Tuesday, 29 March 2011
Dáil Éireann Debate
Sinn Féin has introduced this motion to the House to move to address the grotesque situation where the burden of the worst financial crisis this State has ever seen has fallen on those with the lowest incomes. Those people who were hanging on by their fingertips last year are now struggling with the additional burden of the universal social charge which has resulted in serious cuts in the incomes of the lowest paid in society. The charge, introduced in last December’s budget, has proved Scrooge-like, as it effectively makes a supposedly temporary emergency income levy a permanent fixture of the tax system. By applying the universal social charge to the widest possible income base, with minimal exemptions, what was effectively done was to introduce an alternative tax system for those on low incomes.
The universal social charge, therefore, is little more than a working poor tax. The new charge disproportionately affects certain sections of society. It hits low income workers by significantly shifting the tax burden away from high earners and onto those on lower pay. Yet there is no “inability to survive clause” available for low paid workers. There is no amnesty for the pain of cuts to income and increases in consumer prices. There is no stress test on households in order to determine what support they need from the State in order to survive. This charge is regressive in the extreme. As in the days of Charles Haughey, we are not all tightening our belts, just the lower paid and society’s poorest.
The replacement of the income levy and health levy with the new universal social charge has increased the level of inequality in the earnings distribution. The universal social charge of 2% is borne by those earning incomes upwards of €4,004, that is, people earning just as little as €77 per week. Anyone earning as little as €1 per week above this limit will be liable to pay the universal social charge on all of their income. It is perhaps a measure of the dire straits into which we have been thrust that even teenage children doing the proverbial paper round or college students working at weekends will now be forced to pay tax on this pocket money income. The rate of the universal social charge increases to 4% at €10,037 and to 7% at €16,017. That is how progressive this measure is. A person on €308 a week is paying the same charge at the same rate as someone on €3,000 a week. Where is the fairness in that? These changes have led to an increase in the numbers of the working poor and are less progressive than the combination of the health levy and income levy it is replacing. There was no consideration of ability to pay or how many thousands would be thrust into poverty and no impact assessment was carried out either before the measure was introduced or since to evaluate its real effects on thousands of people.
Three weeks ago Fine Gael and the Labour Party set out their stall in their programme for Government. They have bought themselves some time by postponing a decision on the future of the universal social charge by proposing another review. They have also proposed at least 32 other reviews in the programme for Government for which no terms of reference have been decided upon.
Níl achoimre maith go leor do na céadta agus na mílte daoine atá faoi bhrú siocair an cáin lochtach seo. Ní chuirfidh sé bia ar an mbord agus nííocfaidh sé na billí. Ní féidir leis na daoine atá faoi bhrú mar gheall ar an cháin lochtach seo fanacht go dtí deireadh na bliana go dtí go mbeidh an achoimre seo réidh ag Páirtí an Lucht Oibre agus Páirtí Fhine Gael.
The Government needs to make its intentions known now. Does it intend to abolish this tax, extend it or leave it? With the arrival of a new Government, there is a great opportunity to simplify the tax system. There is an opportunity to address the endemic imbalances in the system where those on low incomes are disproportionately shouldering the burden of taxation.
When the former Minister for Finance, Deputy Brian Lenihan, introduced the universal social charge in his Budget Statement last December, he said he wanted “to move steadily in the direction of an income tax system that is fair, universal in its application and more easily understood.” However, he created an alternative tax system for those on low incomes. There was nothing fair about it. The only thing that was easily understood was the Government’s readiness to plunder the incomes of the poorest in society. PAYE and PRSI contributions are now accompanied by a new tax. The universal social charge is simply the consolidation of the nation’s bank debt into one weekly or monthly payment for the nation’s workforce. Of course, those on lower incomes who are more reliant on State services are also suffering the double whammy of cutbacks as part of the austerity drive.
The universal social charge should be abolished and the previous tax regime — the income levy and health contribution levy — reinstated in the interim. We do not pretend that the introduction of levies on top of income tax was good and we opposed them. However, while the levies themselves were unwelcome, they were, at least, introduced in a progressive manner. The reason the wealthiest have gained from the universal social charge is that the income levy had a progressive rate structure, while the top rate for the universal social charge applies regardless of whether a person earns, for example, €20,000 or €200,000.
During the general election campaign the two Government parties signalled that they would maintain the low tax model. However, a low tax model does not equate with a fair tax model. A low income tax model hides the high stealth tax structure central to the tax system. Instead Ireland should build a fairer tax system by creating a progressive tax base that would tax fairly and equalise wealth. In order to ensure income taxes are progressive, the system should consist of a minimum of three tax bands and possibly more. The key is to have a transparent, streamlined income tax system without levies, charges or stealth taxes. The first step in moving towards this system must be the abolition of the universal social charge and reverting temporarily to the previous system which included some progressive elements in its administration. It is from this system that a reform of the taxation system should stem.
The people cannot afford to wait for a review of the universal social charge. During the debate on the Finance Bill 2011 Deputy Michael Noonan, now Minister for Finance, said, “The floor for the universal social charge — about €4,000 — represents a very low income, and the Minister should accept an amendment to raise this threshold, perhaps by €1,000.” According to the Minister for Finance and if the Government agrees that it is acceptable for somebody on €97 a week to pay tax, is this what we are to expect from the review?
Deputy Gerry Adams: I am somewhat disappointed that the Acting Chairman is the only Labour Party Member in the Chamber. While we can say what we want about Fine Gael, it is deeply disappointing that the Labour Party has aligned itself with the universal social charge. In December Deputy Shortall, now Minister of State at the Department of Health and Children, described it as little more than a working poor tax. She said it was a blatant and unjustifiable attack on the poor.
Throughout the general election campaign and since I have met many people in deep stress — people out of work, elderly people, people trying to rear young families, people in negative equity and in difficulties paying their mortgages. Other Teachtaí Dála — not just Sinn Féin Teachtaí Dála — have talked of having the exact same experience of meeting citizens in deep distress. One young mother told me she had a choice of either paying a bill or paying for food and, of course, she paid for the food. These are the people this tax hits the hardest.
During the general election campaign we said Sinn Féin would campaign to have this tax abolished and we kick-started that campaign today. We should not have to do this; it should not be necessary to have such a campaign. In a republic it should not be necessary to table such motions in this Chamber. I ask members of other parties to represent their constituents. This is not just about the economy, it is also about the type of society in which we live and the political choices we make. A bad Fianna Fáil-led Government made bad decisions in support of or in deference to political and other elites. These decisions obviously favoured the elites, not citizens. This universal social charge is essentially, as Deputy Doherty said, a flat tax. Everyone with an income of more than €16,000 pays at the same rate of 7%. Even those who have as little €77 a week are brought into the tax net. Teachtaí Dála should consider living on such a meagre sum. It breaches the fundamental principle of progressive taxation that those who have the most should pay the most.
The Government has promised a review of this tax and the Minister for Finance has said that it will be done in time for the budget for 2012, but a review is not good enough. Mar a dúirt an Teachta Doherty, ní chuireann sin bia ar an mbord. Labhair mé faoi na daoine bochta agus daoine eile. Tá siad faoi bhrú. Tá siad faoi strus ar fad. Tá sé an-shoiléir go gcaithfimid stop a chur leis an cháin seo.
Sometimes the question is asked, I believe simplistically, “Well, how would you raise revenue?” We proposed a third tax band for those earning more than €100,000. Coincidentally, that brings in €410 million which is almost as much as the €420 million that comes in from the universal social charge without the awful social consequences created by it. There has to be some way of starting to socially proof these matters and looking at the facts of the laws that are introduced. As far as I can see — I will be pleased if the Minister can prove the contrary — there is no evidence that this was even considered by the Government despite the fact that it was Labour Party policy until the middle of the general election. It then did a U-turn on the issue.
It is also bad economics. The people who are burdened and oppressed by this charge cannot afford to save money. They have to spend what they have to get by. This will have a punishing effect on all of the small indigenous businesses which are absolutely vital to the regeneration of our economy, in particular the re-employment of our people that will be hardest hit by deflationary policies.
The need to focus on social and economic needs and the purpose of an economy is something which the Government, with some advantage, could cogitate upon. These people are being hit hardest. My take on this is that part of the EU and IMF deal which the Government has bought into comprises austerity packages like this. The Government is compliant and complicit in the further impoverishment of the poorest people, including those who would never have seen themselves as economically vulnerable until now.
There is a better way to get the State out of recession, which we outlined in some detail. There is a better way of dealing with the IMF and the EU deal. I notice that the Government, whatever it does in Europe, is edging towards the Sinn Féin position. All of this comes back to political choices. There is a political choice to be made, namely, to get rid of this tax or maintain it.
Society can divide and social consequences of the tax is that it creates socially disadvantaged, discriminated against, cynical and sceptical people who have no sense of themselves. Out of that comes abuse, alcoholism, drug abuse, domestic violence, domestic abuse, low expectations, low educational attainment and all the rest. These are the seeds that this Government is sowing to once again widen the gap that the Taoiseach quite rightly proclaimed exists between Irish sections of citizens and the political establishment. The gap will not only deepen but will deepen with dire social consequences.
One can be alienated from a political system and still be well educated, articulate and even wealthy but when one is at the very bottom of the ladder with no hope of getting up that is bad for Ireland, our people and the project we are trying to advance in this Chamber. I call for Deputies across all political parties to vote with their heads and their hearts and not on the basis of their party Whip. The Government Deputies should not be ushered like sheep into the lobbies because they have a majority in the Chamber. They should vote decently on this issue and vote to abolish this charge.
Deputy Sandra McLellan: The Sinn Féin Private Members’ motion is calling for the abolition of the universal social charge. We are calling on the Government to abolish this unfair tax and ensure that all taxes and social insurance contributions are raised progressively so that those who have the most pay the most. We must be clear on this. It is a flat tax. It breaches the fundamental principle of progressive taxation. It is nothing short of a scandal that anyone with an income of over €77 a week pays this tax and it is utterly immoral that anyone with an income above €16,016 is forced to pay the same rate of 7% as a person with an income of over €100,000. How can the Government justify this?
When Fianna Fáil was in government, it chose to concoct a taxation policy that favoured the wealthy and those who were already bestowed with plenty by the Celtic tiger. When it fell apart, it brought in measures that specifically targeted those who are already on and below the bread line. Bankers and beneficiaries of tax breaks are untouchable. The people who are being penalised by the universal social charge are those who are already struggling to survive and those who can barely afford to put food on the table.
How can any Government Minister or Deputy hold his or her head up in this Chamber and attempt to tell any person in this State that this is a fair system? Sinn Féin is asking all of those who have claimed in the past to be opposed to such an unjust flat tax and those who campaigned on a platform of change during the general election to remember the promises they made to the electorate and support this motion to abolish the universal social charge. People simply cannot cope any more.
The Government cannot expect the poorest people to continue to pay for the economic catastrophe. One could not be criticised for describing the universal social charge as an indiscriminate mechanism of punishment for being poor. The Government should take heed of the Democratic Programme of the First Dáil to “secure that no child shall suffer hunger or cold from lack of food, clothing and shelter and that all shall be provided with the means and facilities requisite for their proper education and training”.
This would be far more meaningful and appropriate than vague aspirational commitments to review the universal social charge in the current programme for Government, followed by commitments to maintain the current rate of income tax together with bands and credits. The difference between the meaning of the words “review” and “abolish” is not lost on people. People cannot feed their children or pay their bills, their mortgages or their rent. They are going without food to pay for school books.
I have heard from people in my constituency who are going without so that they can put €20 aside each week out of an already meagre income in order that they can eventually have enough money to emigrate. Ordinary working families who have less should pay less. The Exchequer deficit will not be closed by continuing the inequitable imposition of the universal social charge. Toxic banks should not be saved while people are being sentenced to lifetimes of poverty by a Government which is neglecting them.
It is not good enough that the Labour Party and Fine Gael Deputies made no secret of their opposition to the universal social charge but now that they have their ministerial cars are refusing to get rid of it. I agreed with the analysis of the universal social charge by my Cork East constituency colleague, the Minister of State at the Department of Enterprise, Trade and Innovation, Deputy Seán Sherlock, who during the last Dáil described the tax as “woefully inadequate and inequitable” and a measure that “must be opposed”. I still share that analysis.
The universal social charge has not changed. It is for this reason that I am calling on all of the Deputies who still oppose measures that reduce the pay of those already on low incomes to support the Sinn Féin Private Members’ motion to abolish the universal social charge.
Deputy Brian Stanley: As my colleagues in Sinn Féin have already outlined,the universal social charge is totally unjust, unfair and regressive. It amounts to nothing more than an attack on the working poor. The level of stress and anxiety that people are faced with, living from hand to mouth on a daily basis due to the penalties arising from the universal social charge, is shameful.
My party is calling for the abolition of this tax due to its inequitable and regressive nature. The inequality involved is not good for the economy. It is wasteful and costly, not to mention plain wrong. The universal social charge is a mechanism to enforce poverty, which drains public resources. We would be far better off if everybody was enabled to make a full contribution using a progressive system of taxation where people are working and earning a decent income to spend money to support business and pay their fair share of tax, which will ensure the Government can provide services, social support and other infrastructure.
The universal social charge is nothing more than a device that makes the position of the working poor worse. Those who are locked in precarious low-paid employment at risk of, and in, poverty are the ones who need protection. In my constituency of Laois-Offaly, which has one of the lowest rates of income per head of population in the State, this will bite hard. When will the Government realise that the working poor have nothing left to give? Previous Governments failed to manage the economy to the benefit of everyone and the chosen few who benefited during that time are still being looked after by this Government, which bent over backwards during the general election to talk of change. The most vulnerable, those with large families, low-income workers, older persons and persons with disabilities, were failed by bad policies and choices in the past, and wrong priorities. It is these bad policies and choices and wrong priorities that are now being carried on to ensure it is still those who have least who are being compelled to bear the heaviest burden of paying the universal social charge.
Where is the change that was promised? There is no balance, fairness or justice used in this system. Both Labour and Fine Gael — I welcome the fact that there is one Labour Deputy back now to hear me — refused to commit to abolishing the tax despite their protestations when it was introduced by the Fianna Fáil Party. I note that the Government amendment to my party’s motion restates the programme for Government commitment to review the tax but, once again, fails to state the timeframe in which it will conduct this review. Flawed as the original income and health levies were, there was at least some small progressive element to them.
The Fine Gael-Labour amendment to the Sinn Féin motion states that “the reinstatement of the income and health levies would bring poverty traps back into the system”. It may come as a shock to the Government, and Members on the Government benches, but poverty traps have not gone away. If anything, they are worsening. The Government amendment is meaningless for the 275,000 who are so poor that they lack some of the basic necessities of life, including adequate food, shelter, warmth and clothing. Eliminating poverty traps, not blindly pursuing and embedding policies that advance them, should be a national goal and a priority for the Government.
Everyone is entitled to a decent quality of life and there is no reason this Government cannot scrap the universal social charge and replace it, as Sinn Féin has been calling for, with a higher tax band for those earning in excess of €100,000. From the Government’s perspective, the only reason to retain the universal social charge is to continue protecting those who are not vulnerable and at risk. I ask those in government, particularly those in the Labour Party who called for change during the election campaign, to support the Sinn Féin motion accordingly.
Deputy Caoimhghín Ó Caoláin: This is the first time Sinn Féin, as a party in its own right, has had the opportunity to table a motion for Private Members’ business — it was a long time awaiting — and to have it debated in the Dáil. It is a measure of our progress at the general election that this debate is taking place. It is a welcome development.
Sinn Féin has pledged to stand with those in Irish society who are being made to bear the brunt of this recession — those on low to middle incomes. We are fulfilling that pledge and we will continue to do so in this Dáil, in our constituencies and in communities across the State.
In every one of those constituencies the people delivered a resounding verdict on the disastrous misrule of Fianna Fáil and the Greens and, before that, Fianna Fáil and the Progressive Democrats. One of the chief results of that gross misrule, and one that reaches into nearly every household and into the pockets of the vast majority of workers, is the universal social charge. People are acutely conscious of the fact that they are being made to pay for the folly of a Government that refuses to require gamblers to pay their own debts.
Sadly, that folly is being continued by the new Fine Gael-Labour Party Government. We pointed out before, during and after the general election that Fine Gael and Labour accept the basics of the Fianna Fáil-Green Party Government economic strategy. Despite their rhetoric, they are fundamentally no different.
The parties now in government were careful to give the people a very different impression. Both Fine Gael and Labour poured no end of condemnation on the Fianna Fáil-Green Party Government — all deserved. They slammed the IMF-ECB deal, the budget and, in particular, the universal social charge. Let us remind ourselves of some of what Labour voices said. Deputy Burton, now the Minister for Social Protection, stated in January:
Deputy Róisín Shortall, now Minister of State at the Department of Health and Children, said, “The universal social charge is little more than a working poor tax”, and a blatant and unjustifiable attack on the poor.
The electorate were clearly labouring — no pun intended — under the impression that the so-called parties of change, Labour and Fine Gael, had the universal social charge in their sights. They were going to blow it out of the water, or maybe not. When the smoke of the general election cleared, the programme for Government did not propose to abolish the charge. It proposes a review.
A review is not good enough. The universal social charge is an attack on the poor. It squeezes those least able to afford it and is regressive. Why not scrap it instead of wasting time on a review? What are the timeframe and terms of reference of this review? That has never been explained. The Government could have indicated the terms of reference and the timeframe for the review in its amendment to the Sinn Féin motion. Instead this minimalist amendment states, quite unbelievably, that the reinstatement of the income and health levies would bring poverty traps into the system. Surely the universal social charge is one big poverty trap.
An economist who is, I believe, close to the Labour Party has shown that if the previous levies were reinstated, low income earners could benefit by up to €10 per week while higher income groups would lose out. This would help economic growth since low-income earners spend their additional income, while high-income earners have the option to save. As we clearly state in our motion, the reintroduction of the former levies would be an interim measure, pending root and branch reform of taxation.
This debate again exposes the consensus for cuts. The phoney Opposition party, Fianna Fáil, will troop in behind Fine Gael and Labour when the division is called tomorrow evening. That may provide political ammunition for the rest of us but, be assured, we would much rather see the universal social charge removed. That should happen now. If it does not happen now, then it can be the only just and fair outcome of the so-called review taking place. As my colleagues did earlier, I appeal to all Deputies to recognise that the substantive motion presented by Sinn Féin is worthy of their support.
Deputy Martin Ferris: In her speech on budget day, the Minister of State, Deputy Róisín Shortall, correctly described the universal social charge as a tax on the working poor. It is another tax on the working poor. For many of those working poor, it is literally the difference between being able to make ends meet or not.
During the course of the election I had the experience of going to the house of a woman, a single parent who has a low-income job in the public service and is paid €760 a fortnight. She told me her target was to have €5 left over every Monday morning so she could have enough petrol in her car to drive her daughter the few miles to school in Tralee. Her daughter is 17 years of age, is in her leaving certificate year and hopes to get a place in Mary Immaculate College and become a primary school teacher. The mother does not drink, smoke or socialise. In another house I visited I met a couple and what struck me when I entered their house was how cold it was. That was because they did not have enough money to pay for oil for heating. They could only buy oil in five or ten-gallon drums and could not fill their oil tank. These examples demonstrate the state the country is in and the state in which the working poor are living. The working poor are penalised by the political establishment. I cannot fathom how no Government has the guts to challenge the wealthy and elite of this country. How is it that when the Government needs finance and must impose taxes it targets the weakest and most vulnerable in society? In the past few hours, we have debated the Moriarty report, Denis O’Brien and what went on at the time. Now, once again the elite have managed to compromise the political establishment and the House. That is what the universal social charge is about.
The Labour Party is in coalition with and supports the Government. The Labour Party gave commitments during the election that it would introduce a third rate of tax and abolish the universal social charge. However, it has moved away from that position. Why is that? Is it because we take it for granted that the working poor will accept their lot? It is time for our politicians here to be prompted by their social conscience and for our elected representatives to stand up for those most in need. They must bring a conscience back into this Chamber, a conscience that will deliver for working people throughout the country. It is time and not before time for the trade union leadership, which expressed its opposition to the universal social charge and supported the Labour Party during the general election, to use its influence on the elected Labour Party representatives. It must use its influence to bring a conscience back into the Labour Party, a conscience that will deliver for the poor in society and for those who are marginalised, discriminated against and damn well blackguarded by the political establishment of this island and House.
I challenge every Deputy on the Government side of the House to state categorically that they will abolish this unjust and unfair tax on the poor in our society. They must come out and stand by workers and ensure they will do all in their power to ensure that those who have most will pay most in order to get us out of this mess. We must not continue to penalise the poor. Sinn Féin will stand by the working poor and will be there to represent them and be a voice for what, in many instances, is a voiceless community. The Labour Party should stand by its roots and James Connolly. Would James Connolly be proud of a Labour Party in government with a right wing party that is imposing further tax on the poor? The Labour Party needs to ask that question. It should stand up for the poor in society and not get into bed with right wing politics that has contaminated the political system and the State.
When we vote on this issue tomorrow night, the Labour Party Members should remember that if they vote for the so-called review, they are voting to push the issue down the road and forget about it. They are voting for shoving it down the road so that the people forget about it because once it has been implemented the people get accustomed to it. If they vote for that, the Labour Party Members are voting for the universal social charge as implemented, further penalisation of the working poor, a continuance of everything that has been done before they came into power, and voting to protect the likes of Denis O’Brien and his cohorts. They will perpetrate an awful injustice on the people if they go down that road.
Deputy Brian Hayes: I welcome the opportunity to debate this issue in the House. I am not sure whether Deputy McLellan was making her maiden speech, but I listened intently to what she said and congratulate her on her speech. She referred to the democratic programme in the first Dáil. She was right to highlight the aspirations of that democratic programme. However, she did not refer to another inimical part of the programme, which established, particularly by the then Minister for Finance, the view that we must have balanced budgets. It suggested that the only way Ireland could express its independence in that fledgling Government and first Dáil was through the ambition that the country could stand on its own, have balanced budgets and be prepared to pay its way in the world and not kick down to another generation the appalling legacy of previous British rule at that time, or in the case of our generation, that Fianna Fáil legacy. We make no apologies for our Government in addressing that issue today.
Deputy Ó Caoláin referred to the consensus for cuts. In Northern Ireland, where Sinn Féin is in government, it has had no difficulty in signing up to and subscribing to a budget which, effectively, introduces cuts across many key public services.
Deputy Brian Hayes: I find it difficult to stomach that a party can lecture the two parties of the Government about austerity when, in terms of its Administration in Northern Ireland, it is very good at austerity. It is very good at challenging the notion of James Connolly, as suggested by Deputy Ferris. What would James Connolly do in the case of budgets in Northern Ireland being opposed with such ferocity by Sinn Féin Ministers in charge of that Government. What is sauce for the goose is sauce for the gander, applies here.
Deputy Brian Hayes: The Government makes no apology in setting out its ambitious programme for Government. The first aim of the Government is to renegotiate the terms of the IMF-EU deal. We believe the deal is not working for Ireland and that it must be renegotiated so that we have a path to growth that will get the country back on its feet. We believe the issue of interest rate payments on the package of funds must be renegotiated. We also believe in the renegotiation of a bank restructuring scheme across the European zone and in renegotiation of the terms of the debt that applies in this country. We stand by this first principle, which is contained in the programme for Government.
Second, we make a clear commitment that we will get the deficit down to 3% by 2015. It is because of our belief that we must pay our way in the world and resolve the historical legacy we face from our immediate predecessors that we want to address that issue. We have made difficult choices. For example, we have said that in terms of the aggregated adjustment for 2011 and 2012, we will stick by the general parameters set by the previous Government. I remember the election campaign in my constituency. I have not been elected by any elite and will not accept that cheap jibe from anyone. I was elected by ordinary people in Dublin South-West, ordinary people concerned about the fiscal position of the country who want to address that position and get us out of the cycle of no growth and an utter dependency on an international package that is not delivering for the country. We want to ensure that this country gets back onto a growth path. However, if we are serious about addressing this issue, we must confront the fundamental fiscal reality that faces this country right now due to the mismanagement of the previous Government.
Sinn Féin seeks the immediate abolition of the USC and the reinstatement of the income and health levies, as outlined in its motion. I believe this would be a foolhardy action in advance of a full and proper review. The terms of reference for the review of the USC are being finalised and the Minister has already invited Sinn Féin and any other interested parties to make submissions. I reiterate that view. If people believe there is a better way than what has been put in place by the universal social charge——
The call for the immediate abolition of the USC and reinstatement of the income and health levies is entirely impractical. First, it would not be either simple or straight-forward to reintroduce the income and health levies. For example, the legislation governing the health levy has been repealed and no longer exists in law. So even if it were considered desirable, and I believe it is not——
Second, changing the tax system during the tax year presents significant problems. In this case, there would be a mixture of charges where the USC would apply on income for the first three months of the year and the income and health levies would apply for the following nine months. It is difficult for me to assess what the impact on individuals would be at this stage but I believe we would have a situation where there would be significant overpayments and underpayments of tax. These would require end of year reviews by Revenue and in some cases would result in very painful additional charges being imposed on some taxpayers. We argue that this is not practical in current circumstances.
Third, such an approach would impose a significant cost and administrative burden on employers and payroll companies. None of this would be in the interest of business or employment prospects for the economy. Finally, it has to be recognized that the USC is expected to raise €4 billion in a full year. We cannot afford to jeopardize that by abolishing the charge in a haphazard manner.
It has been claimed by the Deputies opposite that the USC is a regressive charge. This is not correct. It is a fact that the more one earns, the higher the percentage of one’s income is paid under the USC. When the USC is considered in the broader context of how we tax income generally, the overall effect is highly progressive.
According to a recent European Commission publication, Monitoring Tax Revenues and Tax Reforms in EU Member States 2010, Ireland has the most progressive taxation of income of EU member states in the OECD. The data shows that almost all EU countries have progressive taxation systems. On a rating system where less than 100 is regressive and above 100 is progressive, most other EU countries have a progressivity rate of between 120 and 130. By comparison, Ireland has a progressive rate of 174. The independent commentators who compare the taxation systems of different countries do not accept the charge that our taxation system is not progressive.
Examples are given of the USC charge on someone earning €16,016 compared with someone earning €100,000 per annum. It is important that we are honest about this issue, look at the total tax liabilities and not just one part of them. An individual earning €16,016 in 2011 will be expected to pay €440 over the entire year in taxes. An individual earning €100,000 in 2011 will be expected to pay €40,867 in taxes and charges. It is absolutely clear that the greater a person’s income, the greater the amount he or she pays. Given the stated position of the party opposite, I find it difficult how it would oppose this based on the argument of whether or not this is a progressive system. If we want a genuine debate in this country, as opposed to the Punch and Judy gombeen politics that have been served up for too long, then we must be honest about this and not play to the gallery, saying one thing to the public but another thing behind their back.
Deputy Paschal Donohoe: I second the Government’s amendment to the motion. I would like to begin by acknowledging that nobody wants to pay tax. In particular, nobody wants to pay higher rates of tax. We do not want to find ourselves in a situation where we are asking people to pay more tax at a time when they have less money. If we look at what our economy has gone through, there are two points that are pertinent to our debate this evening. The first point is that since 2007, the national income has declined by 19%. Across the same time period, the tax take in our economy has declined by 33%. The rate and the amount of tax revenue coming into our economy is declining at a far faster pace than the economy itself is declining. That is related to the fact that until the middle of 2010, about one in two people did not pay any income tax. If we want to make our State secure, make it sovereign, and to ensure that the aspirations of the first Dáil are delivered this year, we must find a way for the income raised in this country to pay for the expenditure that goes out. While that does not happen, there remains the core of our fiscal bankruptcy and the core of the political bankruptcy that we are also enduring.
Before any cost of banking recapitalisation is endured, the deficit for this year is €14.5 billion. The continuation on that path for the State will mean that the ordinary people that I represent will suffer the most, such as the working poor, the poor who are not working and everybody in between.
In his contribution, the Minister of State, Deputy Hayes, touched on one figure that is at the core of the debate. The universal social charge will raise €3.3 billion this year, €4.1 billion next year, €4.3 billion in 2013, and €4.5 billion in 2014. However, we continually hear Sinn Féin Deputies say that the universal social charge is bringing in €400 million. Deputy Adams claimed this on the floor when I was seated, but the reality is that it is bringing in tenfold that amount.
Deputy Paschal Donohoe: In checking this out, I took time to view Sinn Féin TV, which is embedded in the party’s website. It contains some fantastic hits. On 7 February 2011, I watched Deputy Doherty say on the channel that the universal social charge brings in €420 million per year. That is exactly what Deputy Adams said a few moments ago on the floor of the House. That is not true. The reality is that this charge will bring in €4 billion per year, which is ten times as much as that claimed by Sinn Féin.
Deputy Paschal Donohoe: I will be generous to Sinn Féin by attempting to explain from where the figure came. The figure relates to the additional income that would be brought in by the universal social charge if the health and social levies were rolled out.
Deputy Paschal Donohoe: I will examine that. During the general election campaign, Sinn Féin said again and again that it would abolish the universal social charge and pay for it by introducing a third rate of income tax. According to figures published by Sinn Féin — in fairness, they were costed by the Department of Finance — the third rate of income tax would bring in €400 million per annum. The Department estimates that the universal social charge will bring in €4 billion each year. The reality is that the claim peddled by Sinn Féin during the general election campaign had a black hole of €3.6 billion.
Deputy Paschal Donohoe: We should examine those levies and the detail of what Sinn Féin is proposing. The detail of the income levy is that somebody who earns between €15,000 and €75,000 pays 2% of their income. The detail of the health levy is that somebody who earns between €26,000 and €75,000 pays 4% of their income. The cumulative total is 6%. That is the total that needs to be paid when the two levies are combined. Sinn Féin is now proposing to get rid of one charge, which involves the imposition of a levy of between 6% and 7% on somebody on the average industrial wage, and replace it with two old levies, the combined effect of which would be the imposition of a levy of 6%. Is Sinn Féin being clear? I do not see such clarity in its motion or on its website, on which this proposal is advertised.
Deputy Paschal Donohoe: The cumulative effect of those levies would be to require somebody on the average industrial wage to pay 6% of his or her income. How can that be reconciled with the Sinn Féin rhetoric of abolishing the universal social charge and taxing the rich so the working poor do not have to pay? The reality of what Sinn Féin is proposing is not the abolition of the universal social charge — it is the renaming and rebranding of the charge. That is all it would mean to the average person who is paid an industrial wage in this State. That is the reality of the matter. There is a stark difference between what Sinn Féin says in this motion and what it said during the general election campaign. I never heard anyone from Sinn Féin say during the campaign that the party wanted to reinstate the health and income levies.
Deputy Paschal Donohoe: I will tell Deputies what those people want. They do not want to pay the universal social charge any more than it needs to be levied on them. They want their schools and hospitals to be open.
Deputy Paschal Donohoe: They want this State to be able to exit the arrangement that has been imposed on us, which means that our fate is being determined by other people. Honesty is needed if that is to be possible. The people need to be told from where the figures will come. They need to have it explained to them. There is a better way, but it is not the Sinn Féin way.
Deputy Paschal Donohoe: We need to find a way to make our State secure. We need to find a way of making it sovereign. We need to find a way of making sure we can pay the wages of the people who provide our public services. We need to put in place a tax system that meets the aspirations and needs of the people who serve it.
Deputy Paschal Donohoe: The party that has brought this proposal before the House claims it involves the abolition of a tax that is generating €400 million per annum, but the reality is that it is generating €4 billion.
Deputy Kevin Humphreys: As this is my maiden speech, I would like to begin by taking this opportunity to thank the voters of Dublin South-East for entrusting me with their votes and electing me to the 31st Dáil. It is a great privilege that I do not take lightly. This is a difficult time for the people of Ireland. As a Government, we have a responsibility to ensure we fix our economy and rebuild our society, which should be anchored in the principles of equality of solidarity. I listened to this debate in my office throughout the evening. I would like to make a commitment not to heckle speakers in this House.
Deputy Kevin Humphreys: I will take the time to listen to the contributions of others. I have watched Dáil debates from my home over the years. Far too often, I have been reminded of college debates in which students heckle and criticise each other.
Deputy Kevin Humphreys: We need to listen to each other. Everybody in this House has a mandate. Each of us has been elected by ordinary working people who want us to work together to fix this economy. I am giving a commitment to the Members of this House that I will take the time to listen to their contributions. I will heed what they say and consider the suggestions they make. No one Deputy in this Chamber has all the solutions. We need to take the time to stop heckling and talking over one another. Instead, we should really listen. The voters of Pearse Street, Ringsend and other parts of Dublin South-East have asked me to listen to others in this Chamber and to do my level best in an honest manner. That is what I will try to do. Everybody has a viewpoint.
I listened to the contributions of the Deputies who have been elected to represent Sinn Féin. There were some good points in what they said. We need to listen to one another. We should get over the idea that members of other parties are wrong in every respect and need to be criticised and heckled. If we are to fix this economy, we have to learn to work together. I listened to Deputy Ó Caoláin when he said this is the first time Sinn Féin has been in a position to table a Private Members’ motion. I welcome that, just as I welcome the constructive nature of much of what has been said this evening. It has been a positive debate. It shows us a way of going forward.
I welcome the Minister of State’s confirmation that this measure will be reviewed. All of us must work and act together to get the best deal possible for the Irish people. Too often, Members assume that Members on the other side of the Chamber are automatically wrong, or that the manner in which the Government is proceeding is wrong. We made it clear in the programme for Government that there will be a review. This evening, the Minister of State asked for submissions in that regard. Like many Deputies in this Chamber who have definite views and beliefs, I intend to make such a submission. I am one of those who said that a review of this charge was badly needed. It has to be changed. It is not good enough for anybody here to massage the figures or argue about whether a change would bring in an extra €400 million, or cost an extra €1 billion. We all know how this is affecting the economy and ordinary working people. We have done the biggest of consultation exercises over the past several weeks. We have to listen to the people who realise there is going to be pain but who need to see light at the end of the tunnel. We share a responsibility to work together on building a progressive taxation system. The motion Sinn Féin proposed is welcome but it is premature. Less than two weeks ago we voted on a strategy which included a review of the charge. I will work within my party in Government to ensure the views of all Members are taken into consideration because we owe that to the citizens of Ireland, including the people in Tralee to whom Deputy Ferris referred and the people in Ringsend who cannot afford to send their children to college. This suffering is not of our making, however.
I will support the amendment proposed by the Minister of State, Deputy Brian Hayes, because it represents a constructive engagement. I look forward to the establishment of the committee system because, by working together as a House, we can develop strategies that will fix this economy. We should not be jumping in so quickly to make political points. Deputy Ó Caoláin stated that he would prefer to see change in terms of winning the motion than to score points but the way forward is to work with the review to make the submissions and sit down with the Government to work out solid proposals that will allow this country to recover.
We saw what the banks did with their speculative activities. Their gamble did not pay off but this country must repay the debts. We will be required to impose taxes. There is going to be hardship. When I knocked on doors, people asked me to assure them there would be light at the end of the tunnel. The next two years will be hard but the programme for Government shows hope for the future and the review of the universal social charge will result in positive changes. On one road I visited during the election campaign, every second household was affected by the forced emigration of friends or family members. They had to emigrate because there is no work. These are our best people and significant sums of money were invested in their education. Among their numbers were skilled trades people and university graduates.
This Government has worked extremely hard. Within four weeks of the election we are debating real policies in this Chamber. Every previous Dáil was in adjournment four weeks after its election. Urgency is needed but we must also consider measured proposals. The motion proposed by Sinn Féin is a mature one and the contribution by that party’s Members have been useful. I look forward to working with all Members on resolving the problems for the future. This charge has to be reformed. When I met voters at the doors, I stated it would be reviewed because we did not have instant answers. I will be proactive in that review and I look forward to making major changes as a result.
Goilleann sé orm nuair a cheapann páirtí polaitíochta sa Teach seo gur aige atá an ceart morálta faoi chuile ceist. Tá daoine ar chuile thaobh den Teach gur cúis leo gnáthphobal na tíre. Is minic go bhfuil dea-rud déanta, mar shampla, ag Sinn Féin, mar a chonaic mé féin san am a chaith mé ar Bhóthar Gharbhachaidh, ar Bhóthar an Fhuaráin Mhór, ar Bhóthar na bhFál, ar Bhóthar Bhaile Andarsan, i mBaile Uí Mhurchú, i dTaobh an Bhogaigh, agus le pobal an Droichid. Ní raibh aon bhuntáiste ann seachas do ghnáthphobal na tíre. Creidim go bhfuil mé agus mo leithéid chomh dáiríre faoin bpolaitíocht agus atá Sinn Féin. Ní chreidim go bhfuil an ceart morálta ar fad ag Sinn Féin agus tá lochtanna ar chuid dá pholasaithe.
Tá mé sásta éisteacht agus breathnú ar gach moladh a chuirtear chun cinn. Tá sé tábhachtach go mbrathnófar ar na ceisteanna seo ar fad. B’fhéidir go bhfuil cuid de mhíniú an rúin ann i ngeallúint a thug Sinn Féin go gcuirfeadh sé deireadh leis an muirear sóisialta uilíoch; tuigeann an páirtí anois nach féidir leis sin a dhéanamh, agus mar sin, caithfidh sé na sean-dleachtanna a chur ar ais.
Má táimid dáiríre faoin gceist seo, tá dhá rud ann: an córas féin agus an leibhéal ag a mbaintear cáin ó dhaoine éagsúla. Dhá rud difriúil ar fad iad. Tá Sinn Féin ag iarraidh dul ar ais chuig an seanchóras a bhíodh ann. Duine a bhíonn ag plé le duine atá ar pháíseal atá ag iarriadh tuairisceán cánach a chur isteach, tá a fhios aige go bhfuil an córas faoi láthair bun os cionn agus nach dtuigeann an gnáthphobal é. Is iomaí uair nach gcuireann daoine isteach tuairisceán cánach mar cheapeann siad go bhfuil an scéal ró-chasta.
An chaoi go bhfuil cúrsaí go dtí deireadh na bliana, tá ceithre asbhaint á ndéanamh as pá chuile duine —ÁSPC, an tobhach sláinte, an tobhach ioncaim agus cáin ioncaim. Rud ar bith a laghdaíonn líon na ndleachtanna sin, is ar son an phobail atá sé. Éinne atá ag iarraidh dul ar ais chuig an seanchóras, is siar atá siad ag iarraidh a dhul.
Ceann de na rudaí a chuir mise romham nuair a chuaigh mé isteach sa Roinn Coimirce Sóisialaí ná go ndéanfaimid laghdú ar líon na rátaíÁSPC atá sa taobh seo tíre. Ag an am sin, bhí thart faoi 36 ráta ÁSPC ann. Ní dócha gur thuig éinne ar thalamh an domhain cén chaoi a raibh sin ag oibriú. Ba cheart go mbeadh chuile duine, féin-fhostaithe nó fostaithe, ag íoc ÁSPC ag 4%.
Ba cheart freisin deireadh a chur leis an teorainn ioncaim ag a n-íocann daoine ÁSPC; ní raibh daoine ag íoc ÁSPC thar ráta áirithe ioncaim go dtí an bhliain seo. Mhol mise don Aire Airgeadais go gcuirfí deireadh leis sin agus ar gach ioncam a bheadh ag duine, go n-íocfaí4%, féin-fhostaithe nó fostaithe. Tharla ansin go mbeadh buntáiste le fáil ag duine as ucht an ÁSPC a íoc. Tá an leasú sin curtha i bhfeidhm agus creidim gur fearr a thuigeann an pobal córas mar sin ná córas le 36 ráta éagsúil.
Tá roinnt obair bhreise le déanamh. Ní thuigim cén fáth nach bhfuilimid ag íoc an ghnáthchórais ÁSPC sa Teach seo, táimid ag íoc an 4% anois ach ba cheart go mbeadh chuile fostaí sa tír, agus chuile duine féin fhostaithe, ag íoc 4% ar ioncam saothraithe.
Ansin, bhí an coras tobhaigh shláinte agus an córas tobhaigh ioncaim ann. Bhí sin casta mar bhí an tobhach ioncaim curtha isteach leis an ÁSPC; bhí daoine ag íoc tobhaigh shláinte ach go minic cheap siad go raibh siad ag íoc ÁSPC ach ní raibh aon bhuntáiste dá bharr agus, dar liom, dearmad a bhí ann. Tá sé thar am againn leasú a dhéanamh ar an gcóras ó bhun go barr. Is rud é sin a thógfaidh roinnt mhaith de bhlianta, mar tá sé deacair leasuithe a dhéanamh gan mhíbhuntáiste a bheith ann do dhuine ar bith.
Ó thaobh an fhostaí de, ba cheart breathnú ar an iomlán: ÁSPC, tobhach ioncaim, tobhach sláinte, nó mar atá anois, an MSU, agus cáin ioncaim, agus breathnú ar thionchar an iomláin ar an duine, ní ar cad a dhéanann aon cheann acu faoi leith. Sin mar a bhreathnaíonn an duine air, cé mhéid a baineadh as an phá ag an Stát. Is cuma leis cén lipéad atá air, sin atá sé ag iarraidh a dhéanamh amach. Ba cheart an córas cánach a dhéanamh níos simplí. Go fad-téarmach, d’aontóinn le Sinn Féin, ní cheart go mbeadh ann ach an córas cánach agus an córas ÁSPC agus ba mhaith liom dul ar ais go dtí an pointe sin.
Maidir leis an gcóras cánach, ba cheart fáil réidh leis na faoisimh bheaga ar fad. Thosaíomar ag déanamh sin le blianta beaga anuas, mar shampla, an faoiseamh a bhí ann do bhruscar agus an faoiseamh a bhí do ranníocaíocht le haghaidh ceardchumann. An fáth nár aontaigh mé leis na faoisimh sin ná an dream ba mhó a bhí ag fáil buntáiste mar thoradh orthu ná an dream a bhí eolach faoin gcóras agus a thuig leis an bhfoirm a líonadh agus na liúntais ar fad a tharraignt. Is minic a tháinig daoine agus an iomarca cánacha íoctha acu mar bhí faitíos orthu tuairisceán cánach a chur isteach. Bhí siad ar ioncam íseal, agus mar sin, níor tharraing siad na liúntais ar fad a bhí ag dul dóibh. B’fhearr liomsa, agus leis an bpobal, go mbeadh liúntas saor ó cháin maith ann agus go bhfaighfaí réidh leis na faoisimh bheaga nach bhfuil ann ach anró do dhaoine agus go bhfuil formhór an phobail ina dteideal ar aon chaoi. There is much I could say on this. There is much more we could say about reform, which we will have an opportunity to discuss.
The Government says it will carry out a review of the universal social charge. We need fundamental reform of income tax, PRSI, the USC and all levies taken from people’s wages. I hope one of the first things that will happen is that committees will be set up and the Government will ensure we have an opportunity to discuss these issues in detail. Because of my time as a co-op manager when I dealt with wages manually, I have strong views on the tax system. During most of the period that Fianna Fáil was in Government, from 1997 to 2008 or 2009, we managed to take many low-income people out of the tax net. I was in favour of that. I could not understand the logic of paying family income supplement to a person while in the same week taking income tax from him or her. I do not go along with the idea that during our years in Government we did not do much to take the low-paid out of the tax net. In fact, we did an unprecedented amount. If any Deputies were doing wage slips back in the 1970s and 1980s and manually taking off tax, as I had to do every week, they would have seen the major change that occurred in recent years when low-paid workers were taken out of the tax system, to the extent that 45% of people with an income were not paying tax.
Another thing I do not agree with is an automatic exemption from levies, income tax or any other tax for those receiving social welfare payments. There are many people receiving social welfare payments who have astronomical incomes. The case of widows and widowers is always cited. Because everyone, self-employed or employee, pays PRSI, a person could be on an income of €150,000 per year while receiving a widow’s or widower’s pension. This is quite legitimate. Such people do not pay a levy on their pensions. When one looks at it in the cold light of day, one must ask why such people should be exempt from paying the USC, the income levy or the health levy. The exemptions should be based on income and not on whether, due to some circumstance, a person is receiving a social welfare payment. There is no relationship between one’s income and one’s entitlement to a social welfare payment in the PRSI system.
There is another issue on which we must move carefully, and we amended the provisions in this regard in the Finance Bill. I did not agree with the connection between medical cards and income tax, health levies and other wage deductions. What happens in practice, as we all know, is that if the medical card is linked to income tax, it inhibits people from improving themselves or their wages. When a person loses his or her medical card, he or she must start paying all the income levies and health levies ab initio, which results in a loss of money. This means that people do not want to take overtime or improve themselves. It is regressive. It is much better to link all reliefs to people’s actual income. This results in a much fairer system, because all the money goes towards giving relief to people on the lowest incomes. The other system creates all sorts of poverty traps and irrationality — particularly that of the medical card — which have held many people back. I suggest that the money saved by not using the medical card as an income test be put back into adjusting the income limit.
I would have had much more sympathy for the Sinn Féin motion if it had been more up-front. It is a bit of a cod. The Minister pointed to an inconsistency in the motion. If Sinn Féin wanted to be transparent, it would have said that nobody should have to pay the USC on a certain portion of their income, but people should pay 2% on the next portion, 4% on the next portion, or whatever. It should not have recommended that we revert from the USC, which is at least a combined single system, to the old dual system with all its levels and traps, which was totally flawed. One can argue about the level at which the USC kicks in — we would all much prefer if the level was higher — but there are challenges involved in raising the money required.
I would love to have access to the computer again. I was trying to get information from the Department of Finance yesterday. I was told to table a parliamentary question, but that was not much good for tonight.
Deputy Éamon Ó Cuív: It is quite simple. The USC is better than the combined system. However, none of us likes to take money from the low-paid — I certainly do not like it. If we are unhappy about how much is being taken from the low-paid, then we must come up with a system in which, for example, the first €10,000 is exempt, 2% is paid on the next €10,000, 4% on the next €10,000 and so on. What level would have to be chosen to obtain the same income?
That brings me to the point that we now have a better system. Sinn Féin’s problem with this — it wants to go back to the income levy — is that the USC is applied to incomes that are too low. If that is its argument, it must explain what kind of USC it wants and where it would pitch it. It must then tell us where it will make up the missing money. That is the challenge.
Deputy Éamon Ó Cuív: The problem with wages is that there is a pyramid. In other words, when one starts working up through salary levels, one finds that — despite popular myth — there are not many people at the €100,000 level, so large amounts of tax must be paid to raise the required amount of money. I will come to that issue shortly.
It is important for us to recognise — the penny dropped for the Government when it got into the hot seat — that if we do not reach our fiscal targets, it is not just a question of being €400 million, €500 million or €600 million short. Not only would we fail to be in a position to borrow that extra €400 million or €500 million, the other €16 billion could not be borrowed with it either. That is our dilemma. While I do not like it any more than anyone else in the House, the fact is we are borrowing as much as we can this year. There is no easy answer such as taking the low-paid out of the tax system and borrowing another €500 million. It simply cannot be done because no one will give such a loan. To follow the logic of such a scenario, we would really be in cutback territory because one third of the State’s income would disappear overnight. The €16 billion borrowed to keep services going would not be available anymore. This would mean cutbacks in the health, education and social welfare budgets because 80% of the spend goes on them.
Deputy Éamon Ó Cuív: As a pragmatist, I know if one goes beyond a certain tax threshold it may become economically regressive. Instead of helping increase returns, it could actually diminish them. A debate is needed in which people can state what they believe to be the top rate that can be charged on the combined figure of PRSI, levies and tax without it becoming regressive. It is an argument many of us heard on the doorsteps during the recent election. Last year pensioners, such as retired teachers, engineers, informed me they paid 60% and 70% tax rates on modest incomes in the 1970s and 1980s. Fortunately, I never paid such high tax rates as I never had the income to pay them. Middle Ireland will not accept paying over a certain tax threshold, a fact which we must be realistic about when debating this matter.
While not justifiable, in the past we saw such high tax rates lead employers to pay three-quarters of their employees’ salaries through the books while the remainder was slipped under the table. I do not want to go back to that world. It is one reason I believe taxes should not be too high. High taxes tempt people to cheat paying them which they then start to self-justify. In the past I saw straight businesses put at a serious disadvantage by their competitors who were not entirely in the black or white economy but the grey economy. These are the issues we must address when resolving our economic challenges.
Rather than Members slamming those on the opposite side with ex cathedra statements, it must be agreed there are huge issues facing us if we want to make a better, fairer and understandable tax system. A person should not need to have a computer to work out their tax. I would like to be part of a detailed debate on income tax, the universal social charge and PRSI from which a much better package than the existing one could emerge. We must also examine how we can ensure people are not penalised disproportionately by the tax and levy system. The challenge is to see, in a time of tight public finances, how one can move people to a more equitable, transparent and understandable system while ensuring one does not take a disproportionate amount from one sector, particularly from the low paid who have always been my concern.
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