Category: economics

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economics finance politics

The Joy of Self-Employment in Ireland

An ironic title as such joy is largely confined to the freedom to pick your work hours that exists in a quite limited sense if you’re providing services to people and you have to fit around their schedules.
Let’s look at the positive side:

  1. You’re the boss. Customers or clients may harass or harangue you but at least the boss won’t bully you.
  2. You have some flexibility regarding place and time of work that you may otherwise not be afforded as a PAYE worker.
  3. Expenses. You get to factor in some expenses associated with a home office into your tax bill. More on this later.
  4. Job security in the sense that you are ultimately responsible for whether you have it rather than a VP or SVP with no personal stake in your life deciding you need to be downsized because your division doesn’t look good on his spreadsheet or you’re at a grade where his costings suggest he could bring in someone younger to bugger up your job.
  5. The sense of achievement that comes with making it on your own.
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economics

lack of foresight or willful ignorance?

A friend of mine suggested that my comments about the government’s bungling of the banking sector clean were hindsight and that foresight was rare. Well, while I agree that foresight was rare, we saw a mass mobilisation of academic economists against the government’s plan while it was happening. Therefore I don’t believe it’s in any way fair to say that the criticism was hindsight.

It wasn’t just hindsight. People suggested it
e.g. http://www.davidmcwilliams.ie/2009/02/11/with-credit-taps-turned-off-economic-life-withers
http://blogs.ft.com/maverecon/2009/02/good-banknew-bank-vs-bad-bank-a-rare-example-of-a-no-brainer/
http://www.irishleftreview.org/2009/02/20/ireland-bankrupt/
http://www.ft.com/cms/s/0/9457c0fa-3c2c-11df-b40c-00144feabdc0.html#axzz1FiYmzXLH
Even stuff like this
http://www.ifss2009.com/Leading%20economists%20disagree%20over%20NAMA%2021.10.09.pdf
suggesting that Roubini and Buiter disagree on NAMA is nonsense. Roubini’s version of NAMA crystalises losses for bond-holders in the banks. That plan was never put into effect as the ECB bullied us into paying almost all the speculators back. NAMA as implemented is totally dumb. Krugman thinks it’s dumb aswell. http://www.nytimes.com/2009/04/20/opinion/20krugman.html?_r=2&ref=opinion
And the fundamental flaws of NAMA (as impelmented) were pointed out by the infamous “20 economists” letter
http://www.irisheconomy.ie/index.php/2009/07/03/the-imf-versus-the-20-economists/
But because the government and a decent portion of the electorate are anti-intellectual and therefore distrustful of advice coming from academics or journalists imho they decided to ignore it. Instead we opted to listen to eurocrats with the most horribly vested interests in Eurozone currency stability at the cost of the Irish taxpayer. It was dumb at the time, it’s still dumb.
We setup a bad bank and left the existing banks to “wither and die” as confidence in their ability to hold deposits withered. We could have setup a good bank but we implemented half a plan.
I think I’ve been pretty damn consistent over the past few years and there was no special insight beyond doing some calculations based on publicly available data AND reading the opinions of non-Irish bankers discussing their fundamental problem with both ECB and Irish mgt of the banking crisis.
We needed to draw a line under the debts and give them a good bank to invest in. We could have swapped out debt in the old banks for equity in the new one. People like McWilliams aren’t fortune tellers and they’re not cranks. All they do is do some simple sums and pay attention to what the people who count are saying. That’s not the ECB, it’s the investment bankers who would have taken losses on the chin if they’d been given a credible plan to move the economy forward, giving them a share in the profits. All we gave them, and Irish deposit holders, was more risk. Hence, people took their money out en masse.

The good bank scenario was suggested by many economists. It ties in with the nationalised banking sector proposal whereby an intermediate stage would be a semi-public good bank where depositors could leave their money with some confidence they would suffer from a “Computer says no” shock at the ATM machine.

Continue reading “lack of foresight or willful ignorance?”
Categories
economics politics

Ireland versus Iceland

Iceland would win. Consider what has happened to these 2 countries since 2008. Iceland are not part of the EU and held a public referendum to accept the terms of a repayment deal for money lent by British and Dutch governments as a result of the IceSave crisis.The public rejected the initial terms of the deal (93% against) and the government used this result to negotiate a new and more favorable deal.

Let’s look at the terms. They’re paying fixed rates to both NL and UK. 3% to the Netherlands on £1.2Bn STG and 3.3% to the UK on £2.3 Bn STG. Good terms so far but it gets even better. Payments will not begin until July 2016 and cannot continue beyond 2046. Iceland has also secured a limit on the amount it is expected to pay out relative to its national growth. Payments cannot be lower than 1.3% of Iceland’s GDP nor exceed 5%.

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economics

Over-taxed but under-“taxed”

Even if we ignore consumption taxes, I’m not sure it matters to the person paying whether it’s income tax they’re paying or other forms of levies such as income or health. Ultimately, they all go into the pot and reduce take-home pay.
I calculated % total deductions from gross income for salaries from 10k to 140k.
I based my calculations on
http://www.hookhead.com/Tools/tax2010.jsp
It’s far from linear. The steepest rises occur between about 15k and 45k. Someone on 20k a year for example pays 6.38% of deductions. Someone on 50k pays 28.86%. A whopping >22% increase.  Now if we compare another 30k band 80k (@ 36.48%) to 110k (@ 40.23%) we see that the percentage change in deductions is much less i.e. those on middle-ish incomes benefit less from increases in their gross salaries whereas those earning multiples of the industrial wage have more incentive to earn more.
This is effectively regressive even if it isn’t technically so as there’s an ever decreasing increase in the total deductions as you earn more. When I have the time I’ll calculate the changes in these deductions over time. I believe that the austerity budgets have and will make it even less worthwhile for the average joe to work harder and increase their income unless they can jump the income gap into the “well off” camp.
So I don’t believe it’s the case that people aren’t paying enough tax (even though the gov will try to extract blood from stones). However a flat tax rate would incentivise the middle incomes to earn more, may result in increased productivity, create a more just tax system and could coincide with more cost-efficient and streamlined processing of taxes, social insurance and levies.Even if we ignore consumption taxes, I’m not sure it matters to the person paying whether it’s income tax they’re paying or other forms of levies such as income or health. Ultimately, they all go into the pot and reduce take-home pay.
I calculated % total deductions from gross income for salaries from 10k to 140k.
I based my calculations on
http://www.hookhead.com/Tools/tax2010.jsp
It’s far from linear. The steepest rises occur between about 15k and 45k. Someone on 20k a year for example pays 6.38% of deductions. Someone on 50k pays 28.86%. A whopping >22% increase.  Now if we compare another 30k band 80k (@ 36.48%) to 110k (@ 40.23%) we see that the percentage change in deductions is much less i.e. those on middle-ish incomes benefit less from increases in their gross salaries whereas those earning multiples of the industrial wage have more incentive to earn more.
This is effectively regressive even if it isn’t technically so as there’s an ever decreasing increase in the total deductions as you earn more. When I have the time I’ll calculate the changes in these deductions over time. I believe that the austerity budgets have and will make it even less worthwhile for the average joe to work harder and increase their income unless they can jump the income gap into the “well off” camp.
So I don’t believe it’s the case that people aren’t paying enough tax (even though the gov will try to extract blood from stones). However a flat tax rate would incentivise the middle incomes to earn more, may result in increased productivity, create a more just tax system and could coincide with more cost-efficient and streamlined processing of taxes, social insurance and levies.

Was reading Ronan Lyon’s excellent blog today and it occurred to me that perhaps his comments on income tax are only part of the picture.

Even if we ignore consumption taxes, I’m not sure it matters to the person paying whether it’s income tax they’re paying or other forms of levies such as income or health. Ultimately, they all go into the pot and reduce take-home pay.

I calculated % total deductions from gross income for salaries from €10k to €140k.

Continue reading “Over-taxed but under-“taxed””