Friday, 9 November 2012
Dáil Éireann Debate
Tax Transparency Bill 2012: Second Stage [Private Members]
I thank the Chief Whip and the Minister for Finance for facilitating this debate. I also thank the Chief Whip for making the taking of Second Stage debate on a Private Members' Bill possible through his reforms in this House. I thank the officials of the Department of Finance for their engagement in the drafting of the Bill.
Agreeing to pay a proportion of one's salary into a central fund in the form of tax is a cornerstone of the social contract. We agree to come together collectively and to select a few people to run things, and we pay over some of our earnings for those people to administer on behalf of all of us. It is a basic tenet of society. It follows, therefore, that we have a right to know how the Government is spending our taxes and the Government has a responsibility to tell us. It does that, and in more detail now than it ever has previously. However, I believe we can and should go further.
Whether people feel they should be paying more or less tax, we all insist that the tax we pay is spent efficiently and appropriately. We trust that it is. However, every time we hit another pothole in the road or hear of a government project running over budget, that trust is called into question. Some people will always complain about how their taxes are being spent because there will always be a difference of opinion about the policies the government of the day is pursuing. That is politics. Nevertheless, with all that has happened in recent years in Ireland, citizens are now rightly demanding more information from the Government and increased transparency and openness about how the country is being run. This is particularly true of the tax spend, as people's real income is reduced and new taxes and charges are introduced.
In Ireland we have seen an increasing tendency towards transparency in how people's taxes are spent, by making explicit the connection between what each of us pays individually and the benefits that society as a whole receives for this money and how. It is important to note the advances the Department of Public Expenditure and Reform has made in this regard. Last year saw the publication of a detailed medium-term Exchequer framework as well as a Revised Book of Estimates. More recently, we have seen greater transparency in the pay structures operating in the public sector. There are also new online projects under way, such as the Department of Public Expenditure and Reform's Databank and IrelandStat. All of these measures are welcome and indicate a positive trend under this Government towards greater transparency.
I introduced this Bill last March. It has three central components. The first element, if adopted, would see each taxpayer receive an annual statement detailing how much tax they paid in the previous year and how this contributes to Government spending priorities. The statement, which could either be delivered by post or made available online, would resemble an itemised receipt detailing the recipient's contribution in euro and cent to the different areas of government spending.
How would it look? For illustrative purposes, let us take the example of Ms Jane Duffy, a PAYE worker in the private sector who earns €42,000 a year and receives the basic tax credits and standard bands of tax. Jane Duffy's statement would detail her various income contributions - USC, PAYE, PRSI - and the total amount she paid in tax. At €42,000 salary, her contribution is €10,707.
Ms Duffy's contribution would then be broken down indicatively according to the percentage of Government expenditure spent on each Department. There is an example of Ms Duffy's statement online on my website, but I will highlight some points here. She would see, for example, that she had contributed €1,352 towards the education sector, that €465 of that amount had gone towards primary education and €237 towards third level. She might agree with the extra resources being devoted to primary education, but she might also wish that a greater amount of her more than €10,000 in taxes was going towards primary education. She might make this point to her local Deputy and she might even suggest where she felt she should be paying less tax.
She would see that €2,113 of her taxes had been spent on health, a significant amount, but only €76 of her taxes had been directed towards aid to developing countries. She might still consider this to be too high or she might consider this to be acceptable because she might like the statement that it makes about her and her priorities. She would see that law enforcement was costing her a relatively small amount at €338 and might wish that more money would be directed towards the Garda. This might be something she would remember at the general election when evaluating the different parties' election pledges. She would probably be concerned at the high contribution to social protection at €3,128, her largest contribution, but might be surprised to see that only €423 of this is going on jobseeker's allowance for all the people who are looking for work. She might wonder how the rest of it is spent, and her statement would go on to outline the various details of where her money is being spent to help other members of society. Ms Duffy would see that €1,055 of her hard-earned money was going on paying off just the interest on the national debt. This might make her more or less supportive of government policies to close the deficit as quickly as possible. She would finally have an answer to the rhetorical question: "What is the price of democracy?" For Jane Duffy it would be €13.
Imagine if everyone received this information on the same day every year. Imagine the debate that would take place in every workplace, home, pub and sports ground throughout the country. Imagine if every party contesting a general election was bound to submit its economic plans to such a formula in order that people could get a really meaningful idea of how its policies, if its members were elected, would change national priorities in terms of how their taxes were being spent. Consider how important this information could be to every debate that we have and for every person in society.
The second central component of the Bill is the provision of an online tax calculator to give that same breakdown I have just mentioned, but based on Ms Jane Duffy's own estimates as to the VAT and excise duty she had paid in the year. The breakdown returned would very much depend on her lifestyle and how she spent her income. I will not dwell on this element but, as I am sure others will point out, this could be just as significant relative to her taxes paid on income.
The third element is the introduction of an obligation on the part of each Department to publish on its website all items of expenditure it incurred in excess of €5,000. This would allow people to scrutinise their personal statements in greater depth. Some Departments have already introduced this policy at the €20,000 threshold and this provision would simply lower that amount.
Why would we provide such a statement to each taxpayer? As I said previously, people have a right to this information and we have a responsibility to provide it. Through greater transparency and open government we build trust. This is essential at present when there is a problem with trust among the electorate in terms of trusting their politicians and what they are doing with their money. Such a statement would clearly identify Government priorities to the individual, in euro and cent. This would mean a better informed electorate and country, and a better informed debate around the choices we make as a society and how we prioritise those choices.
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