percent of the populace who are below the taxable income tax threshold - pay no tax at all....

But...things are about to change.

The Looming Budget
In early December of this year - a few weeks from now - the government is planning to implement a hair shirt budget, one of the most daunting since the miserable early 1980's. In this budget - a necessity due to the horrid economy and swelling government spending - our erstwhile Irish public representatives are reported to be planning a whole series of increases in taxes, together with cuts in public sector pay. The results could be alarming.

Recently, the OECD - those mandarins in Europe who cobble together fiscal recommendations for members of the European Union - suggested wide ranging government initiatives designed to curb public sector borrowings, while promoting (we hope) job creation. Those recommendations included everything from charging tuition for 3rd Level (university) attendance, to significant cuts in pay for public sector workers (read: teachers, police, firemen, nurses, and bureaucrats), to re-tooling the tax table to include more and more lower income workers in the tax net.

Should the government follow the OECD's lead, the shorter term outlook will probably result in: strikes, increased taxes, short-term economic deflation, a drop in total disposable income, and increased unemployment. However, and longer termed, the government here might finally find a formula that will lever Ireland out of its current economic difficulties, and toward a reasonably prosperous future.

For the past 10 years, the Irish economy - and the Irish themselves - have been living far beyond its means. While we may be taxed to the hilt, we were also some of the best paid people in Europe. The result was an 'irrational exuberance' that led to soaring debt as we all financed new BMW's, holiday homes, and global vacations. However, the Celtic Tiger proved to be just as fragile as any human being, and finally succumbed to a combination of domestic and international greed, as we all sought to feather our own nests.

All of us who live here have already had to tighten our belts as the economy has continued to sour. The coming budget will mean that we'll all have to tighten our belts further.

But by taking a bit more pain now, we may be in a position to offer our children and grandchildren a brighter future.


  1. Wow. I had absolutely no idea the extent of taxation. I knew that taxes were higher because of healthcare, free university and the like -- but I did not realize just how steep the taxes were on everything.

    Still, as it currently stands, you can get your college degree for free (or as close to free as one could hope), your healthcare is good and you won't lose your house should you need extensive care. I guess, the reality is that we either pay via taxes or via hospital bills and tuition.

    I guess there is no place on earth where one's pockets are not picked one way or another.

  2. I hope the economy will be doing better soon. I hope the government will do something about this asap that will not only benefit them but of course to the whole nation.

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  5. And thanks so much for the lovely comment, Chris. This poor writer tries, but every now and then he wonders: "Is anybody getting anything out of this? Is it helping, hurting?"

    You made my day....