Saturday, January 7, 2012

7/1/2012: Irish Exchequer Results 2011 - Shifting Tax Burde

In the previous 3 posts we focused on Exchequer receipts, total expenditure by relevant department head, and the trends in capital v current spending. In this post, consider the relative incidence of taxation burden.

Over the years of the crisis, several trends became apparent when it comes to the shifting burden of taxes across various heads. These are summarized in the following table and chart:

To summarize these trends, over the years of this crisis,
  • Income tax share of total tax revenue has risen from just under 29% in 2007 to almost 41% in 2011.
  • VAT share of total tax revenue has fallen, but not as dramatically as one might have expected, declining from 30.7% in 2007 to 29.7% in 2011
  • MNCs supply some 50% of the total corporation tax receipts in Ireland. And they are having, allegedly, an exports boom with expatriated profits up (see QNA analysis last month). Yet, despite this (the exports-led recovery thingy) corporation tax receipts are down (see earlier post on tax receipts, linked above) and they are not just down in absolute terms. In 2007-2011 period, share of total revenue accruing to the corporation tax receipts has fallen from 13.5% to 10.3%. So if there is an exports-led recovery underway somewhere, would, please, Minister Noonan show us the proverbial money?
 So on the tax side of equation, the 'austerity' we've been experiencing is a real one - full of pain for households (whose share of total tax payments now stands at around 58% - some 12 percentage points above it levels in 2007) and the real sweet times for the corporates (the ones that are still managing to make profits to pay taxes, that is). This, perhaps, explains why even those working in protected sectors are talking about their biggest losses coming from tax changes.


BrendanH said...

A nitpick: years and categories are reversed in your star chart.

TrueEconomics said...

Brendan, not sure what you mean by it - each year is plotted on axes, for each year I plot corresponding tax head weight. Colored lines connect tax burden evolution year to year for each specific tax head.

BrendanH said...

It would be better to have categories on the axes and each pentagon representing a year. Alternatively, if you want the line to represent evolution of the category through time, a simple line-plot would be easier to read.

(Sorry to focus on the medium and not the message!)

TrueEconomics said...

Understand. I simply grew tired of line graphs - given I use them like 20 times per day :-)