Address by the Minister for Finance, Mr. Brian Cowen T.D.
Irish Taxation Institute
Friday 23 February 2007
Ladies and Gentlemen: Once again I am delighted to have been invited to your Annual Dinner and to engage with people who either as members of the Institute of Taxation or its guests here this evening spend most of your days thinking about issues of taxation. I thank your President, Dermot O’Brien and Chief Executive, Mark Redmond for affording me the opportunity to address this distinguished gathering. I am also aware that we have some visitors from
As a body that spends a considerable portion of its time engaging with those who administer and operate tax legislation, the Institute’s views and contributions are always appreciated by myself, my Department and the Revenue Commissioners. Indeed, the Institute's contribution is an evolving one and I welcome and commend its increased engagement not only on issues of administration but also on issues of policy. The contributions of the Institute have proven to be very useful in working towards tax legislation that has been central to this country's emergence as one of the world's strongest economies.
As Minister for Finance, my first responsibility is to maintain that economic strength. We can’t rest on our laurels. We must continue to move forward by implementing the right policies, policies which promote investment and reward work, if we are to consolidate the gains already made. I see that as my first responsibility and the continuation of prudent management of our economic affairs is the best way of meeting it.
Others see things differently. Their view is that the heavy lifting has been done.
I reject that analysis. It reminds me of a Chinese saying that says: “the blossom of the plum tree is at its most beautiful just before it blows away”. My strong view is we should not assume that our current status is a precise predictor of future success. We have to keep working at our competitiveness. The only way forward is to continue to implement the right policies, the sustainable and affordable policies if we are to continue enjoying economic success. If we do not continue moving forward along these lines, we will slip back.
Once our current prosperity is secured, it must be used as the foundation for our future success. We can protect our prosperity by putting in place the necessary investment to boost our productivity, to enhance our competitiveness and to make our country a better place to live, to work, to grow up and to grow old. The National Development Plan, which commits €184 billion to
Our current prosperity is the foundation on which we will build a better
We are in the midst of pre-election party conference season. The Labour Party leader’s volte face on tax borders on the Orwellian. This week, tax cuts bad. Next week, tax cuts good. Forty years of policy conviction extinguished in forty seconds.
To listen to some people on the opposition benches, you would believe that our taxation reforms have favoured the rich. Perhaps they came to that conclusion because our country is wealthier as a result of the hard work of the Irish people responding to the policies of the Irish government. I challenge them to check the record. In 1997, the top 10% of income earners paid 50% of the total income tax take. This year, that share will be almost 60%. At the same time, those on the minimum wage have been taken completely out of the tax net thanks to the reforms we have introduced in government. 80% of income earners pay less than 20% of their income in tax as a result of this Government’s tax reforms. The very richest are paying more taxation and those on modest incomes are not paying income tax at all. That’s real reform, that’s real progressivity, that’s real social justice.
I am deeply proud of our record on taxation. Proud of what we have done on rates. Proud on what we have done on bands and proud of what we have done on credits. Our policies have transformed the tax system from being a barrier to economic and social progress to being a driver of prosperity. Our tax changes have made
All workers have benefited from our tax reductions. Before we took office, a single person on the average industrial wage paid over 27.5% of their earnings in taxes, levies and social insurance. This year, that worker will pay just 14.5% of their earnings.
For married couples where both husband and wife are in paid employment and on the average industrial wage, we have reduced the average tax rate from over 15% in 1997 to just 1.8% today.
Our taxation reforms have seen the tax burden shift away from work. This makes good sense economically and makes good sense socially. It promotes employment and prosperity while ensuring that resources are generated to fund increased expenditure on health, welfare, education, justice and transport.
In 1997, income taxes contributed 36.6% of total tax revenue. Last year, they contributed 27.2% of total tax revenue. Clearly, we have reduced the burden of tax on work by over a quarter. At the same time, the increased prosperity of our country has seen increased wealth. Despite reductions in tax rates, the contribution of capital taxes has increased dramatically to 15.7% from 4.6% ten years ago. The tax burden is now more fairly distributed and more supportive of a strong economy.
We understand how important low taxes are to our economic success. That is why we reduced the income tax burden. That is why, under Fianna Fail, low taxes will continue to be the centrepiece of our economic policy as
In summary, I want our taxation system to encourage investment, to reward work and to promote wealth creation. I want it to be a driver of success. It is in every one’s interest that our country and we as individual citizens enjoy even greater success. Those of another ideological bent hate success. I hate failure, be it of a social or economic variety. Our tax system must work to help people who go out to work every day. It must encourage the people who put their money to work in our economy. It must reward people who provide good employment opportunities. During the dark days of the mid 1980s, our tax system punished such people. Today, it encourages them. If possible, I would like to see it encouraging them even more. We must never go back to using taxes to stop people from working, investing or employing.
Ladies and Gentlemen, we are in for an exciting few months. The colour will be vivid, the volume loud, the pace hectic. You will be bombarded with promises and commitments of all varieties, from all-comers. I am determined that our proposals will not be designed to attract a quick burst of publicity only to be ditched when their useful life expires. Rather, our proposals will be aimed at the long-term needs and the long-term potential of our country. We have travelled a good journey together over the last ten years thanks to the hard work of the Irish people and the policies of this government. I believe that we have further to travel as
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