5 October 2006 Edition

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Tax inequality - Rabbitte adheres to the regressive system

ICTU’s Economic Advisor Paul Sweeney

Labour's new low


"Taxes are down and will stay down" declares the headline on a recent edition of the Labour Party news sheet 'the Rose'. It is a pledge, from a party that claims to be of the left, to preserve the status quo - a personal guarantee from Pat Rabbitte that Labour will do nothing to tackle the inequalities in the present tax system. It is a promise from the Labour Party to retain a tax regime designed by the Progressive Democrats.

The Labour Party, in pledging to defend the present tax regime, is helping to mainstream the neo-liberal ideal of the low-tax low-public service model. They are contributing to the sinister propaganda that we have a good tax system which must be maintained exactly as it at present. This line, also aggressively promoted by the media, seeks to mask the true inequality at the heart of the present tax system. It ignores the truth that the present system is littered with advantages for the better off -- tax breaks, a ceiling above which employee PRSI is not paid, low taxes on wealth, the absence of a progressive income tax rate specifically on high incomes. Labour may be vocal in relation to tax avoidance by the super-rich but this is worth little when taken with their undertaking to leave the tax system as it is.

In order to maintain the present low rates of taxes on high income earners, on wealth and on property, we have to contend with high rates of indirect taxes such as VAT. Indirect taxes are regressive as unlike direct taxes such as income tax, indirect taxes do not take into account ability to pay. Ordinary householders end up paying a disproportionate amount of tax as a result of the high rates of VAT. Not only is high VAT bad for low and average income earners, an over-reliance on VAT as a source of Government revenue, such as exists in the 26 counties at present, also leaves the 26 counties vulnerable to a sharp decline in revenue if there was any significant downturn in consumer spending.

In the face of the media offensive in support of the present tax model there needs to be an alliance of the left in favour of real tax reform to create a progressive redistributive system. The trade unions must play a key role. They must decide which side they are on. Some, such as ICTU's Economic Advisor Paul Sweeney, have presented a critique of the present tax system. Sweeney has argued that a consequence of the overall tax reductions over recent years is poor public services and has pointed to the positive redistributive effect of property and wealth taxes if introduced.

Those within the trade union movement who have yet to shed their traditional ties with Labour must consider whether they are prepared to continue to prop up and financially support a party which has declared its adherence to the present flawed and regressive tax system. It is time for trade unions to realign themselves with those who are genuinely committed to using the taxation system to provide the highest quality of universal public services and social protections and to redistribute wealth.

An Phoblacht
44 Parnell Sq.
Dublin 1

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