There has been a lot of justifiable wonderment about the £20 million grant to the GAA over a three-year period, announced by Charlie McCreevy in the Budget, which amounts to a little under £7 million a year. But nothing at all about a straightforward cash benefit of almost £19 million every year to the richest in society.
This windfall follows the extraordinary announcement in the Budget speech of a reduction in the capital gains tax of a half and some other minor adjustments, at a net cost, we were told, of £19 million a year.( By the way, the cost will be far higher than £19 million, possibly a multiple of the figure).
The news took just a paragraph of the Budget speech to impart:
"For a considerable period of time I have been of the strong view that a reduction in capital gains tax will release pent-up investment funds and create an incentive for the acquisition of further capital assets. This will encourage investment and growth in the future. I have decided therefore to reduce the rate of capital gains tax from 40 per cent to 20 per cent . . ."
And that was it, apart from the exemption of capital gains for disposals of development land and a slight adjustment in the applicable allowance and the added bonus that "the reduction in (the tax) will take effect from today".
What conceivable economic or social justification could there be for this extravagance?
Were the economy in recession there could be a case for reducing capital gains tax to release investment funds into the economy. But manifestly this is not now the case. The economy is in full flood, and investment funds are available in abundance.
And it is not just a device for unburdening the tax-ravaged rich of £19 million a year; the ruse will open up avenues to others to avoid paying their fair share of tax. Take, for instance, the hot-shot executives many of whose bonuses are paid by way of share options. At a stroke, the tax on a vast slice of their earnings is halved. They will end up paying tax on their earnings at a rate of a little over 20 per cent in all, in contrast to the vast majority of taxpayers who will pay at the rate of 46 per cent.
So what is going on here? How is it that the wealthiest in our community are gratuitously exempted from the rigours of our normal tax code and there is not a cheep about it?
Charlie McCreevy referred in his Budget statement to an investigation undertaken by the Revenue Commissioners "of the amount of income tax paid by high income earners". He failed to disclose what the results of this investigation were but went on to boast: "I called on previous occasions in opposition for measures to ensure that all taxpayers liable to income tax pay an adequate effective rate of tax on their earnings. This is what fair taxation means."
On December 14th last the Sunday Business Post published a remarkable story by their political correspondent, Mark O'Connell. It failed to get any attention largely because of the lead story about financial donations to the Progressive Democrats. There was an obvious link between the two. The Mark O'Connell story gave details of that investigation by the Revenue Commissioners into tax paid by high earners, that is, people earning more than £250,000 a year. It revealed that only 8 per cent of these high earners paid the tax rate we assumed applied to high earners (48 per cent) and that certainly applies to the vast majority that earn more than a very modest income.
The report also disclosed that nearly one in five of these high earners pay tax at an effective rate of just 20 per cent.
It showed that 8.5 per cent of high earners paid in the tax year 1994/95 less than 5 per cent of their income in tax; 3 per cent between 5 and 9 per cent; 2.7 per cent between 15 and 19 per cent; and 4.5 per cent between 20 and 24 per cent of their income.
Of course, several of the spectacularly high earners pay no income tax at all, either here or elsewhere - these are the tax exiles who include some well-known figures. They manage this by claiming to be domiciled in Monaco or Barbados or the home of some of Mr Haughey's friends, the Cayman Islands.
Is it any wonder then that almost every one of the high earners should bankroll the party that most unashamedly represents their interest in paying as little tax as possible, the Progressive Democrats?
The list of bankrollers revealed by the Sunday Business Post was thoroughly predictable, and I am quite certain that all of the high-roller contributors did so for reasons that were entirely proper. But surely it raises a question about the fairness of the political system?
The Progressive Democrats got off the ground in large part because of the energy of Desmond O'Malley and the respect in which he was held throughout the country. But that was not all. The considerable financial backing it got was also an indispensable factor, and it got that because it was a party that was going to represent the interests of the high rollers. And have they delivered!
This latest Budget must surely be the ultimate vindication of the Progressive Democrats. A massive £100 million splurged in reducing the top rate of tax for the high earners (not a scintilla of economic or social justification that I can see for reducing the top rate of tax for anybody earning over £50,000). And now a new ruse, via the reduction in capital gains tax, to enable them to avoid even more tax.
Meanwhile, in this same Budget speech, Charlie McCreevy acknowledged that the recommendations of the Commission on Social Welfare all of 12 years ago now, on the elimination of basic poverty, have yet to be implemented in full.
The capital gains tax reduction took effect from "today", Charlie McCreevy announced. None of the miserly social welfare increases will take place until June and some not until September.
Why should a massive benefit for the rich take effect immediately and pathetic improvements in social welfare benefits be deferred?
Why also should one of the few devices for achieving some modicum of equality of wealth and power, the distribution of capital gains, be undermined so comprehensively at a single stroke?
The political system is corrupt. It is, at its core, rigged in favour of the rich against the less well off. And part of the explanation for this was revealed in the PD skip - the rich fund the system and they call the tune. And Charlie McCreevy for one fairly danced to that tune in the December 3rd Budget.