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Topics

  • A New Economic Model
  • Wages and Incomes
  • Employment and Job Quality
  • Climate and the Just Transition
  • Taxes and the Welfare State
  • Understanding our Labour Market

Reforming Tax and Spend in the United Kingdom and in the Republic of Ireland

Tax
Working Paper Series
 July 
1,
 2020
Tax%20and%20Spend%20WP%20no.67%20FINAL.pdf

Fiscal policy, entailing government’s ability to raise revenues (primarily through levying taxes) and to spend is amongst the most important elements of public policy. Fiscal policy is a leading tool through which states can meet economic and social goals. In this paper, we compare measures of tax revenues and public expenditure to comparable states along several metrics to assess differences in the emphasis of fiscal policy in the UK (and Northern Ireland in particular where possible) and the Republic of Ireland. We find that Ireland and the UK are relatively low revenue and low spending states in relation to comparable western European countries. The aggregate “underspends” in both cases are primarily driven by low levels of expenditure under the heading of Social Protection, which persists when data are adjusted to reflect atypical demographic profiles in both states. Similarly, both states present as relatively low revenue jurisdictions caused by shortfalls under the heading of taxes on labour, particularly payroll and social contributions levied on employers. We argue that governments in both states should levy taxes that minimise distortions, increase efficiency and promote equality by addressing tax expenditures and pursuing revenue raising through the social security system, particularly on employers. Finally, in order to increase their economies long-run productive capacities both states should significantly increase their levels of public spending on education, on childcare services, and on public R&D.

Authors
Paul Goldrick-Kelly
Paul Mac Flynn
Dr Tom McDonnell
Taxes and the Welfare State

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    • A New Economic Model
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