Ruins of war await our next government
The passage of the outgoing regime was like the 'Charge of the Light Brigade', writes James Fitzimons
Published 06/02/2011 | 05:00
The next government needs to make restoring public confidence its number one priority. That may seem to be a tall order but it is achievable, and with it everything else should start to fall into place.
If we are honest with ourselves about our economic problems, then we can make things better. No solution will be perfect, but nothing could be worse than what was inflicted on us in the last two years. If we re-evaluate what needs to be done about the banking crisis in Europe, we might fix our own financial problems. Anyone who suggests renegotiating the ECB/IMF deal is branded a socialist.
Joe Higgins spelled out how the European banks impacted on our own banking problems for Mr Barosso. It wasn't what Mr Barosso was accustomed to hearing.
But Mr Barosso, Ms Merkel and Mr Trichet are all willing to sit back and watch us suffer once it gives them time to save their own contaminated banks.
Finance Minister Brian Lenihan played along with them when he should have been looking out for us. It was like the foolhardy Charge of The Light Brigade in Tennyson's poem. "Not tho' the soldiers knew someone had blundered... Charging an army while all the world wondered."
In much the same way, Brian Lenihan recklessly committed us to financial ruin.
Meanwhile, due to another blunder in Nama, Paddy McKillen won his case in the Supreme Court and his property seems to be protected for the moment. The taxpayer may be left to foot the bill once again. Is anyone to be held accountable for this blunder? The CEO of Nama gets a 60 per cent bonus. That's about €250,000.
Failure of this type might warrant the use of the new Universal Social Charge (45 per cent) for what was brought in last week to tax bankers' bonuses. Now that we have it, why not use it? The same might apply to claw back millions paid to experts who got it wrong.
It's time to balance tax and public spending. Eamon Gilmore would tax incomes over €100,000 at penal rates. This is clearly supported by Fianna Fail, who increased the Universal Social Charge for the self-employed earning above €100,000.
While it may be fair for this group to bear a higher share of the tax burden, it must be remembered that most of these people work hard for what they get and everything may be spent supporting their families and paying their mortgages.
House prices were pushed up to unsustainable levels in the boom. It is wrong to apply unduly high tax rates to any income that is needed to maintain a reasonable lifestyle. A lot of the people in this category have no disposable income after meeting their normal outlays. The Labour Party appears more interested in pandering to the whims of the masses in order to get votes at any cost and with no regard for improving the system.
This approach will hurt the most those whom the Labour Party should be protecting.
It is not only Labour that has a poor understanding of the tax system. Mr Lenihan said the tax system is no longer fit for purpose. But then he went on to make all the usual mistakes. He axed tax relief for pensions for people who need help to plan for their retirement. If you are 30, the changes are not unduly harsh; but if you are 60 and without a fund, they are.
The changes and restrictions don't apply to those who have already built up wealth in pension schemes. There are compelling arguments to support extending the restrictions to those who have already built up a fund or even defer being able to claim relief. Maybe they can afford to take the pain more than those to whom the restrictions apply. It would spread the burden and its impact would be less for any one individual.
The outgoing Government left loopholes in the pension system, and it makes nonsense of any changes it introduced. It is hoped the next government will carry out an economic assessment of this measure. The injustice is compounded when the private sector is forced to pay higher taxes to fund public sector pensions. The pension time bomb needs to be reviewed.
Tax relief and incentives for pensions and even property-based schemes are not all bad. They need to be controlled. Labour's Joan Burton has claimed the rich use Section 23-type tax schemes to avoid paying tax. Isn't that the general idea of tax schemes?
Ordinary people use them too, and many of them prove to be good investments that improve lifestyle. We shouldn't knock these schemes too soon. We will need them again. Hopefully, we have learnt from our mistakes.
There are millions of euro of unclaimed tax refunds that PAYE workers and pensioners, in particular, haven't claimed. They include health expenses, bin charges, employee expenses, tax relief for mortgage interest and even mistakes.
Look up the Revenue website (www.revenue.ie) under "Tax Credits" for more details Get back what you can before it's too late as you have only four years to apply. I hope you are pleasantly surprised. If in doubt, talk to your financial adviser.
James Fitzsimons is an Independent Financial Adviser specialising in Tax & Financial Planning