From top: Minister for Finance Pascahl Donohoe; Tony Groves
It is difficult to define an elephant, but you know one when you see it – Bob Dowdall, Chief Inspector of Taxes
There are idioms and sometimes there are cliches. The elephant in the room is that both idioms and cliches are merely at different stages of the common lexicon cycle. One man’s philosophy is another man’s bunkum. Both things CAN be true.
It’s with this verbal trick in mind that my eye is once more drawn to the state of our exchequer returns. Month after month our indicators of economic performance have painted a picture of an economy that is once again the envy of all of Europe.
Forget Leprechaun Economics, we have more people at work than ever before in the history of the state. Don’t mind the begrudgers who point out Ireland’s preeminence in tax evasion scandals like the Panama Papers, we collected more tax in 2016 than ever before in the history of the state.
Put aside your concern for the various crises (housing, health, policing etc) and focus on a growing fiscal space that might start to tackle these issues.
But above all else, ignore the elephant in the room.
Since February a funny thing keeps happening with the income tax take; it keeps undershooting the government’s targets. Our former Minister for Finance, Michael Noonan is said to be at a loss to explain the results.
[Word of advice; in the event of a zombie apocalypse do not reach out to Michael Noonan, the Department of Finance and the new Finance Tzar, Paschal Donohoe, for help]
They can’t see the elephant in the room, let alone tackle it. It doesn’t take too much imagination to picture Taoiseach Leo Varadkar giddily welcoming the zombies and talking about his favourite Walking Dead episodes.
Whether our leaders are willfully blind to it, genuinely perplexed, or sincerely unaware doesn’t matter; the fact is that report after report has found that (at least) 1 in 5 self-employed workers are not really self-employed.
These are workers in the “sharing economy”, the “gig economy” and even your GP. The lad on the mountain bike, delivering your Thai Green Curry is a modern day entrepreneur, apparently. The fella sweeping the building site is the CEO of yard brush enterprises, who knew?
These are the workers whose job description includes the unwritten criteria of pretending they are self-employed.
This is the ‘elephant in the room’ work practice that the instruments of the state, Revenue Commissioners, Department of Social Welfare and the Department of Finance ignore because “the arrangement is administratively efficient in collecting tax from a sector which is traditionally recalcitrant when it comes to paying tax”.
What that actually means, in the eyes of the state, is that some money is better than no money.
It is bizarre to think that allowing people be misclassified as self-employed is the lesser of two evils, when, if these individuals were PAYE workers, the tax would be deducted at source.
From an employers point of view this is a ‘no brainer’. The estimated loss to the state (and saving to the employer) is an estimated 30% per employee.
Savings in pension contributions, sick pay, holiday pay, employers PRSI all hit the state coffers. All this while flexibility is forced upon workers in precarious employment. It’s manna from heaven for an unscrupulous employer.
There are quite literally tens of thousands of these wishy-washy contract for employment jobs, in lieu of contract of employment jobs; nearly 100,000 in Relevant Contracts Tax roles alone.
This herd of stampeding elephants have smashed holes in the ‘Fiscal Space’ that will determine our budgetary constraints. They have been allowed trample on hard earned employees rights, making the nature of work more precarious than in the past.The insurable jobs divide in the gig economy is estimated to be growing at 15% per annum.
People in such employment will be excluded from things like mortgages and employers pension schemes, they are not the recalcitrant children. They are the victims. The state, by looking the other way, are the issue.
You know an elephant when you see it, and this elephant is bad for the state, its citizens and the future. It needs to be addressed. Tackling it might seem like a mammoth task, but as the cliche (or is it an idiom?) goes; How do you eat an elephant? One bite at a time.
I just don’t see any big game hunters in our midst.
Tony Groves is a full-time financial consultant and part-time commentator. With over 18 years experience in the financial industry and a keen interest in politics, history and “being ornery”, he has published one book and writes regularly at Trickstersworld