Wednesday, 20 March 2013
Should Bankers salaries be raised to attract new talent
Article From Journal.ie concerning increasing bankers salaries
In my opinion bankers salaries in Ireland should not only be capped but actually slashed. I may be wrong but most of the positions in Irish Banks are actually filled from within the bank itself. So in effect you are not attracting the top candidates. You are in fact just awarding higher salaries to people who would have got the jobs anyway. The entry level for banks in Ireland are at the clerical level and then employees work their way up the career ladder within the bank. So really is the banking sector in Ireland a closed shop. The circle of available employees at higher levels are likely to come from within the bank or at most from another Irish bank. So how can it be said that the higher salaries are attracting a higher caliber of staff when in fact the staff came from the Irish banking system anyway.
It might be argued that the higher salaries retains higher caliber staff but really where would they go to anyway. All that happens in Ireland is that staff would transfer between banks so the talent pool is not expanded. Irish banks would find it difficult to compete with foreign banks anyway for the few really exceptional staff who most likely are so career focused they would be heading abroad anyway.
I would suspect that for the higher management levels that the employees hired by banks are even more restricted to people who came from certain schools and social circles. I believe Shane Ross highlighted this in one of this books on the Irish banking system.
http://www.thejournal.ie/poll-does-bankers-pay-need-to-be-attractive-to-attract-the-right-people-838147-Mar2013/#comment-1033241
Tuesday, 19 March 2013
Cyprus ordinary people's hard earned saving been taken to pay billionaire bankers and bond holders
Cyprus was one of the countries my father was stationed when he served with the United Nations. They were a peace keeping force tasked with keeping the two sides of the island away from killing each other. He always told us about how beautiful a country it was. If you consider that he and his fellow Irish soldiers were in a quasi combat setting then it must have been really beautiful in order for them to notice. This amazing island is the setting for one of the biggest mistakes that the EU has ever created. This is saying somethine considering the complete mess they have mad with the rest of Europe.
They proposed that the Government in Cyprus deducted a tax from the bank deposits of people. They wanted 6.75% from people with less than Euro100,000 on deposit and 9.99% from accounts over 100,000. These will then be used in effect to pay back the countries debt.
Clear away all the technical terms and what it means is that normal peoples saving will be reduced by 6.75% and the bondholders who own the countries debt will be paid fully from the saving of people. Now there is a political element in this as alot of money from Russia has seemingly been hidden in Cyprus bank accounts.
Still alot of ordinary people would have had money taken out of their hard earned savings to repay billions to bondholders and banks who are worth trillions of euros.
This is also setting a precendent for future bailouts. Will the EU insist on the same when Spain and Italy eventually collapse or what if we in Ireland need a second bailout will we be forced to do the same thing.
This fear of it been imposed on other countries could lead to a huge financial crisis if deposit holders decide to take their money out of the banking system in order to avoid these taxes.
It turns out now that the EU has backed down on to some extent on this proposal. Is it not worrying that the minute I and most people heard of this measure that we realized that it was obviously a huge mistake and that it could have huge consequences. However the people in power in Europe didn't foresee the crisis it could cause and this is what really worries me. Are they enclosed in their little bubble so much that they cant see the effects of their policies on people.
They proposed that the Government in Cyprus deducted a tax from the bank deposits of people. They wanted 6.75% from people with less than Euro100,000 on deposit and 9.99% from accounts over 100,000. These will then be used in effect to pay back the countries debt.
Clear away all the technical terms and what it means is that normal peoples saving will be reduced by 6.75% and the bondholders who own the countries debt will be paid fully from the saving of people. Now there is a political element in this as alot of money from Russia has seemingly been hidden in Cyprus bank accounts.
Still alot of ordinary people would have had money taken out of their hard earned savings to repay billions to bondholders and banks who are worth trillions of euros.
This is also setting a precendent for future bailouts. Will the EU insist on the same when Spain and Italy eventually collapse or what if we in Ireland need a second bailout will we be forced to do the same thing.
This fear of it been imposed on other countries could lead to a huge financial crisis if deposit holders decide to take their money out of the banking system in order to avoid these taxes.
It turns out now that the EU has backed down on to some extent on this proposal. Is it not worrying that the minute I and most people heard of this measure that we realized that it was obviously a huge mistake and that it could have huge consequences. However the people in power in Europe didn't foresee the crisis it could cause and this is what really worries me. Are they enclosed in their little bubble so much that they cant see the effects of their policies on people.
Thursday, 14 March 2013
Big Data. How to use the data that your business gather in imrpove your business
Big Data:
How to use the data that your business gathers
to improve your business.
Big Data is
one of the new buzz words that is been used at the moment. It refers in my
opinion to the data that your company can gather from it operations. The concept is that you can use this data to
improve the efficiency of your business. It can be used for a multitude of
purposes depending on what information your gather and depending on how you
decide to try and use it. This data can be gathered from your customers or from
your suppliers .It can be gathered from your contacts with out side agencies.
It can come from your interactions with social media sites on the internet or you
could do market research or set in place a database which is updated as you
make contact with third parties.
The three
attributes of data gathering have been defined as the three v’s of volume,
velocity and variety. In the modern world, technology has enabled more and more
data to be gathered and analysed (this refers to the volume of data).This is
been accumulated at much greater speed (velocity) and it can come from a much
wider variety of sources. In this regard the world is truly becoming a global
market which is smaller and faster and varied.
A lot of
the bigger global corporations have realised the value of utilising the data it
can gather to its full potential in order to maximise the returns it can
achieve. Some have even started to place a value on data in their accounts. It
is these firms that realise that data can make such a huge difference to their
profitability and return to stakeholders. The problem often is that people do
not know how to approach the information they have available to them in order
to use it in a productive manner.
In my
opinion the solution to this problem is to ask yourself what question does the
information you have available answer. By so doing you can brainstorm in order
to make full use of it. Often times the benefit of analysing data is lost
because the volume or complexity is too much for people to comprehend. This is
where taking small bits of it and working up to a full matrix of what you have
available may make it more accessible.
A really
good example of using big data to expand and focus a business is Tesco’s
clubcard. When the clubcard was introduced the information it provided allowed
Tesco to grow from the third biggest retailer in the UK to the third biggest
retailer in the world. They were able to see for example which products were
most popular in which stores and aim their purchasing to maximise sales. They
also would have been able to see what quality of different products were the
best sellers and in which stores. So that stores with customers who bought
cheaper brand products could be stocked to reflect this pattern
Your
business can do the same. You have a host of information available to you that
you could use. You could take a look at what services or products that
customers are looking for the most and market your product towards that, By
asking customer questions about where they heard about the firm, you could
decide which advertising methods were most productive for certain groups of
customers and be more specific in what products and services you were
advertising in any geographical area and through which media channel.
I also
think this can extend to other areas of the business from the purchase of raw materials
and stock through to production methods, By analysing what customers
requirements are in terms of the quality of product sold or the type of extras
that they purchase, you could reduce your capital investment in stock by
concentrating your purchases on the products that are the most in demand. This
is especially relevant in a economy where the banks are not forthcoming with
finance for business investment. It may even facilitate you implementing a just
in time system of stock control which has the benefit of dramatically reducing
your need for working capital investment in stocks. The implementation of a
total quality management system by using the data available to you from your suppliers
and your customers may allow you to implement a just in time system which will
be both functional and reliable.
Relevant data
can also come from in house sources. If you are a manufacturer you could monitor
and gather information about the production process from the raw material input
to the effectiveness of machinery, to the quality of the finished product. This
data could then be used to decide on an optimum mix of quality and production
techniques which produce a finished product which meets customer requirements
and which maximise your profitability
The growth
in the use of the internet and social media has allowed for analytical models
to be developed which can really help you to target your products and services
to demographic and geographical markets in a way which can maximise your sales
and return on investment and profitability. One of the concepts in managerial
economics that always fascinated me, was price discrimination and I feel that
true price discrimination can be achieved by using the data available to a
business in order to maximise the sales price achieved in particular markets. This
is particularly relevant to globalised companies such as motor car manufacturers’
who can charge different prices for different spec car models in different
geographical areas. The standard features in the Honda civic you buy in Ireland
are a lot different to the standard spec of a Honda civic bought in the United
Kingdom.
So my
advice is to step back from your day to day activities and take an overall view
of your business by looking at the information that is available at your finger
tips. You just have to discover where this information is and then decide how
to use it.
Author
Frank McGivney BA (1st Class honours) ACMA CGMA 14 March 2013
Wednesday, 13 March 2013
Reaction to property tax
I've been listening to the reactions of peoples to the property tax
letters on the radio. To me the reactions are the initial proof that the
Irish government has made a huge mistake trying to impose a high
property tax on the people of Ireland.
One set of people are ringing in complaining that their property isnt valued high enough and another set are ringing in saying that the property is not valued low enough. The people ringing in are pure irrate at the revenue for not getting thier property values right and are saying that Daft.ie is more accurate then the revenue estimates.
Like I was saying in previous articles, people in Ireland are used to getting their net income and been told how much tax they owe especially if they are PAYE workers. But with the property tax you have to look at your own circumstances and calulate the tax yourself. This is a huge change for people.
Its the reason people are been so angry with the revenue and in a way they are right. If you develop a culture of not having to claculate your own tax then trying to impose such a fundamental change then it is bound to be met with resisitence
Anyone who has dealt with the revenue knows that they always use estimates. The estimates are just a way of establishing a debt which they can enforce. However they will always come back looking for the correct figure. There are millions of houses in Ireland so there is no way they can independently value each house. So they produce estimates which will on average over the size of the population give a mean value which will be apporximatley correct. Remember the revenue is unlike most government agencies and is in fact run quite cost effectively (okay not in all circumstances but certainly better than most government bodies). As a result the benefits of incurring the costs of valuing each individual house would not be justified so instead they work with estimates and risk analysis and reporting by exception.
It is up to each individual tax payer to put in a correct return as best they can. After all no matter what figure you come up with its only an estimate on your part as well. Because who knows how much any particular house would sell for in a depressed housing market.
The revenues work is based on risk analysis. So they will look at all the returns in total and determine which ones are the most likely to be wrong and then they investigate them. So fr a basic example if everyone in your street values their house in and around 200,000 to just say 300,000 (covering two value bands) and your house is valued at 50000 then you may expect to come up as someone to look into. If you can explain the reason for the difference then they will accept it generally.
In all likely hood the returns they will follow up are ones selected from a random sample and ones of a high value where the individual tax is likely to be high enough to justify chasing up any tax under paid.
My point really is that the Irish government have opened up a mine field for the revenue commissioners to step into.
Author Frank McGivney 13 March 2013 All rights retained by author
One set of people are ringing in complaining that their property isnt valued high enough and another set are ringing in saying that the property is not valued low enough. The people ringing in are pure irrate at the revenue for not getting thier property values right and are saying that Daft.ie is more accurate then the revenue estimates.
Like I was saying in previous articles, people in Ireland are used to getting their net income and been told how much tax they owe especially if they are PAYE workers. But with the property tax you have to look at your own circumstances and calulate the tax yourself. This is a huge change for people.
Its the reason people are been so angry with the revenue and in a way they are right. If you develop a culture of not having to claculate your own tax then trying to impose such a fundamental change then it is bound to be met with resisitence
Anyone who has dealt with the revenue knows that they always use estimates. The estimates are just a way of establishing a debt which they can enforce. However they will always come back looking for the correct figure. There are millions of houses in Ireland so there is no way they can independently value each house. So they produce estimates which will on average over the size of the population give a mean value which will be apporximatley correct. Remember the revenue is unlike most government agencies and is in fact run quite cost effectively (okay not in all circumstances but certainly better than most government bodies). As a result the benefits of incurring the costs of valuing each individual house would not be justified so instead they work with estimates and risk analysis and reporting by exception.
It is up to each individual tax payer to put in a correct return as best they can. After all no matter what figure you come up with its only an estimate on your part as well. Because who knows how much any particular house would sell for in a depressed housing market.
The revenues work is based on risk analysis. So they will look at all the returns in total and determine which ones are the most likely to be wrong and then they investigate them. So fr a basic example if everyone in your street values their house in and around 200,000 to just say 300,000 (covering two value bands) and your house is valued at 50000 then you may expect to come up as someone to look into. If you can explain the reason for the difference then they will accept it generally.
In all likely hood the returns they will follow up are ones selected from a random sample and ones of a high value where the individual tax is likely to be high enough to justify chasing up any tax under paid.
My point really is that the Irish government have opened up a mine field for the revenue commissioners to step into.
Author Frank McGivney 13 March 2013 All rights retained by author
Monday, 11 March 2013
How to pay the Local Property Tax
The previous two articles have all been about the consequences and the context of the property tax. This one is just about how to pay it.
(1) Notices issued by the Revenue commissioners. The revenue commissioners will issue most houses with an estimate of the property tax. If you are happy with the value that they put on your house then just agree with their estimate and pay it. (i will detail payment options below).
(2) If you do not agree with the value that the revenue is putting on your house then you can fill out the form that they send you with the value that you feel is correct and pay this amount. Take a look at recent house sales (if there has been any) in your local area for similar houses and this will give you some guidance. The revenue have an online property value guide which is easy to use you just choose your county, type of house and if house was built before or after 2000. Then you click on your area on a map of Ireland and it gives you a value. Also if you go to https://lpt.revenue.ie/lpt-web/valuation-guide/index.htm and click the ok box on the side of the page you can get a list of properties sold in your area for last few year. Saying that the revenue do appear to have put fairly low values in the letters they are sending out.
(3) The paper LPT form is easy to fill out. Your name and address is filled out automatically by revenue when they send it to you and then you fill out the name of the person liable for the tax (this is essentially the person who owns the property at the 1 Novemebr of the preceding year or the 1 may 2013 for this year), your pps number then you can mark a box if the property is exempt or if it is not your principal private residece (you still have to pay the tax) and if you are non resident for income tax purposes (you still have to pay the tax). Then you enter the band number for the value of the property and the value you feel the property is worth and the amount of tax you need to pay (see below for how to calculate) . Then sign and if you are not the liable person then who are you i.e. their son or daughter etc. Enter your phone number and email address (if you have one). Finally you enter payment details by choosing one of the option available as detailed below.
(4) Online form this is essentially the same as the written form but with an additional option to pay by credit card or debit card.
(5) how to calculate your local property tax liability The tax for properties up to Euro 1 million in value is calculated at .18% of the mid point of certain bands. These are the bands and the amount of tax due. So to calculate the tas just decide what you feel is the value of your house and then find what band that value is in and then the tax across from this band is how much you owe in 2013
Valuation
Band Number Valuation Mid-Point LPT Charge in 2013 LPT Charge in 2014
Band Range of Valuation Band (€) Half year charge) (€) (full year charge) (€)
01 0 – 100,000 50,000 45 90
02 100,001 – 150,000 125,000 112 225
03 150,001 – 200,000 175,000 157 315
04 200,001 – 250,000 225,000 202 405
05 250,001 – 300,000 275,000 247 495
06 300,001 – 350,000 325,000 292 585
07 350,001 – 400,000 375,000 337 675
08 400,001 – 450,000 425,000 382 765
09 450,001 – 500,000 475,000 427 855
10 500,001 – 550,000 525,000 472 945
11 550,001 – 600,000 575,000 517 1,035
12 600,001 – 650,000 625,000 562 1,125
13 650,001 – 700,000 675,000 607 1,215
14 700,001 – 750,000 725,000 652 1,305
15 750,001 – 800,000 775,000 697 1,395
16 800,001 – 850,000 825,000 742 1,485
17 850,001 – 900,000 875,000 787 1,575
18 900,001 – 950,000 925,000 832 1,665
19 950,001 – 1,000,000 975,000 877 1,755
20 Value greater than €1m Assessed on the actual value as follows:
● at 0.18% on the value up to €1m
● at 0.25% on the portion above €1m
(6) Payment options are as follows
LPT can be paid in full by:
● Single Debit Authority - like an electronic cheque. To select this option complete the payslip on the
Return and payment will be deducted from your bank account no earlier than 21 July 2013.
● *Debit/Credit Card.
● *Cash payments (including debit/credit card) through approved Payment Service Providers.
LPT can be paid on a phased basis from 1 July 2013 by:
● Deduction at source from your salary or occupational pension.
● Deduction at source from certain payments received from the Department of Social Protection
(DSP) and scheme payments received from the Department of Agriculture, Food and the Marine
(DAFM). Deduction from a DSP payment cannot reduce your DSP personal rate payment to less
than €186 per week.
● *Direct Debit.
● *Cash payments (including debit/credit card) in equal installments through approved Payment
Service Providers.
(7) The following persons are liable to pay LPT:
● Owners of Irish residential property, regardless of whether they live in Ireland or not.
● Landlords where the property is rented under a short-term lease (for less than 20 years).
● Local authorities or social housing organizations that own and provide social housing.
● Lessees who hold long-term leases of residential property (for 20 years or more).
● Holders of a life-interest in a residential property.
● Persons with a long-term right of residence (for life or for 20 years or more) that entitles them to
exclude any other person from the property.
● Personal representatives of a deceased owner (e.g. executor/administrator of an estate).
● Trustees, where a property is held in a trust.
● Where none of the above categories of liable person applies, the person who occupies, or receives
rent from, the property is the liable person.
(8) You can defer the payment if you cant afford to pay and you meet the following criteria. The tax is attached to your property and will be deducted when you sell the property and interest is charges at 4% per year.
Full Deferral
(a) Gross income for the year is unlikely to exceed €15,000 (single or widow/er) and €25,000 (couple).
(b) Gross income* for the year is unlikely to exceed the adjusted income limit. This adjusted limit is calculated by increasing the thresholds of €15,000 (single or widow/er) and €25,000 (couple) by 80% of the expected gross mortgage interest payments for the year 2013.
Partial Deferral (you defer half of the amount due but pay the other half as per normal)
(c) Gross income* for the year is unlikely to exceed €25,000 (single or widow/er) and €35,000 (couple).
(d) Gross income* for the year is unlikely to exceed the adjusted income limit. This adjusted limit is calculated by increasing the thresholds of €25,000 (single or widow/er) and €35,000 (couple) by 80% of the expected gross mortgage interest payments for the year 2013.
(1) Notices issued by the Revenue commissioners. The revenue commissioners will issue most houses with an estimate of the property tax. If you are happy with the value that they put on your house then just agree with their estimate and pay it. (i will detail payment options below).
(2) If you do not agree with the value that the revenue is putting on your house then you can fill out the form that they send you with the value that you feel is correct and pay this amount. Take a look at recent house sales (if there has been any) in your local area for similar houses and this will give you some guidance. The revenue have an online property value guide which is easy to use you just choose your county, type of house and if house was built before or after 2000. Then you click on your area on a map of Ireland and it gives you a value. Also if you go to https://lpt.revenue.ie/lpt-web/valuation-guide/index.htm and click the ok box on the side of the page you can get a list of properties sold in your area for last few year. Saying that the revenue do appear to have put fairly low values in the letters they are sending out.
(3) The paper LPT form is easy to fill out. Your name and address is filled out automatically by revenue when they send it to you and then you fill out the name of the person liable for the tax (this is essentially the person who owns the property at the 1 Novemebr of the preceding year or the 1 may 2013 for this year), your pps number then you can mark a box if the property is exempt or if it is not your principal private residece (you still have to pay the tax) and if you are non resident for income tax purposes (you still have to pay the tax). Then you enter the band number for the value of the property and the value you feel the property is worth and the amount of tax you need to pay (see below for how to calculate) . Then sign and if you are not the liable person then who are you i.e. their son or daughter etc. Enter your phone number and email address (if you have one). Finally you enter payment details by choosing one of the option available as detailed below.
(4) Online form this is essentially the same as the written form but with an additional option to pay by credit card or debit card.
(5) how to calculate your local property tax liability The tax for properties up to Euro 1 million in value is calculated at .18% of the mid point of certain bands. These are the bands and the amount of tax due. So to calculate the tas just decide what you feel is the value of your house and then find what band that value is in and then the tax across from this band is how much you owe in 2013
Valuation
Band Number Valuation Mid-Point LPT Charge in 2013 LPT Charge in 2014
Band Range of Valuation Band (€) Half year charge) (€) (full year charge) (€)
01 0 – 100,000 50,000 45 90
02 100,001 – 150,000 125,000 112 225
03 150,001 – 200,000 175,000 157 315
04 200,001 – 250,000 225,000 202 405
05 250,001 – 300,000 275,000 247 495
06 300,001 – 350,000 325,000 292 585
07 350,001 – 400,000 375,000 337 675
08 400,001 – 450,000 425,000 382 765
09 450,001 – 500,000 475,000 427 855
10 500,001 – 550,000 525,000 472 945
11 550,001 – 600,000 575,000 517 1,035
12 600,001 – 650,000 625,000 562 1,125
13 650,001 – 700,000 675,000 607 1,215
14 700,001 – 750,000 725,000 652 1,305
15 750,001 – 800,000 775,000 697 1,395
16 800,001 – 850,000 825,000 742 1,485
17 850,001 – 900,000 875,000 787 1,575
18 900,001 – 950,000 925,000 832 1,665
19 950,001 – 1,000,000 975,000 877 1,755
20 Value greater than €1m Assessed on the actual value as follows:
● at 0.18% on the value up to €1m
● at 0.25% on the portion above €1m
(6) Payment options are as follows
LPT can be paid in full by:
● Single Debit Authority - like an electronic cheque. To select this option complete the payslip on the
Return and payment will be deducted from your bank account no earlier than 21 July 2013.
● *Debit/Credit Card.
● *Cash payments (including debit/credit card) through approved Payment Service Providers.
LPT can be paid on a phased basis from 1 July 2013 by:
● Deduction at source from your salary or occupational pension.
● Deduction at source from certain payments received from the Department of Social Protection
(DSP) and scheme payments received from the Department of Agriculture, Food and the Marine
(DAFM). Deduction from a DSP payment cannot reduce your DSP personal rate payment to less
than €186 per week.
● *Direct Debit.
● *Cash payments (including debit/credit card) in equal installments through approved Payment
Service Providers.
(7) The following persons are liable to pay LPT:
● Owners of Irish residential property, regardless of whether they live in Ireland or not.
● Landlords where the property is rented under a short-term lease (for less than 20 years).
● Local authorities or social housing organizations that own and provide social housing.
● Lessees who hold long-term leases of residential property (for 20 years or more).
● Holders of a life-interest in a residential property.
● Persons with a long-term right of residence (for life or for 20 years or more) that entitles them to
exclude any other person from the property.
● Personal representatives of a deceased owner (e.g. executor/administrator of an estate).
● Trustees, where a property is held in a trust.
● Where none of the above categories of liable person applies, the person who occupies, or receives
rent from, the property is the liable person.
(8) You can defer the payment if you cant afford to pay and you meet the following criteria. The tax is attached to your property and will be deducted when you sell the property and interest is charges at 4% per year.
Full Deferral
(a) Gross income for the year is unlikely to exceed €15,000 (single or widow/er) and €25,000 (couple).
(b) Gross income* for the year is unlikely to exceed the adjusted income limit. This adjusted limit is calculated by increasing the thresholds of €15,000 (single or widow/er) and €25,000 (couple) by 80% of the expected gross mortgage interest payments for the year 2013.
Partial Deferral (you defer half of the amount due but pay the other half as per normal)
(c) Gross income* for the year is unlikely to exceed €25,000 (single or widow/er) and €35,000 (couple).
(d) Gross income* for the year is unlikely to exceed the adjusted income limit. This adjusted limit is calculated by increasing the thresholds of €25,000 (single or widow/er) and €35,000 (couple) by 80% of the expected gross mortgage interest payments for the year 2013.
Saturday, 9 March 2013
Will the Property Tax be the reason for a government falling
In the 2013 Finance act the Irish Government are bringing into law a property tax, The first such tax in Ireland in many years. The British empire imposed a window tax in Ireland in 1696 which was in effect a property tax.This needed a shocking amount of detailed legislation to impose because as you would expect the people of Ireland did all kind of adjustments to their windows in order to avoid it. Further on in the 1800's the payment of taxes to land owners which was then sent over to London left Ireland in the grips of a crippling famine in a country with the some of the most fertile land in the world. So will the current Irish government have any more success with imposing this property tax.
You only have to look at the main street of any small town in Ireland and you will see a scene that you would see in any horror movie where the streets are deserted of humans. Then if you drive through any of the housing estates you will see cars in all the driveways during the daytime, a sign that people are at home rather than at work. The government is constantly talking about its efforts to attract foreign investment which is all great. However to me it appears to be ignoring Irish indigenous business. Small Irish business are been devastated with a lack of trade. It is in this context that the government is imposing a high property tax which will take even more money out of the Irish economy. There is nothing wrong with high taxes if that tax is reinvested in the economy through government spending but this is not the destination of this tax because all government spending is been reduced or frozen at present. Therefore all additional taxes are ultimately going to be used to repay the debts of either the banks or the government or to repay bondholders. This tax will reduce the amount of money people have to spend in the local shops and businesses. This will further suppress the economy and reduce the amount of vat collectible from businesses, It will also reduce the amount of people employed and the amount of tax from employees and the amount of income tax and corporation tax collected. In other words the amount of tax from the property tax will be offset to a large extent from a reduction in other taxes. Regardless of the government saying the tax will be targeted to local authorities this effect will still happen because the expenditure on local services is to be maintained at current levels or lower levels. Therefore the spin that the tax will be used on funding local services by the local authorities will have no net effect on local output (because it would have been spent anyway) but conversely the reduction of money in people’s pockets will have a dramatic effect.
You only have to look at the main street of any small town in Ireland and you will see a scene that you would see in any horror movie where the streets are deserted of humans. Then if you drive through any of the housing estates you will see cars in all the driveways during the daytime, a sign that people are at home rather than at work. The government is constantly talking about its efforts to attract foreign investment which is all great. However to me it appears to be ignoring Irish indigenous business. Small Irish business are been devastated with a lack of trade. It is in this context that the government is imposing a high property tax which will take even more money out of the Irish economy. There is nothing wrong with high taxes if that tax is reinvested in the economy through government spending but this is not the destination of this tax because all government spending is been reduced or frozen at present. Therefore all additional taxes are ultimately going to be used to repay the debts of either the banks or the government or to repay bondholders. This tax will reduce the amount of money people have to spend in the local shops and businesses. This will further suppress the economy and reduce the amount of vat collectible from businesses, It will also reduce the amount of people employed and the amount of tax from employees and the amount of income tax and corporation tax collected. In other words the amount of tax from the property tax will be offset to a large extent from a reduction in other taxes. Regardless of the government saying the tax will be targeted to local authorities this effect will still happen because the expenditure on local services is to be maintained at current levels or lower levels. Therefore the spin that the tax will be used on funding local services by the local authorities will have no net effect on local output (because it would have been spent anyway) but conversely the reduction of money in people’s pockets will have a dramatic effect.
This tax is
in my opinion a fundamental shift from the way tax has been imposed in Ireland in
regard to PAYE workers. Self-employed people are used to paying taxes out of
the money they have received. However Paye workers get their wages net of tax. This
also applies to social welfare recipients. Up to this people can spend their
net income in whatever way they want to. However now the property tax will have
to be paid out of their net income’s. This means for the first time a lot of people
will have to pay tax themselves. It can be argued that motor tax is similar but
there is one big difference, motor tax is only due to be paid if you decide to
own a car and it is not imposed in the fashion that this property tax is
proposed. The majority of Irish people have had very limited exposure to the
revenue commissioners. But this is about to change with the property tax and
people will discover that if you owe the revenue money then they will do
everything to make sure you pay it and will not take no for an answer. In other
words everyone who is due to pay this tax will end up paying because it will be
deducted from social welfare payments or from net income by your employer, Even
if you can avail of the deferral option you will still eventually pay it. However
I feel that this may be the moment when Irish people finally stand up for
themselves and the resistance to this tax will be significant, as evidenced by
the huge percentage of people who have not paid the household charge from last
year and also because people are in such a poor financial position that they
simply can not afford to pay it.
I do
believe that a country should have a property tax. It should be part of an
overall tax system. I should be very progressive with normal value homes been
at a very low rate of for example €100 per year and then higher value houses
owned by high net worth individuals should be subject to much higher property
tax charges. The tax however needs to be linked to take account of people’s
incomes and levels of assets other than the family home. The
spread of income in the world is represented by a Lorenz curve with very few
people holding most of the wealth therefore this should be reflected in the
overall tax system. This means people are responsible for paying for their
local amenities but not to a level where there is a negative effect on the
economy. There is a lot more issues involved such as
using the taxes of the country on proper government spending in the economy
rather than paying back bonds to banks and bondholders who are seemingly the
only ones in the world protected from the risks associated with business. Maybe a tax once again will topple a
government like the vat on children’s clothes did in the 1980’sFriday, 8 March 2013
Basic structure of tax
I was writing an article on the new property tax and i was trying looking at it from the angle of fairness and its effect on the economy but I got side tracked a bit when i started thinking about taxes and what they are. So I wrote this piece on tax and how it should be structured. I intend this article to help put the property tax in the correct context for the next article.
Some basics about tax: Governments get money in various ways. Some of these are
(1) taxes
(2) other sources include fines (i.e. Speeding fines, parking fines),
(3) income from state run organizations (i.e. contributions from state universities student fees, revenue from profitable state bodies)
(4) Printing currency by the central bank (not an option for euro countries anymore)
(5) Borrowings and so on.
Taxes could be defined by the following
(1) they should be non penal. i.e. they should be based on a percentage of income or wealth that is fair and equitable
(2) They should be compulsory , i.e. you have no option but to pay them
(3) The government should impose them by way of the law of the country
(4) taxes should be in essence a transfer of wealth from the private to the public sector (i.e. government)
(5) they should based on preset criteria as laid down in the tax laws so that people can calculate how much they owe in the tax and know the basis of calculating the tax
(6) the tax paid should not be a reflection of services received i.e. its based on each taxpayers income or wealth and not on how much public services they receive. This is completely different to everything else you spend money on. The more books you buy in a bookshop the more you will pay but with tax often times those who pay the most receive the least amount of services. This is of course the redistribution of wealth from the wealthier to the poor. The ultimate model of this is perhaps communism
(7) The non payment of the tax should always punishable by penalties and fines and imprisonment. This is vital in order to ensure the tax is paid. Also it encourages people to pay on time by penalizing those who are late paying
(8) It should be equitable and progressive. so the more you earn the more you pay and the greater your wealth the more you pay. Number 8 is one of the areas where problems arise with property tax because a person may have substantial assets which are very valuable but which generate no income and they may not be able to pay higher taxes based on wealth alone. However implied in the tax system is the premise that such a person should sell their assets until they are at a level where they can pay the tax. This is again complicated by taxes which arise when you sell assets.
(1) taxes
(2) other sources include fines (i.e. Speeding fines, parking fines),
(3) income from state run organizations (i.e. contributions from state universities student fees, revenue from profitable state bodies)
(4) Printing currency by the central bank (not an option for euro countries anymore)
(5) Borrowings and so on.
Taxes could be defined by the following
(1) they should be non penal. i.e. they should be based on a percentage of income or wealth that is fair and equitable
(2) They should be compulsory , i.e. you have no option but to pay them
(3) The government should impose them by way of the law of the country
(4) taxes should be in essence a transfer of wealth from the private to the public sector (i.e. government)
(5) they should based on preset criteria as laid down in the tax laws so that people can calculate how much they owe in the tax and know the basis of calculating the tax
(6) the tax paid should not be a reflection of services received i.e. its based on each taxpayers income or wealth and not on how much public services they receive. This is completely different to everything else you spend money on. The more books you buy in a bookshop the more you will pay but with tax often times those who pay the most receive the least amount of services. This is of course the redistribution of wealth from the wealthier to the poor. The ultimate model of this is perhaps communism
(7) The non payment of the tax should always punishable by penalties and fines and imprisonment. This is vital in order to ensure the tax is paid. Also it encourages people to pay on time by penalizing those who are late paying
(8) It should be equitable and progressive. so the more you earn the more you pay and the greater your wealth the more you pay. Number 8 is one of the areas where problems arise with property tax because a person may have substantial assets which are very valuable but which generate no income and they may not be able to pay higher taxes based on wealth alone. However implied in the tax system is the premise that such a person should sell their assets until they are at a level where they can pay the tax. This is again complicated by taxes which arise when you sell assets.
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