UCD Quinn students win with Fantasy Budget Competition
2nd year students of Economics and Finance at UCD Quinn Business School, Laura Boggan, Anne-Marie Nolan, Colm O’Donnell and Siobhan Twomey, scooped the prestigious Fantasy Budget competition organised by the Irish Taxation Institute. Over 200 entrants from business schools in UCD, NUI Galway, University of Limerick, Galway Mayo Institute of Technology, Dun Laoghaire College of Art and Design, Dublin Institute of Technology and Letterkenny Institute of Technology put themselves in Minister Brian Cowen’s shoes and proposed a budget for 2006.
Mark Redmond, chief executive of the Irish Taxation Institute, was rich in his praise of the students. “Our aim is to raise the profile of the budget among students and to demonstrate the importance of taxation to the economy. The judging panel, which included Philip Brannan, president of ITI, Jim Power, chief economist with Friends First and Brendan Keenan, group business editor with Independent Newspapers, was impressed by the practicality and vision of the winning entry. Some of the students’ suggestions for policy initiatives to the Irish tax system would certainly make it fairer and more effective. Indeed, some of their proposals would make Ireland a better place in which to work and live.”
The ITI educates, informs, represents and sets standards for tax consultants in Ireland. It is the examining and professional standards body for the tax consultancy profession. “I would encourage business students to seriously look at taxation as a challenging and rewarding career and hope that the fantasy budget competition highlights the impact that taxation has and will have on their lives.” Mark Redmond added.
The winning submission… Fantasy Budget 2006
Introduction
How do you produce a Budget? It sounds easy in theory and most people would assume it’s just thinking of a tax. But it’s more complicated than that. You have to consider who will be taxed? What rate should be used? Who will get tax relief? And how do we implement such taxes?
When producing our “Fantasy Budget” we realised that it’s a very complex procedure. You have to research the current position, make sure your policy doesn’t contradict an existing tax, take part in a heated discussion, and make sure it satisfies the principle cannons of taxation.
And that’s before you start writing the report! So hopefully, in the following few pages we have considered all these factors and produced coherent policies.
Spatial Strategy – A Guide to a better Ireland
The spatial strategy was introduced as a means of making different areas of Ireland more attractive to live and work in. Launched in 2003 the initial plan although creative was not successful in its implementation. We aim to extend the original plan and make it more user-friendly. Our main concern was to encourage individuals to move out of the capital and relocate to other parts of
the country. To do this we have to make these Gateway towns more attractive to the prospective inhabitants, by providing housing, employment and general social infrastructure.
Policy
- 1% decrease in corporation tax for companies based and operating in the Gateway towns.
- Exemption from stamp duty which not only applies to first-time buyers but to all buyers on their principle private residence within the gateway towns.
- Exemptions from stamp duty for investors in business developments who are locating in the area for a minimum of ten years.
These policies are designed to promote growth and redevelopment in the Gateway towns. This plan should make Ireland more than a one city country and facilitate the distribution of population and wealth. The multiplier effect of having a large company locating in an area is evident- more business, more employment, more prospects.
Note: For the purpose of this policy the gateway towns are
Athlone, Tullamore, Mullingar, Dundalk, Letterkenny, Shannon, Sligo,
Waterford, Navan and Newbridge.
Congestion Tax – Freeing up Dublin
It’s often seen as one of Dublin’s most pressing problems. Traffic congestion in the city has steadily increased in the last decade to the detriment of business and life in Dublin. Following the success of the London congestion charge we feel a similar plan would be beneficial to Dublin.
Policy
- “7-7-7” Between the hours of 7am and 7pm on weekdays the charge of €7 will apply to motorists entering or driving within the specified zone (Dublin’s canal region).
- Certain vehicles will be exempt: Emergency Vehicles, Public Transport, Taxis and Alternative-fuel Cars.
- 90% Discounts will be given to residents within the zone.
- All revenue will be ring-fenced for public transport expenditure.
- Fines will be imposed for late payments.
This policy we believe will reduce traffic congestion in and around the zone, improve transport services, increase journey time reliability and encourage people to live and work in Gateway towns.
VAT on children’s clothes– Why a rate change
makes economic sense.
Children’s clothes in their own right are not luxury goods. However, when it comes to parents buying designer clothes for their children, whether or not it’s a necessity is questionable. Currently in the E.U. only Britain and Ireland have a 0% VAT rate on children’s clothes.
Policy
- Increase tax rate on children’s clothing to 12.5% with the possibility of further increases.
- With the revenues received establish a “Christmas clothing allowance” in addition to increasing the “Back-2-School clothing allowance” and extend the availability in an effort to redistribute wealth.
With this policy we aim to eliminate the loop-holes in the current system. For children of a larger size/height, they are forced to buy adult clothes that include VAT. For smaller adults, they benefit unfairly from the existing 0% rate.
Our system although controversial is more equitable. The increased rate will not affect substantially those who can buy these designer clothes and so with the increased revenues we can help those on the margin.
SSIA’s – Investing your money in your Future
The five-year savings scheme, which the Exchequer contributes to, by way of a
tax credit, is due to mature next year. The amount of money released into the
economy will be substantial. At present, when your SSIA matures, only profit
earned from the investment of both your subscriptions and Exchequer tax credits
will be liable to tax at 23%. With regard to SSIA’s that are deposit accounts, the
profit taxed will be the interest earned.
Policy
- Allow individuals who put their entire SSIA savings into a pension fund to avail of an exemption of the 23% tax on interest/investment returns.
Of our 2 million workforce, 900,000 have no pension provision except for their
state pension. This plan would allow individuals to have some security for their
retirement. It would encourage more people to set up pension funds, and given
the increasing level of life expectancy, it would ease the burden for the
government, as the population retires.
Carbon Tax- Putting a Price on Pollution
Global warming. Polar ice-cap melting. Greenhouse Emissions. Pollution. They are all problems that historically we have failed to tackle and consequently
have had an adverse effect on our environment. We have partially redressed the
balance but if we are going to meet the Kyoto targets agreed upon in 1997 we
need to do a lot more.
Policy
- Introduce a 10% Carbon Tax on Manufacturing Companies’ profits to be charged in addition to corporation tax, if they have not reached their predefined target within 5 years.
- Starting January 1st 2006 until January 1st 2011, there will be distinct categories into which a company will fall. Depending on its size and current emissions the company will be responsible to reduce its emissions by the amount required.
- For a company that has already started to reduce its emissions, this will be taken into consideration when calculating the reduction necessary. With this policy we are trying to make Ireland a more environmentally friendly country. The Kyoto agreement was not just bureaucrats sitting in a room, it was a real effort by world governments to control a real problem. We aim to make Ireland a country committed to pollution reduction and hopefully set the standard for others to emulate.
Conclusion
We have tried to consider all the factors that are needed to create a comprehensive and
viable Budget. However with time there is always more than can be added, parts that can
be changed and policies that become no longer relevant. We believe our policies addressthe current needs of society in today’s social and economic climate. And so with confidence we can conclude:
“Only two things in life are certain: death and taxes.”
And death seems easier to handle!
References
1. Irish times, Sunday Times articles, Business Post.
2. www.wikipedia.com
3. www.cclondon.com
4. www.union.ie
5. www.europa.eu.int
6. www.askaboutmoney.com
7. www.revenue.ie
8. www.friendsoftheirishenvironment.org
9. www.ida.ie
10. www.ibec.ie
11. www.taxireland.ie
12. www.oecd.org