Thursday 27 October 2016

Kenny gets his tax facts wrong, say economists

Published 27/06/2015 | 02:30

Taoiseach Enda Kenny has been criticised by economists
Taoiseach Enda Kenny has been criticised by economists

Taoiseach Enda Kenny has been criticised for saying the international bailout in this country did not lead to higher income taxes and higher valued added tax.

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Mr Kenny made the comments in Brussels this week when discussing proposals for higher taxes in Greece.

He said proposals from Greece had to make economic sense.

"In Ireland's case, we did not increase income tax, we did not increase VAT, we did not increase PRSI, but we put up alternatives to those measures proposed in order to keep a pro-growth policy and make our country competitive, grow our economy and provide jobs for our people," he said.

But the Taoiseach's comments were flatly refuted by economists.

University College Cork economist Seamus Coffey said: "He is clearly wrong. Everything he said we didn't do, we did do."

The lecturer said VAT (value added tax) was raised, there were changes to Pay Related Social Insurance and changes to income tax since the bailout was put in place.

And IBEC economist Fergal O'Brien said there was €7bn in extra taxes imposed during the bailout.

The brunt of the income tax hikes were imposed on middle-income earners.

"Austerity of around €7bn has been imposed in terms of extra taxes, with this falling hardest on middle-income earners," he said.

A family with one earner on €40,000 is paying €1,200 a year in extra income-related taxes since the Troika came here, according to calculations by Micheál Collins of the trade union-backed Nevin Institute.

He said the Fine Gael-Labour government had increased VAT from 21pc to 23pc soon after it came to power in Budget 2012, unveiled late in 2011.

This cost the average household €207 a year.

The PRSI weekly allowance was abolished the following year, in a move that cost employees more money.

The minimum PRSI contribution for the self-employed was increased that year.

And the universal social charge (USC) standard rate was applied to the over-70s with income over €60,000.

There were a raft of changes to income taxes after the Troika bailed out the State, and after the deal was agreed in November in 2010.

These included changes to the tax credits - the amount you can earn before you pay tax - and changes to the income tax bands.

The USC was introduced in Budget 2011, which was announced in December 2010.

Referring to the Taoiseach, Dr Collins said: "His comments seem intent on highlighting the Irish way of doing a bailout - but his memory of that bailout, including some of the adjustments that the government he leads has delivered, is simply incorrect."

He said that since the Troika arrived in Ireland in November 2010, there have been increases to income taxes, increases in VAT and changes to PRSI.


Value added tax was increased in Budget 2012, which was announced in December 2011 by Finance Minister Michael Noonan.

The standard rate, which applies to a huge range of goods and services, was increased from 21pc to 23pc.

The standard rate applies to a range of goods and services from telephone bills to car parts.

Also on the list for the high rate are detergents, diesel, fridges, furniture and furnishings, hardware, jewellery, washing machines, and bottled water.

This means it is one of the biggest hits to household incomes of all the austerity measures.

Dr Micheál Collins of the trade union-backed Nevin think-tank has estimated that the decision to raise the standard VAT rate is costing the average family €207 a year.

At 23pc, Ireland's standard VAT rate is a fifth higher than the international average and not far behind Hungary, which at 27pc charges the highest VAT in the world, according to a report by the Organisation for Economic Cooperation and Development.

Irish Independent

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