In a developed country the majority of the citizens look to and expect the Gov’t to provide a range of basic services, such as Education, primary, secondary & tertiary, Policing & Prisons, Clean Water & Clean Air, a Road Network, Hospitals etc. Where they decide to “farm out” / privatise some services they continue to have some regulatory responsibilities or supervisory function to play. Without such regulatory functions private companies may become very selective in how they provide services which have been entrusted to them. EG. there may be little profit in running a regular bus service to outlying towns such as Spiddle or Glenties for a profit maximising private transport company.
To fulfil this wide range of responsibilities the Gov’t obviously needs money,preferably a regular predictable revenue stream. It raises this revenue in a variety of means such taxation, direct & indirect, Income Tax, Corporation Tax, VAT, Capital Gains Tax, Stamp Duty & Social Insurance Contributions. The total amount raised is usually expressed as a % of the country’s GDP (Gross Domestic Product). This % figure enables us to gauge year on year whether the Gov’t’s revenue and expenditure is increasing or decreasing as the GDP rises or falls. Unfortunately certain services need to be provided at a level which is not influenced by the rise or fall of our GDP, policing and schools are two obvious examples. How the Gov’t handles or mishandles this problem is for another discussion.
Another use of this information which expresses revenue as a % of GDP is that it enables us to compare ourselves with other countries irrespective of their size vis a vis Ireland. However for Ireland to get a % which is usefully comparable we have to do a little “massaging” of the figures due to the abnormally large amounts of money “passing through” our economy without paying much if any tax and without generating real economic activity in the form of local jobs. EG. Aircraft Leasing, Property speculating Venture Funds, I could add Apple, they certainly pay little or no tax and relative to the Billions of sales booked through Ireland their 6,000 employees is disproportionately small.
In summary, Ireland uses a Hybrid GDP figure which is calculated by the Irish Fiscal Advisory Council and it is this figure which I will use to express revenue & expenditure as a %, of GDP. This Hybrid figure gives a higher % than if we used our “oddly inflated” GDP figure.
The point I wish to make is that the Gov’t can only provide Public Services from the revenue it receives and unfortunately as we will see below, we cannot expect the range or quality of Public Services that are available in other European countries simply because our Gov’t has not got the money. The % figures given are Revenue as % of GDP and are Gov’t projections for next 5 years (the actual figures for the last 2 years were fairly similar) The figure in brackets after Ireland’s % is the UK %.
EU Area Average: 46%, Ireland 33% (37%).
Since late 1990s in terms of how we managed our economy we drifted “closer to Boston and further away from Berlin”. We went for low taxes. i.e.. low Gov’t revenue and a corresponding low level of good quality Public Services. As a comparison outside EU the USA % has just recently broken 30%. So there you have it. In my opinion we are very entitled to be unhappy with our Public Services and should be agitating every what way for the changes necessary to enable us to enjoy a truly European range of Public Services.
The old argument that if we add costs to doing business in Ireland we will become uncompetitive doesn’t really hold water. Watch this space for a look at how some other EU countries who pay much higher taxes than Ireland remain internationally very competitive.