Commission on Taxation and Welfare

Commission on Taxation and Welfare

Establishing a Commission on Taxation and Welfare was one of the little heralded but very important commitments set out in the Programme for Government. Ireland has what is, on the whole, quite a progressive and redistributive system, but there are issues that should be examined – for instance, are we over-reliant on Corporate Tax revenues, do we do a good enough job taxing wealth and should we re-examine some tax expenditures to make them less regressive (yes, no, yes, in my opinion).

In making my submission to the Commission in my role as Green Party Spokesperson for Social Protection, I for the most part concentrated on the welfare element of the Commission’s work over the taxation piece, leaving that to my colleague Neasa Hourigan. We are, in my opinion, fortunate to live in a well-established welfare state where there is a safety net built in to the structure of our society, but there are still those who fall through that net. We have an opportunity through the work of this Commission to identify those areas that need strengthening to better provide for all our citizens and residents.

Read my submission in full below:

I welcome this opportunity to make a submission on the work of the Commission of Taxation and Welfare. The establishment of this commission follows through on a commitment in the Programme for Government, as follows:

‘We will establish a Commission on Welfare and Taxation to independently consider how best the tax system can support economic activity and promote increased employment and prosperity, while ensuring that there are sufficient resources available to meet the costs of the public services and supports in the medium and longer term.

In doing its work, the Commission must have particular regard to the impact of the COVID-19 Emergency, as well as long-term developments such as ageing demographics, the move to a low-carbon economy, and the rise of digital disruption and automation.’

It is welcome in particular that the structure of the commission’s deliberations recognises taxation and welfare to be two sides of the same coin, acknowledging the role of redistributive taxation redressing some of the inequalities that exist in our society and our economy.

As set out in NESC report of November 2020, The Future of the Irish Social Welfare System, our system of Social Protection payments in Ireland are composed of a hybrid of universal payments (such as the Child Benefit) as well as payments based either on the contributory principle or the solidarity principle. While this model is strongly redistributive in character, as evidenced by its impact on the Gini coefficient, its composite nature can serve to make the relationship between taxation and contributions versus entitlements somewhat opaque which can in turn have implications for the social sustainability of revenue-raising measures. The Commission should examine whether this hybrid approach should be streamlined, and also look at ways to make the links between taxation and positive social outcomes more immediately evident and apparent.

The Commission should also consider if our current approach to taxation and welfare will be sufficient to achieve the ambitious poverty reduction targets as set in in the Roadmap for Social Inclusion or whether additional revenue streams will be required. In considering our poverty reduction targets, the commission should also investigate which approach is most likely to deliver the best outcomes – targeted interventions aimed at groups at highest risk of poverty, general increases in base rates of social welfare payments or some combination of those two.

The balance of positive outcomes to be achieved in terms of poverty reduction and other social measures should also be a component in considering the impact of cash payments through the social welfare system versus the provision of services. In that regard, the provision of universal basic services in general and in the area of health in particular should be a matter for consideration by the Commission.

The Commission should also investigate the potential to benchmark social welfare payments rather than the current system whereby decisions on payment levels are made on a political level as part of the budgetary cycle. The Roadmap for Social Inclusion proposes a ‘smoothed earnings’ approach to pensions, reporting that relevant government departments were asked ‘to institute a process whereby future changes in pension rates would be explicitly linked to changes in the consumer price index and average wages.’ Similarly, the benchmarking other social welfare payments to ensure income adequacy using the above measures as well as a consideration of the MESL (Minimum Essential Standard of Living) should form a component of the Commission’s investigations.

In examining that approach, the Commission should also be cognisant of the impact of any changes on people’s incentives to participate in the labour market, both at the intensive and extensive margins. Wherever possible, cliff edges in terms of social welfare payments should be avoided whereby the financial position of people hoping to engage in the labour market is negatively impacted by the withdrawal of benefits.

As well as looking at social protection measures in the round, the Commission should use the opportunity to investigate the potential for targeted measures to positively impact certain cohorts within our society, and those known to be at greater risk of poverty in particular – children, lone parents, people living alone and people living with disability amongst them. For example, the Commission should form a view on how the welfare state can support people to meet the cost of disability, as set out in the recent Indecon report. Likewise, the Commission should take a position on the impacts of both fuel poverty and transport deprivation on people close to or below the poverty line and how those impacts may be mitigated both in terms of the short-term spike in energy prices and with a view to longer term trends. The Commission has been asked to take a view on the work of the Pensions Commission and their recommendations to secure adequate pension provision into the future. The adequacy of welfare payments to younger people should be a matter for consideration as well, and whether it is equitable for younger people to have reduced welfare entitlements in some instances.  

In conclusion, I agree with President Higgins’ repeated position that the state should seek to set a basic floor of human dignity under which we should not allow any citizen or any resident of the state to fall. Poverty in all its forms is an affront to that dignity, and the state should seek to eradicate it. The Irish taxation system is already strongly redistributive in character. However, we must be mindful of the future sustainability of those taxation revenues and ever watchful of the efficacy of its use in providing social protection measures that safeguard the welfare of our people. We should be honest with ourselves as well with regard to the failings in that system and the impacts those failing have on members of our society, and seek to remediate them. The work of the Commission will play a very important role in identifying those areas where the state can better provide for its people into the future and express through its systems and apparatus the strong principles of social solidarity that suffuse and define the best nature of Irish society.