October 2008 Archives

Banking Crisis

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Having provided guarantees to the banks on very favourable terms, the Government must follow these up with equity injections, as is being done in many other countries, in order to underpin our fragile banking system, re-enforce its guarantees and participate in the upswing which will ultimately occur.

While this will impact on Exchequer borrowing, massively dilute existing shareholders and shred the reputations of many high-flyers, it is surely more prudent to inject new equity before problems arise rather than as the "the last option" favoured by the Minister for Finance.

If, God forbid, an Irish bank was to default on any significant scale, it is hard to see how the other banks could respond without jeopardising their own stability with disastrous national consequences.

To mangle a phrase often attributed to banks, the Government should lend them umbrellas before it rains and take them back once the sun starts shining.

This letter was published in the Sunday Business Post on 2nd November 2008.

Income Levy

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The proposed income levy is a crude and inequitable method of raising revenue. Based on Revenue's latest published statistics, 855,000 taxpayers had incomes of less than €20,000 in 2006 and paid income taxes of €198 million on total incomes of €8.5 bn.

On this basis, the income levy of 1% would cost them €85 million. At the other end of the spectrum, 58,000 taxpayers earned over €100,000 and paid taxes of €3,320 million on total incomes of €10.1 bn. Application of the 1-2% levy would cost them €145 million.

This shows that the levy is equivalent to a 43% surcharge on income taxes paid by the lowest paid whereas it amounts to just 4% of income taxes for the highest paid.

If the levy scheme was changed to exclude those earning less then €20,000, the higher rate for the levy might, for example, have to be increased from 2% to 4% to generate the same overall revenue.

This would reduce their average incomes of €175,000 by €4,000 a year, hardly a large sacrifice in these who, by virtue of their high incomes, benefited most from the Celtic Tiger.

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