Teknovis

I am always interested in statistics relating to Irish incomes, and I often get asked about this while travelling, so I thought the the following statistics from Plans to slash the USC are rash and dangerous – here’s why were very interesting:

• 70% of earners have an income greater than 12,000€ per annum
• 50% of earners have an income greater than 27,000€ per annum
• 22% of earners have an income greater than 50,000€ per annum
• 16% of earners have an income greater than 60,000€ per annum

These figures relate to earned income, so they do not include non-earned income.

Tags: Ireland

FRKelly has produced a nice infographic in Ireland as a Patent Nation showing Ireland’s prowess as a patent filing nation (click to see larger version):

Ireland as a Patent Nation (Copyright FRKelly)

I think that the breakdown between academic institutions, individual inventors, and corporate bodies is the most interesting statistic.

Tags: FRKelly, Ireland

I heard of an interesting situation in a small Irish technology company recently. The company is successful, and it generates a small profit. In previous years some of this profit was redistributed to employees in the form of a bonus.

However, this year management decided to do a cost-benefit analysis on these bonuses. It was not a surprise that they found it was very bad value, due to the punitive income tax rates in Ireland. See Bruton criticises high income tax rates for an explanation, and bear in mind that this does not consider employer’s PRSI. There is roughly 4€ of benefit to the employee for every 10€ spent by the company.

So instead the management allowed employees to choose from a list of alternative incentives that would not incur a tax liability. Some of these incentives included:

• Additional annual leave
• Additional investment in informal employee education and training
  • Travel and accommodation for attending foreign trade shows and conferences
  • Purchasing of new hardware relating to the business (smart phones, tablets, laptops)
• Improved office facilities
  • Free food
  • The creation of a recreational zone
• Donations to charities of the employees’ choosing

There were more, but I cannot remember them all now.

Unsurprisingly, not even one person choose to receive a bonus! So now the government is not going to get even a single cent of income tax from the potential bonus pool. Furthermore, this means that the company’s total income tax bill this year will be the lowest in many years.

So what is the moral of this story? There are two!

Firstly, there are many rewards that employers can offer employees that have a one-to-one cost-benefit balance. It is just a matter of thinking creatively!

Secondly, that by continually increasing income tax rates the government is taking a larger percentage of a smaller amount of money!

Tags: Ireland, Tax

Ireland and Greece are both currently being bailed-out. This effectively means that both countries are funding their current expenditure using borrowed money. This became necessary because their economies both got into serious difficulties. So it is very interesting to see how both countries are adjusting to this financial dependence.

I read today that the minimum wage in Greece has been reduced to 580€ gross per month, according to Greek unemployment at record high with youth jobless rate now over 50%. This reduction is designed to boost employment (by making it cheaper to employ people) and boost the economy (by making exports cheaper).

I was curious how this compared to Ireland, so I did some investigating. According to my calculations, the minimum wage in Ireland is 1,500€ gross per month. (This is based on a minimum wage of 8.65€ gross per hour as described in Minimum rates of pay.) Even more interesting is the fact that the minimum wage in Ireland was increased by 173€ gross per month in 2011.

The Greeks (and probably many others in the EU) must look at Ireland and wonder how the Irish can afford such high minimum wages at a time when the country is bankrupt!

I certainly do not understand this!

Tags: Greece, Ireland

If anybody is wondering why Ireland needs to borrow so much money, then there is a good clue in Keep your pension pot away from the sharks:

THESE ARE good times for more than 7,000 public servants who have just retired on pensions that many in the private sector would die for. Many of the 7,700 public sector (ex) workers have now cleared their mortgages, reared their children and are still relatively young. And as if all that wasn’t good enough, they have also just received six-figure lump sums as part of their pension deals.

Honestly, I think it would be better for Ireland if we could no longer borrow money until we stop spending it so foolishly!

Tags: Ireland

During the week I read Latest memorandum reveals more austerity ahead in Budget 2013. I agree with the thrust of the Memorandum of Understanding (MoU), because we all know (except the Government) that you cannot keep spending money that you do not have:

The latest Memorandum of Understanding (MoU) between the Troika and the government has confirmed that “at least €3.5 billion” will be taken out of the economy in the next budget through tax increases and reductions in spending on social welfare and capital projects.

However, I was disgusted when I read the following:

Revenue raising measures amounting to €1.25 billion will include a broadening of the personal income tax base which could mean either raising taxes or lowering the bands on the amount at which people are taxed.

There will be further restructuring of motor taxation, increases in excise duty and other indirect tax measures. A reduction in general tax expenditures is also proposed – meaning a potential cut in tax credits.

Honestly, I do not understand why the Government is determined to take more and more money from the fewer and fewer people who are working in order to fund a bloated public service and social welfare system!

The document also outlines where €2.25 billion in savings will be made including reducing expenditure on social welfare, cutting the total bill for pay and pensions in the public sector and reductions in capital expenditure – all areas where the government has previously implemented cuts.

I would love to believe that this will happen, and I would be happier accepting increased taxes if I saw that our public service rates (not numbers) and social welfare payments were decreasing towards European averages.

Indeed, Colm McCarthy recently highlighted these two groups of people as “silent winners” of the economic downturn in Ireland’s squeezed middle:

The silent winners are, however, quite numerous. Social welfare rates of payment have been cut and scheme rules tightened, but not across the board. State and public service pensioners have been spared the cutbacks. Even high-income pensioners have had free medical cards restored. But pensioners reliant on funded occupational schemes are not so lucky: most schemes are underfunded and benefits are under threat – a situation exacerbated by a government levy on funded schemes.

The winners are those far-sighted enough to choose careers with employers who do not pre-fund for retirement, which means the public service.

All this is happening at an interesting time for me, because I may have the opportunity to continue my current work in another country with far more favourable tax rates. It really is starting to look attractive!

Tags: Ireland

I read a very interesting breakdown of the income per Irish county in Capital rule: People from Donegal have lowest income in Ireland.

I am not surprised that the top three are:

1. Dublin (30,891€)
2. Kildare (27,498€)
3. Meath (26,312€)

What I find more surprising is that these are the only three counties where the county average is greater than the national average (26,192€). I think it is another sign of the growing divergence between the economic powerhouse that the greater Dublin area is compared to the rest of the country.

Tags: Ireland

If you are one of the many hard working private sector employees in Ireland that earns the average industrial wage, and you are facing the prospect of paying substantially higher taxes in 2012, then you may be wondering what is the Irish Government doing with your money.

You might find the answer, or at least part of it, in the following article: Most public servants on under €60,000.

Almost 20,000 public servants earn €20,000 or less per annum; more than a third are paid €40,000 or less and another third get between €40,000 and €60,000.

So two thirds of Irish public servants earn more than 40,000€ per annum. As far as I remember, the average industrial wage in Ireland is approximately 40,000€. So this means that two thirds of public servants earn more than the average industrial wage!

The fact that so many private sector employees are supporting the privileged positions (inflated salaries, guaranteed job security, and defined benefit pensions to mention a few privileges) of their public sector counterparts needs to be considered in the context of a government that is only surviving due to a financial bailout.

Again this highlights one of major problems we have in this country, and it really cries out for reform!

Tags: Ireland

Yesterday the Irish Government announced the second part of the budget – the tax increases. See Budget focuses on jobs, property or Noonan unveils measures to raise extra €1 billion in tax for details.

Overall, I am very disappointed. I think that this Government has a significant majority, so it it had wanted to, it could have proposed a really radical budget. Instead we got the usual mix of minor adjustments without any real goal or vision. I think that this is because career politicians find it difficult to see or think beyond their immediate environments.

So what would I have done differently over the last two days? I would have reduced our deficit significantly more by imposing far greater spending cuts. The obvious way to achieve these spending cuts would be to look at the civil service costs. I believe that the Croke Park Agreement was a bad deal for tax payers in this country, and I believe that it will inevitably need to be abandoned in its current form.

The other aspect of the budget that is really amazing me is how everybody in this country who is on the State’s payroll (civil service and social welfare) seems to believe that they have a divine right to their incomes! This is probably due to a combination of laziness and arrogance, perhaps due to the Celtic Tiger.

I would love these people to realise how serious our financial predicament is, and although it was not their fault (mostly), they cannot expect future generations to be subjected to more and more borrowing just so that they can remain immune from the cuts that the majority of the people in Ireland are experiencing!

Tags: Ireland

The Irish Government spent today announcing the first part of the budget – the spending cuts. I must admit that I am very disappointed with it. I was hoping for some creativity, some imagination, some willingness to confront the problems. Instead it consisted of minor tinkering. Perhaps this is to be expected from a government that is being lead by a primary school teacher :|

So where does the problem lie? Enda clearly identified it in his speech to the nation the other night (see Full text of Taoiseach’s speech):

Right now, the State is spending €16 billion a year more than it is taking in.

Yes – it really is that simple! The Government is spending too much money that it does not have! Most of this money is being spent on social welfare and the civil service.

So what is the Government doing to address this? Again, let me quote Enda:

The pay and pensions of senior public servants have been cut.

Excellent!

However, the reality of what is happening is very different. Indeed, one only needs to look at today’s media! For example, consider Controversy over pay rise for Govt adviser:

Minister for Agriculture Simon Coveney has said he understood how people might find it difficult to understand how a Government adviser, Ciaran Conlon, could be paid a salary of €127,000 after a €35,000 pay rise following an intervention from the Taoiseach.

Now perhaps this could be justified if Ciaran Conlon was coming from the private sector, and he had skills that were essential to the Government. Unfortunately, his previous employer was Enda’s own party – Fine Gael :(

I will not claim to know if Enda’s actions in this matter are due to simple ineptitude or intended cronyism. Either way, Ireland deserves better!

However, this level of hypocrisy is not confined to politicians within the civil service.

Another measure announced in today’s Budget was a cut to teaching funding. Again, this is designed to try and reduce the excessive amount of borrowing that is being done to sustain an expensive civil service. The Teachers’ Union of Ireland (TUI), amongst others, has publicly denounced these measures (see Live – Budget 2012 and Cut in teacher numbers a disaster for schools – TUI):

The TUI has said a cut in teacher numbers will be a disaster for schools and said they would be “catastrophic” for the life chances of the most vulnerable.

The Association of Secondary School Teachers in Ireland (ASTI) also commented publicly on the cuts (see Live – Budget 2012 and Budget 2012 – education measures and ASTI reaction):

The ASTI says today’s Budget cuts mean the majority of second-level schools will lose one teacher and schools will see a reduction in funding for their day to day running costs.

It all reads very genuinely!

Unfortunately, neither organisation found the time today to comment on the cost to the Government of ensuring that over half their members get pay rises next year (see Pay rises on way for 50 per cent of teachers)!

Almost half of all teachers will receive pay increases next September of €1,000 to €3,615 a year, as guaranteed under the Croke Park agreement.

And:

The salary increments will cost €13.8m for 19,500 primary teachers, and a further €6.4m for 1,000 second-level teachers.

I guess the teachers are really more concerned that their salaries keep inflating at the expense of both the education system, and the private sector tax payers in Ireland. Shameful.

So yes, I am very disappointed that Enda and his colleagues have not taken any real measures to reduce the unsustainable Government spending that is occurring on both social welfare and the civil service.

Tags: Ireland