Economic cost must be fair

November 9, 2009 at 10:07 am | Posted in Uncategorized | Leave a comment

The government has signaled clearly that in December’s budget they are going to reduce public service expenditure by €4 billion. It appears that €2.7 billion of this will centre on social welfare reductions and social service provisions. This would have an appalling effect on our society. What can be done? Rather than just give off about this, here are four immediate alternative proposals.

First, we clearly need to mobilise the enormous wealth which remains in our society and bring it within the tax net. Much of this wealth is hidden behind a complex array of tax breaks and tax reduction schemes. These need to be radically reformed and almost all done away with.

Second, we need taxes on embedded wealth such as property, capital gains and financial speculative transactions. We should be pushing for the introduction of a Tobin tax system on transnational financial exchanges.

Third, we need a third taxation band that targets those earning more than €100,000. The rate needs to be quite high given our present circumstances – perhaps 60%.

Finally, we need to re-examine our corporation tax system. This should not be an untouchable. Take Shell’s deal regarding Corrib gas. They will pay 25% tax on net profits. The Dept of Finance estimate that the State thereby will take just under €2 billion in taxes from a well currently valued at almost €12 billion. This is clearly wrong. We need a significant windfall profit tax imposed. Whatever about the justification for this regime in the 1990s, the circumstances have now changed. The economy is in crisis and everything ‘is now different’; there has been an enormous rise in the value of natural gas which is not connected to any investment by the developers; we now know more about how fossil fuel use is causing catastrophic climate change. For these reasons, Shell must pay far more – at least 50% of the gross value should be returned to the State.

The point is that the citizens of this State can not and should not see reductions in their economic condition unless it is fair. This means that everyone in society – the wealthy and the corporations – must pay their proportional share and be seen to do so. This is the only basis by which we can proceed from this crisis to create a new, fair and just Ireland.

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