If ever the present income tax structure and its injudicious nature was highlighted by anyone, it was by the Minister for Finance who emphasised how inequitable it is. This made me believe that there is an urgent need for us to review our taxation system and consider whether it is still possible to lavish subsidies on our industrial sector while, at the same time, imposing a crippling burden of taxation on workers. Can anyone justify the present discriminatory tax structure, when 700,000 workers covered by PAYE contribute 82 per cent of the total income tax revenue, companies contribute a miserly 5 per cent, farmers a negligible 1 per cent, and export orientated foreign capitalists contribute absolutely nothing? These are very illuminating statistics. In the light of them, I wonder who is contributing most to the economy. Is it the workers who are making demands to enable them to bear this crushing burden of taxation? Is it the companies who enjoy the multiplicity of taxation concessions? Is it the foreign companies who function completely free of taxation while benefiting from the largesse of IDA grants paid for out of the taxes of the workers?
As if this direct taxation which cripples the working section of our community so much is not enough, the worker gets a second going over with the high rate of indirect taxation, VAT, and so on. As the Minister noted in his budget speech, indirect taxation is notorious for its regressive effects, and for the fact that inevitably it bears most heavily on those least able to afford it. The Minister was quite right to advert to this matter. Despite what the Minister said, the budget laid most emphasis on indirect taxation. At present Ireland enjoys the dubious distinction of having the highest incidence of indirect taxation in the EEC. As I worked on these figures I found that indirect taxation accounted for 55 per cent of all tax revenue collected in 1975, while direct income taxation accounted for 45 per cent. I believe the recent budget merely added fuel to the flames by introducing exasperating increases in indirect taxation, increases which are barely offset by the paltry increases in the tax free allowances.
The fact that tax revenue is composed of direct income taxation, with the worker paying 82 per cent, and indirect taxation with the worker again bearing the brunt, would seem to belie the notion that one of the functions of taxation is to achieve a more equitable distribution of wealth. The Labour Party have always champoined the Robin Hood approach of taxing the rich in order to support the poor. I may be accused of being over-critical, but it seems to me that the recent budget was more in favour of the opposite, of taxing the poor in order to support the rich. I believe we have reached a crisis point with regard to this crushing burden of taxation on the working classes. The patience of the workers has been exhausted. Unless there is a restructuring of the whole taxation system, an easing of the PAYE burden, and a spreading of the tax load, we will soon be faced with the prospect of a taxpayers' revolt. That is not exaggerating the situation.
The Minister for Finance displayed a commendable grasp of the gross inequities of our tax system in his budget speech. I should like to give a few quotes from his speech. He mentioned that 72 per cent of total taxation came from indirect taxation, the old reliables, the cost of which bears most heavily on the working classes. He said in Ireland 50 per cent of total earnings is taken by taxation at an earnings level of just over £13,000. The next lowest corresponding thresholds in the EEC are Britain at £16,000, the Netherlands at £25,000, and Italy £100,000. In France the State never takes 50 per cent of earnings. The Minister has shown we have a system of taxation which is grossly inequitable. What he said is a very praiseworthy analysis. However, an analysis is not enough.
The steps the Minister took to alter the taxation system by way of anti-evasion measures, extending the net to include the lumpers and, to a small degree, the farmers, as well as the proposals for contemporary assessment, all fall far short of the type of measure necessary to reconstruct the tax system along justifiable lines. The Minister, regrettably, did not go beyond recognising the disproportionate distribution of the tax burden. He proposed nothing which would accomplish a fundamental change in the present tax system. If the Minister is sincerely determined to equalise the tax burden I propose that he establish immediately a taxation review committee which would provide him with recommendations for reforming the present system. I do not envisage this as some long drawn out committee which would make recommendations to him in a few years. This committee, as a matter of urgency, should tackle this crippling taxation burden on the PAYE sector in general and the lower income groups in particular.
We should aim at completely removing the tax burden from the lower paid sector by spreading the burden evenly across the economic spectrum. Such a spreading of the load would entail a closer look at the multitude of tax concessions enjoyed by companies as well as the low level of farmers' contributions. This committee could report to the Minister within ten weeks. He could then accept their recommendations and implement them in a budget on 1st July.
The Minister, to show his sincerity in what he has said, should act with all haste to ensure that what he has said can be implemented. This could be implemented by applying higher company taxation, perhaps eliminating some of the tax free concessions, which foreign industrialists enjoy in this country. We are obsessed with the question of exports. This export obsession is not only evidenced by the myriad of tax concessions offered to industry with export sales relief, accelerated depreciation, stock relief and so forth, but also by the millions of pounds which the IDA offer in capital grants to foreign industrialists who agree to set up industries in Ireland. Over £45 million was paid to those people in 1974.
This export obsession also underlines the pay pause demands of industrial employers, the argument being that our competitiveness is being seriously undermined by wage costs. Since exports are the mainstay of employment, the argument goes, a pay pause is required, if further unemployment is to be avoided. This is not correct as I will explain later. The continuation of our economic crisis into our third year, the 118,000 people who remain unemployed and the system of taxation which fleeces the poor to support the rich, all demand that we give up looking for solutions in piecemeal economic tinkering and start questioning some basic assumptions.
We must have a cost/benefit analysis of these taxpayer subsidised bonanzas for export industries. What have they achieved in terms of immediate employment? Is the preoccupation with export growth costing us too much? This is the only way out of the labyrinth of economic depression. The argument regarding competitiveness is a conventionalism for most but the recent Economic and Social Research Institute commentary maintains that industrial exports did not lose competitiveness in 1975 when compared with other OECD countries. There may be many valid reasons for a pay pause but the scare tactics of relating pay increases to a disastrous fall in export competitiveness simply does not wash.
The soaring unemployment figures indicate that job creation is forever falling far behind job loss and export industries do not have the capacity to provide the necessary level of employment. Of course, the world is in recession but an economy which depends so heavily on exports and, therefore, on the continued economic growth of other countries, leaves itself in a most vulnerable position because when the balloon bursts it is inevitably left defenceless.
The policy is even less justifiable when workers are taxed into oblivion and the Government give massive handouts to foreign export industries which contribute nothing by way of taxation and an insufficient amount by way of employment. Foreign capitalists are always the first to withdraw in difficult times since their commitment to the economy of this country does not extend beyond the tax free profits already obtained. It is amazing that we lack so much confidence in the economic benefits of fostering a home demand, a demand which so many foreign importers are eager to exploit.
The failure of export industries to protect and to maximise employment is very evident. We no longer have the right to link the fortunes of our people to every slump and recession in the world economy. It is time to devote some sort of effort to fostering the home market and jobs in home-orientated industry, instead of giving it to developing jobs in the export industries in the last decade.
I am not proposing an embargo on export efforts and I am no economic isolationist or economic Sinn Féiner, far from it; I am only interested in achieving a realistic balance which will encourage productive Government spending and offer people opportunities for employment. The present imbalance is the result of supporting capital intensive industry rather than labour intensive industry. Nearly two-thirds of the jobs in Irish manufacture are still dependent on the home market for survival. It makes more sense to protect jobs through labour subsidies than to subsidise foreign capital to provide jobs.
The Government have failed to protect our citizens' most basic right, the right to work. The recent budget demonstrated a total lack of commitment to job creation. Direct and indirect taxation continues to undermine the living standards of our workers while money continues to pour into the coffers of manifestly incapable and foreign dominated export industries. It is apparent to me, and it should be to many who are studying the economy, that the working people of Ireland are paying everybody's way in the present crisis and that any new sacrifices which the Government deem necessary will fall on their shoulders alone.
If Ireland is to continue to be a place worth living in it is essential that we examine our basic economic assumptions, that we spread the burden of the crisis fairly, that we do not tax our workers out of existence in an attempt to prop-up foreign capital with this misguided faith in the capacity of export industries eventually to solve all our problems. We should make a new commitment to social injustice and unemployment.
I recognise the Minister's dilemma in choosing those areas which provide the most money and impose the least hardship on the taxpaying public but, without being over-critical, I got the feeling that the budget was a most unimaginative one. It seemed to me that it was done in haste and sufficient effort was not made by the Minister's Department to examine other areas where tax could be applied without hurting those most vulnerable. One wonders why the Minister taxed motorists so severely and allowed the punter to escape unscathed. This is particularly mystifying in the light of the staggering fact that £1½ million was speculated in the first four weeks of this year, which represents 62 per cent increase over the same period last year. We are left to wonder why those massive sums escaped the taxman's net. The punter could have been taxed to alleviate the burden of the car owner.
I believe, if we are to save existing jobs—the figures each week suggest that something of an emergency nature may have to be applied—especially those vulnerable to free trade, we must give serious consideration to some form of import controls as an emergency measure. We have the highest rate of unemployment in the EEC. The official unemployment rate is 13 per cent. In my area alone I have estimated from a survey that it is over 20 per cent.
A 13 per cent rate is more than twice the average for the EEC countries. In Ireland unemployment was endemic for a long time but now it has reached epidemic proportions and with a virulence that saps the life of our nation. In a situation like this we should be obsessed with the question of solving the problem. I wounder why we have not applied import controls. The director of the business bureau in Brussels expressing surprise that we have not applied some form of import control, says this is all the more surprising in light of the fact that Article 135 of the Treaty of Accession entitled us, up to the end of 1977, to take safeguard measures. That Article refers also to Denmark and the UK but the director of the business bureau emphasises that Ireland is the only country which can take such safeguard measures in the case of extreme urgency, notifying the Commission after the event. That is an important point. I believe the other member countries would sympathise with us in our problem and would realise that because we have the highest unemployment rate, we have no option but to safeguard existing employment. Therefore, we should avail of this special provision in the agreement. Undoubtedly, this safeguard was in the minds of our negotiators when the Treaty was agreed and signed. Apart from this provision, France and Italy provided ample precedent recently for the imposition of emergency import controls.
The capital programme is worth examining in the light of the unemployment problem. This programme, ten years ago, accounted for 33.5 per cent of government spending while in 1975 it accounted only for 24 per cent or a loss of £176 million in 1975 terms. This is a foreboding development since the capital programme offers the best opportunity for productive government spending. Investment in the programme creates jobs, produces tangible benefits in increased housing, road works, public buildings and so on. For the past year-and-a-half I have been emphasising the need for the expansion of the capital programme and for the implementation of a public works programme.
The unemployment problem is more than a burden on the State in terms of social welfare payments. It has a very depressing effect on those who are out of work. These people are anxious to find employment. They find it embarrassing and demoralising to have to queue up for benefit. There is the factor also of hardship resulting from the drop they suffer in their standards of living. The CII have estimated this drop to be 50 per cent. These factors should be borne in mind when we talk of these people living on handouts. It is a sad reflection on us that we have so many of our people in this predicament. The recent capital programme should have taken account of the unemployment situation and should have committed a greater proportion of funds to job-intensive sectors.
Taking inflation into consideration and realising that the rate is still galloping, I wonder if a 17.3 per cent increase in respect of building or a 4.4 per cent increase in respect of housing was adequate. Were such increases an indication of a determination to expand the capital programme so as to lessen the unemployment problem? I do not think so. I recognise the needs of the industrial sector. I appreciate the need for increasing enormously the amount of money that must be put into this sector but I am aware also of the needs of the 22,000 people who were laid off in the construction industry. Many of those people could be returned to work immediately if funds were allocated to the job-intensive sectors. This would not involve any drain on our external reserves. It would not involve massive imports because we would be concentrating on the home-generated products such as cement and all the other ancillary products associated with the construction industry. I am disappointed that no determined effort was made in this field.
Regarding the IDA, the industrial grants scheme should be reviewed with the object of replacing these handouts with long-term interest-free loans. Such a scheme would mean that investment in Ireland would continue to be attractive and would provide a fund which would replenish itself to some degree. A stricter criterion of job intensity should be applied to developers seeking assistance.
So far as the banks are concerned, these institutions have failed to play a socially useful role in directing the financial resources of the country towards more productive development such as job creation. Instead, they have fanned the flames of home-created inflation by expanding the money supply and by making available a large amount of credit for non-productive purposes. They have amassed assets of almost £3,000 million and they have profit margins in excess of 55 per cent. They hold in their hands the fortunes of many enterprises, industrial and agricultural. The criterion they apply is in terms of profits attainable when the enterprises concerned, in order to help them protect the livelihoods of those they employ, should be receiving every assistance.
Is there any reason why we should not impose an exceptional levy on bank assets, say 1 per cent? Such action was taken in France in 1969 as an exceptional measure and has been continued since. A similar measure here would generate revenue in excess of £25 million, an amount which could be used to finance the extension of the capital programme or the employment premium scheme and which could assist the construction industry. Such an extension has been mentioned as one means of rescuing six major construction projects planned for Dublin alone. Both areas offer immediate advantages in increased home demand. Is there any reason why the banks should not be compelled to offer low interest loans to labour-intensive enterprises? Why should the Government not take steps to ensure the productive use of credit or why should the profits made by banks from their foreign investment not be taxed severly? Is there any reason why the banks should not declare an emergency delay on the repayment of loans by firms faced with the prospect of redundancies or closures?
An analysis of bank profits would suggest that the percentage paid by way of tax revenue is very small. I wonder if there is any reason why the tax on banks' profits should not increase at the same time as the tax on workers increases. It is the function of government to ensure that society's wealth is used to the best advantage of the community. No one sector should be asked to bear the weight while others profit from subsidies and concessions.
The export industry is of crucial importance. It can only benefit from the level of Government assistance given to it. Assistance cannot be provided at the cost of an inequitable tax structure with the workers alone pulling their weight. Banks, farmers and companies must contribute also.
We are at a critical point. I believe that suggestions along the lines I have made could help to reduce unemployment and get the country moving again. We must be prepared to take control of our problems if they are not to take control of us. The wider interests of the many must outweigh the narrow interests of the few.
We have almost forsaken our young school leavers. As an emergency measure, is there any reason why we cannot call for the early retirement of people in their sixties with full compensation granted to them in order to make way for the school leavers to enter industry? In this way we could absorb many of the young people and help the economic situation. They would be paying taxes, they would be contributing to the economy and the Government would not suffer any loss of revenue. Is there any reason why we cannot have a plan for phased retirement, where a person could go on a three-day week or a two-day week and where the school leavers could be brought in on a graduated basis? This would not upset the work force or the economy and it would be of help to people who are about to retire.
There can be no progress in a country where people have no faith in the future. I was interested to hear the call by the Tánaiste for an economic and social plan. I hope there will be early action on this matter. An economic plan must be prepared that will open the opportunity for steady and productive employment. We must be told about the way the economy is going. I should hate to think that we were frittering away each day in a Micawber-like fashion hoping that something will turn up. If we float along rudderless we will be in serious trouble and the public and national morale will suffer. If people saw evidence of Government leadership, of a plan and of the goals to be attained, it would boost their morale and they would be prepared to contribute. We must take the burden from the lower section of the community who are paying tax. That burden should be spread more widely and I call now for implementation of the recent recommendation that the farming community should contribute a lot more in the payment of tax.
