Saturday 10 December 2016

Howlin must get on with his heavy task

The minister needs to wake up to problems in the free-spending public sector, writes James Fitzsimons

Published 04/12/2011 | 05:00

The Budget this week will take €3.8bn out of the economy so that we can reduce the imbalance between tax revenue and spending. It seeks close to twice as much in spending cuts as it does in extra tax. But there is another €400m of tax revenue being collected in 2012 from for the USC that is not included in the €3.8bn. That makes the split between expenditure and revenue closer to 50:50.

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There is nothing wrong with running a Budget deficit to maintain essential services and growth. But when the main objective preserves waste and condones harmful spending it will destroy the economy. The reliance on tax to prop up public spending is crazy. Tax is being taken from the wrong people and it is applied inefficiently. Even the French have finally admitted that European debt is too high and it cannot all be paid back. Mr Sarkozy, the president of France, warned last week that there would be greater cuts in the future before balance can be restored.

Less income tax would have been collected this year but the new Universal Social Charge (USC) was imposed to avoid this. Stamp duty is up but that is because of the theft of €490bn from private sector pensions. VAT will account for less than 30 per cent of total tax revenue this year and income tax will make up about 40 per cent. Combined with excise duties they will account for 80 per cent of tax revenue. Consumers are being hardest hit and what they don't pay in income tax is taken when they spend. The VAT rate might increase to 23 per cent but less tax will be collected if spending falls.

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