# Can we have no more threads about public sector pay



## Sunny (9 Dec 2009)

Whatever future savings can be achieved in the delivery of the public services, I don't think anyone can sit there this evening and say that every single public sector worker has not taken a big hit in their living standards in the interests of this Country.


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## The_Banker (9 Dec 2009)

The next threads will be started by Public Servant letting off steam.


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## Sunny (9 Dec 2009)

The_Banker said:


> The next threads will be started by Public Servant letting off steam.


 
True. To be fair, I wouldn't begrudge them it. The steps had to be taken but it is still a very harsh budget for them. Going to avoid going home to my see my public sector family members for a while! Might bring them home a cheap bottle of whiskey!


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## Deiseblue (9 Dec 2009)

Sunny said:


> True. To be fair, I wouldn't begrudge them it. The steps had to be taken but it is still a very harsh budget for them. Going to avoid going home to my see my public sector family members for a while! Might bring them home a cheap bottle of whiskey!


As you say Public Sector workers are understandably angry !
This I feel will result in a demotivated , demoralised workforce who will be totally at odds with their employer , always a recipe for disaster.
I feel that we will see a huge increase in sick leave and an absolute refusal on the part of teachers in particular to do any extra curricular work such as supervising games or holding parent teacher meetings outside school hours .
Any reform in the Public Sector is surely now aspirational as well.
Further Industrial action must also be on the cards.


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## corkgal (9 Dec 2009)

I'd second a period of stopping threads on this subject.


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## orka (9 Dec 2009)

Deiseblue said:


> I feel that we will see a huge increase in sick leave


Will this be from genuinely poorer health? - there was another thread which assured us that unwarranted sick leave was not tolerated in the public sector.


Deiseblue said:


> an absolute refusal on the part of teachers in particular to do any extra curricular work such as supervising games or holding parent teacher meetings outside school hours .


My daughter's school already holds PT meeting school hours - giving the girls afternoons off.


Deiseblue said:


> Any reform in the Public Sector is surely now aspirational as well.


 It's either reform or further pay cuts.  I also thought that all this reform was promised in exchange for the last round of benchmarking?


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## csirl (9 Dec 2009)

I dont think we'll be seeing too many public servants on this forum in future months. They'll all either be working second jobs to make up for the income loss or will be signing on the dole because its not financially worthwhile for them to work anymore.


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## csirl (9 Dec 2009)

> Will this be from genuinely poorer health? - there was another thread which assured us that unwarranted sick leave was not tolerated in the public sector.
> 
> Quote:


 
Remember that the middle level management were hit with 10% reduction in the spring and have now been hit with another 8%. They've taken the biggest hit and will be the least motivated.


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## jhegarty (9 Dec 2009)

Deiseblue said:


> Any reform in the Public Sector is surely now aspirational as well.




Perhaps the government will realise they can take on the unions , and "reform" will be done in the in the ways it's done in un-unionised jobs.


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## Yorrick (9 Dec 2009)

While there are genuine hardship cases in all sectors, private, public, and social welfare recipients I can't help but believe that a lot of people could minimise the hurt by cutting out 40 fags a week, or 4 pints a week or maybe even making a lunch at home and bringing it to work a few days a week and forget your 11 o clock cappucino.  Cut out newspapers two days a week or more.  Also as regards petrol consumption make your littlle brats walk to football practice. They will eat whats put on the table then.


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## Deiseblue (9 Dec 2009)

jhegarty said:


> Perhaps the government will realise they can take on the unions , and "reform" will be done in the in the ways it's done in un-unionised jobs.


You are right of course , they have taken on the unions.
We have however yet to see if the unions will take on the Government !


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## z107 (9 Dec 2009)

Are half of all public sector people on more than €30K?


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## bogle (9 Dec 2009)

csirl said:


> Remember that the middle level management were hit with 10% reduction in the spring and have now been hit with another 8%. They've taken the biggest hit and will be the least motivated.



Sorry Dude but its the clerical staff who are really taking the hit here! A higher rate tax payer like me won't loose approx 7% of net pay. However many clerical officers (mostly female I might add) don't pay any tax at all because they don't earn enough (job sharers on 15 to 20K a year) so the 5% will be more or less off the bottom line for them. Given the cost of child care, for some it probably makes more sense to give up working now - thats a shameful position for the Government to put them in!


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## RMCF (9 Dec 2009)

Sunny said:


> Whatever future savings can be achieved in the delivery of the public services, I don't think anyone can sit there this evening and say that every single public sector worker has not taken a big hit in their living standards in the interests of this Country.



But have you not just created another unnecessary one?


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## Sconhome (9 Dec 2009)

csirl said:


> I dont think we'll be seeing too many public servants on this forum in future months. They'll all either be working second jobs to make up for the income loss or will be signing on the dole because its not financially worthwhile for them to work anymore.



Are you saying the only time public servants are here is when they are working?


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## Caveat (9 Dec 2009)

Sunny said:


> Whatever future savings can be achieved in the delivery of the public services, I don't think anyone can sit there this evening and say that every single public sector worker has not taken a big hit in their living standards in the interests of this Country.



I agree.


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## liaconn (9 Dec 2009)

Yorrick said:


> While there are genuine hardship cases in all sectors, private, public, and social welfare recipients I can't help but believe that a lot of people could minimise the hurt by cutting out 40 fags a week, or 4 pints a week or maybe even making a lunch at home and bringing it to work a few days a week and forget your 11 o clock cappucino. Cut out newspapers two days a week or more. Also as regards petrol consumption make your littlle brats walk to football practice. They will eat whats put on the table then.


 
Thanks Yorrick. I already bring my lunch in 5 days a week, only buy a newspaper on Saturday and freeze all my leftovers to do for another meal. I also don't smoke. I hope there won't be any more threads on public sector pay but people have been screaming for PS cuts for months so why suddenly say 'oh dear, this must be really hard. Let's stop it now'. Why didn't you do it last month or even last week?


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## sandrat (9 Dec 2009)

I don't smoke don't go out have a ten year old car shop in lidl don't mostly only drive to work or to visit my family. Just been looking at where we can save money. We rent a dvd the odd week so going to cut that. Already bringing lunches don't buy papers don't have a gym membership that we can cancel. Petrol costs in going to work will go up can't save there. We don't have savings so we can't cut that. Might be a possibility to cut childcare costs slightly with negotiation. On the other hand we won't starve just hoping european central bank don't increase interest rate as we are on a tracker. Think we might be close to qualifying to gp visit card unless the threshold has changed? Things will be tough and we'll have to watch every penny but it wouldn't be a recession without that! Roll on my next increment!


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## orka (9 Dec 2009)

liaconn said:


> people have been screaming for PS cuts for months so why suddenly say 'oh dear, this must be really hard. Let's stop it now'. Why didn't you do it last month or even last week?


Don't want to state the obvious, but people can stop screaming for PS pay cuts now because pay cuts have happened.  'even last week' we were still in the middle of the unpaid leave fiasco.


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## olddog (9 Dec 2009)

liaconn said:


> Thanks Yorrick. I already bring my lunch in 5 days a week, only buy a newspaper on Saturday and freeze all my leftovers to do for another meal. I also don't smoke. I hope there won't be any more threads on public sector pay but people have been screaming for PS cuts for months so why suddenly say 'oh dear, this must be really hard. Let's stop it now'. Why didn't you do it last month or even last week?




Liaconn,

I guess some would see your postie as a rant. 

Not I 

I dont have a paid job to go to anymore and doubt I ever will again. I would love to export myself to an ex-UK colony ( Canada, Aus, NZ ? ) but am way to old to be acceptable even though I have experience and qualifications longer than my arm.

Newspapers for me are read in the public library ( This country will be heading towards reality when queueing systems are used for newspaper access in libraries )

Grocery choices are based on Lidl / Aldi specials & RFQS stuff

Internet access ( E10/month - go work it out for yourself ) is the next item for review on the budget ( am reluctant to do this as it also gives me free local calls as well as free calls to friends in UK, Switzerland & Austria  at no additional cost ) 


Despite the above, quality of life seems to me to be better than 30 years ago. 

So far as I am concerned the biggest danger is that 'climate change' will be reversed and we will go back to the winters of the 1940's & '50s. If that were to happen few except the very well off would last to see 70. ( This, of course, would sort out the pension problem and make the Greenies feel good at the same time )

Regards

Olddog


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## aonfocaleile (9 Dec 2009)

Yorrick said:


> While there are genuine hardship cases in all sectors, private, public, and social welfare recipients I can't help but believe that a lot of people could minimise the hurt by cutting out 40 fags a week, or 4 pints a week or maybe even making a lunch at home and bringing it to work a few days a week and forget your 11 o clock cappucino.  Cut out newspapers two days a week or more.  Also as regards petrol consumption make your littlle brats walk to football practice. They will eat whats put on the table then.



Thanks for the helpful tips. I bring in my lunch 4 days a week and only 'treat' myself to a take away sandwich once a week. Don't drive to work and only use my small car, which I bought second hand a few years ago, for shopping and visiting friends/family. Shopping is done in aldi, no leftovers are wasted. I freeze everything or else throw stuff into a stirfry or curry. I only socialise in peoples houses, rarely go to the pub anymore. My 11 o clock cuppa consists of own brand coffee, brought in from home. Only buy a newspaper on a saturday. Don't have sky or anything like that. Can't remember the last time I was in a restaurant. Thankfully, my employer pays my monthly line rental on my mobile and there are no charges for calls or texts. Small consolation for the fact that I'm "unofficially" on call 24/7. I don't get allowances or overtime to compensate for this. The only expense I can cut is my broadband. Frankly, I don't see what other savings I can make to "minimise the hurt". So forgive me if I feel aggrieved at the way my wages have been hit today. At least I have my "rolls royce" pension to look forward to in 30 years.

I've been listening to the moral outrage about how good I have it with my public sector job over the last year. I hope todays announcement will at least put an end to the pontificating from the likes of Fionnan Sheehan and Jim Power about the public sector. But please, allow us to express our frustration in LOS withot being patronised. If I need further tips on budget living, I'll take myself off to the money makeover forum.


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## Lex Foutish (9 Dec 2009)

aonfocaleile said:


> Thanks for the helpful tips. I bring in my lunch 4 days a week and only 'treat' myself to a take away sandwich once a week. Don't drive to work and only use my small car, which I bought second hand a few years ago, for shopping and visiting friends/family. Shopping is done in aldi, no leftovers are wasted. I freeze everything or else throw stuff into a stirfry or curry. I only socialise in peoples houses, rarely go to the pub anymore. My 11 o clock cuppa consists of own brand coffee, brought in from home. Only buy a newspaper on a saturday. Don't have sky or anything like that. Can't remember the last time I was in a restaurant. Thankfully, my employer pays my monthly line rental on my mobile and there are no charges for calls or texts. Small consolation for the fact that I'm "unofficially" on call 24/7. I don't get allowances or overtime to compensate for this. The only expense I can cut is my broadband. Frankly, I don't see what other savings I can make to "minimise the hurt". So forgive me if I feel aggrieved at the way my wages have been hit today. At least I have my "rolls royce" pension to look forward to in 30 years.
> 
> I've been listening to the moral outrage about how good I have it with my public sector job over the last year. I hope todays announcement will at least put an end to the pontificating from the likes of Fionnan Sheehan and Jim Power about the public sector. But please, allow us to express our frustration in LOS withot being patronised. If I need further tips on budget living, I'll take myself off to the money makeover forum.


 
Outstanding post, Aonfocaleile.


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## z107 (10 Dec 2009)

> Thanks for the helpful tips. I bring in my lunch 4 days a week and only 'treat' myself to a take away sandwich once a week. Don't drive to work and only use my small car, which I bought second hand a few years ago, for shopping and visiting friends/family. Shopping is done in aldi, no leftovers are wasted. I freeze everything or else throw stuff into a stirfry or curry. I only socialise in peoples houses, rarely go to the pub anymore. My 11 o clock cuppa consists of own brand coffee, brought in from home. Only buy a newspaper on a saturday. Don't have sky or anything like that. Can't remember the last time I was in a restaurant. Thankfully, my employer pays my monthly line rental on my mobile and there are no charges for calls or texts. Small consolation for the fact that I'm "unofficially" on call 24/7. I don't get allowances or overtime to compensate for this. The only expense I can cut is my broadband. Frankly, I don't see what other savings I can make to "minimise the hurt". So forgive me if I feel aggrieved at the way my wages have been hit today. At least I have my "rolls royce" pension to look forward to in 30 years.
> 
> I've been listening to the moral outrage about how good I have it with my public sector job over the last year. I hope todays announcement will at least put an end to the pontificating from the likes of Fionnan Sheehan and Jim Power about the public sector. But please, allow us to express our frustration in LOS withot being patronised. If I need further tips on budget living, I'll take myself off to the money makeover forum.



I make my own lunch 7 days of the week, and would never buy sandwiches. My small car is over 12 years old. I don't waste food, don't have sky, don't even drink anymore. I've being going to lidl since it opened in Ireland, so I don't find this is a sacrifice. Most (non-food) stuff I buy off of the internet to get the very best deal possible. I don't buy newspapers, but read them second hand and I also share a bin. I have to pay for all my phone calls, and broadband etc.
Oh, and I can't afford a pension, never mind a rolls royce one.

However, I'm happy I've still got a job.


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## Purple (10 Dec 2009)

This is starting to sound like a certain Monty Python sketch.

"When I were a lad..."


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## Lex Foutish (10 Dec 2009)

Purple said:


> This is starting to sound like a certain Monty Python sketch.
> 
> "When I were a lad..."


 
"Aye! We had nought but we were 'appy, laike!"


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## z107 (10 Dec 2009)

> "Aye! We had nought but we were 'appy, laike!"


You had nought? - you were lucky with nought.
We've got about minus €20billion.


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## MrMan (10 Dec 2009)

aonfocaleile said:


> Thanks for the helpful tips. I bring in my lunch 4 days a week and only 'treat' myself to a take away sandwich once a week. Don't drive to work and only use my small car, which I bought second hand a few years ago, for shopping and visiting friends/family. Shopping is done in aldi, no leftovers are wasted. I freeze everything or else throw stuff into a stirfry or curry. I only socialise in peoples houses, rarely go to the pub anymore. My 11 o clock cuppa consists of own brand coffee, brought in from home. Only buy a newspaper on a saturday. Don't have sky or anything like that. Can't remember the last time I was in a restaurant. Thankfully, my employer pays my monthly line rental on my mobile and there are no charges for calls or texts. Small consolation for the fact that I'm "unofficially" on call 24/7. I don't get allowances or overtime to compensate for this. The only expense I can cut is my broadband. Frankly, I don't see what other savings I can make to "minimise the hurt". So forgive me if I feel aggrieved at the way my wages have been hit today. At least I have my "rolls royce" pension to look forward to in 30 years.
> 
> I've been listening to the moral outrage about how good I have it with my public sector job over the last year. I hope todays announcement will at least put an end to the pontificating from the likes of Fionnan Sheehan and Jim Power about the public sector. But please, allow us to express our frustration in LOS withot being patronised. If I need further tips on budget living, I'll take myself off to the money makeover forum.


 
To be honest I usually skip passed the ps threads because they are predictable and usually quickly descend into complete rants but I am interested today given the budget we had. I can't for the life of me see how ps workers could have expected anything else, but do sympathise with those who have to make do with less income. I don't agree with the lazy labeling of ps workers as drones but do personally feel that the ps should be more efficient and that has still to change. 
Since last year my income has dropped almost 40% with no overtime paid, bank holidays worked and no days in lieu so while your current predicament isn't nice for you and your colleagues I hope that in time (soon) services will continue as usual.
It would be great if we could continue as before but as the whole economic landscape has dramatically changed, everyone else has to fall into line accordingly.


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## Lex Foutish (10 Dec 2009)

umop3p!sdn said:


> You had nought? - you were lucky with nought.
> We've got about minus €20billion.


 
You're right. But we did have Jimmy Barry Murphy.


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## gebbel (10 Dec 2009)

Like MrMan above, I don't normally post in this forum but read it every day. I feel some sympathy for the public sector posters among us on this forum (and elsewhere), as they have had their jobs/pay/conditions etc. ridiculed for the last year. I agree that the Public v Private argument has gotten out of hand on occasion, and can be fairly bitter between the 2 sides. But if we are to be logical and calculating about it all, this budget had to happen. The pay cuts had to happen. We have to think of our kids and the mess they will inherit if action like this is not taken now. Nobody likes to take a hit in their pay packet, but I can't foresee this pushing anyone over the poverty line in fairness. Hopefully it should only mean a slight re-adjustment in expenditure..but nothing major.

By the way I am a private sector worker who has taken a 7% pay cut and a salary freeze. My company will do well to survive 2010.

I would also like to see the end of public sector threads. It's time to move on now.


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## Sunny (10 Dec 2009)

liaconn said:


> I hope there won't be any more threads on public sector pay but people have been screaming for PS cuts for months so why suddenly say 'oh dear, this must be really hard. Let's stop it now'. Why didn't you do it last month or even last week?


 
Because the cuts had to be made. I am glad the Government had the bottle to follow through. Doesn't mean I don't appreciate how hard it is for people. Believe it or not, I don't enjoy family members and friends earning less money. However, I don't believe there is any more blood in public sector pay especially at low and middle income earners. Still plenty to do on the reform side including over overall public sector numbers.


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## Yorrick (10 Dec 2009)

I certainly did not mean my comments to be a criticism of anyone. I was pointing out where people who have not already done son could make some savings.
Every case is is an individual case. There are as a many wasters in the private sector as in the public sectore.g. dodgy builders, double glazing salesment etc 
 But I'm am fed up of people saying  " its not fair" Please show me in the Constitution where it says it should be fair.  And don't fool yourself that Gilmore, Kenny, Adams and the rest would have done anything different.


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## Caveat (10 Dec 2009)

Sunny said:


> Still plenty to do on the reform side including over overall public sector numbers.


 
Of course.

But according to Impact, 'sand has been kicked in their members faces one too many times' and they are refusing to co-operate with the government on public sector reform.  Beautiful.


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## Firefly (10 Dec 2009)

Caveat said:


> Of course.
> 
> But according to Impact, 'sand has been kicked in their members faces one too many times' and they are refusing to co-operate with the government on public sector reform. Beautiful.


 
+1 I fear that without reform there will be unecessary cuts made next year.


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## aonfocaleile (10 Dec 2009)

I will admit to having a new found respect for the Govt - they did what was necessary in terms of the public pay bill, which will hopefully be for the greater good in the long term (although I do expect short term resistance). That doesn't mean individuals like myself will be thrilled with the effect it has on our bottom line or that we won't have to make appropriate "adjustments", to quote that oft-used phrase.

I think anyone working at the moment is grateful to have a job. I certainly am and I work all the harder to keep it. I won't apologise for having the job I have, but I also have genuine sympathy for those out of work. Hopefully Lenihan is right when he says we have turned a corner. This budget should put an end to the public v private debate, for now at least. Signs of this are already appearing;
http://www.independent.ie/opinion/c...tor-is-hit-with-vicious-pay-cuts-1969456.html

This headline made me smile this morning, even if it was a wry smile. Mr. Sheahan, you have a brass neck, I'll give you that!


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## VOR (10 Dec 2009)

Sunny said:


> ...in the interests of this Country.


 
I agree with all you said Sunny except for the last 6 words above. The PS have certainly taken a cut. However, it is not a large cut and it's not like they heroically came forward and offered the reduction. Far from it actually.

It would have made more sense to say that the unemployed have taken a cut " in the interests of this country". JA is reduced by 4%.


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## liaconn (10 Dec 2009)

VOR said:


> I agree with all you said Sunny except for the last 6 words above. The PS have certainly taken a cut. However, it is not a large cut and it's not like they heroically came forward and offered the reduction. Far from it actually.
> 
> It would have made more sense to say that the unemployed have taken a cut " in the interests of this country". JA is reduced by 4%.


 
What a mean minded post. Out of interest, do people in the private sector take a cut in the interests of their employer or in the interest of saving their job and because they have no other choice.


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## shnaek (10 Dec 2009)

Caveat said:


> But according to Impact, 'sand has been kicked in their members faces one too many times' and they are refusing to co-operate with the government on public sector reform.



Business as usual so.


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## csirl (10 Dec 2009)

The net effect of the cut will be more competition for the few private sector jobs out there. From talking to PS workers I know there are a lot with one eye on the door.


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## Purple (10 Dec 2009)

liaconn said:


> Out of interest, do people in the private sector take a cut in the interests of their employer or in the interest of saving their job and because they have no other choice.


 In the private sector that's all the same thing.


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## liaconn (10 Dec 2009)

Yes, but it's not pure altruism which is what VOR seems to be crticising us for.


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## VOR (10 Dec 2009)

liaconn said:


> What a mean minded post. Out of interest, do people in the private sector take a cut in the interests of their employer or in the interest of saving their job and because they have no other choice.


 
I don't see how that post was "mean-minded" but if it read like that I am sorry. I hope you can see that a job, pension and a 5% cut is far better than no job, no pension and a 4% cut. I am not belittling the cut the PS took, but I do believe it should be put in context. 

The interests of the business and my personal interests of keeping a job are generally the same thing. If the business doesn't do well, I don't get paid ( has happened numerous times this year and for weeks at a time) or worse, we close and I'm out of a job.


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## Shawady (10 Dec 2009)

Sunny said:


> However, I don't believe there is any more blood in public sector pay especially at low and middle income earners. Still plenty to do on the reform side including over overall public sector numbers.


 
It would be a smart move by the government to state something to this effect. Something like "we have done as much as we need with cutting pay and are confident that future savings can be made through reform, numbers etc". 
I think a lot of public servants, while unhappy with the cuts, would just get on with the job and not be interested in strike action.
We have to move forward.


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## liaconn (10 Dec 2009)

Shawady said:


> It would be a smart move by the government to state something to this effect. Something like "we have done as much as we need with cutting pay and are confident that future savings can be made through reform, numbers etc".
> I think a lot of public servants, while unhappy with the cuts, would just get on with the job and not be interested in strike action.
> We have to move forward.


 

Eh, you seriously think we'd believe the Government???


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## Mpsox (10 Dec 2009)

liaconn said:


> What a mean minded post. Out of interest, do people in the private sector take a cut in the interests of their employer or in the interest of saving their job and because they have no other choice.


 
Lots of reasons, in my own case, the pay cuts were voluntarily but most people here signed up for them. I can't comment on others but in my own case

As a manager I did not feel it was appropriate for me to ask staff to take a cut unless I was prepared to do the same myself
A strong message came out from above that we needed to cut costs to make ourselves cheaper and more competative when tendering for new business. As someone who spends 25% of his time on new business initiatives, I could clearly see the need to do this and it definately has made us more competative.
As a manager, I have a budget, like often happens, I get a "stretch" on my budget and pay cuts were one way of making that stretch. On a corporate level, it was never stated that if we did not meet the savings, we resort to staff cuts, but the message was clear, that one way or another, the savings would be made.
In terms of my own career, sometimes, you need to be seen to "take one for the team". No one said you'd be singled out if you didn't take a cut, but there certainly was a belief, at least at managerial level, that if you didn't, it would be remembered
Did we make staff cuts on top of pay cuts, yes but that was because business was down and we no longer needed the staff, would we have had to make more staff cuts if we hadn't got people to stand up and take pay cuts, most definately yes


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## Shawady (10 Dec 2009)

liaconn said:


> Eh, you seriously think we'd believe the Government???


 
Liaconn, I'm no fan of the government but they should lay their cards on the table regards future savings to the PS wage bill. If they are of the view that no more pay cuts should be required and stated this, it would remove a lot of uncertainty. I think it woul deter a lot of people from industrial action and put the ball back in the union's court regards reform.
I won't be voting Fianna Fail in the next election but they might be here for 2 more budgets and I don't want this to happen again next year.


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## liaconn (10 Dec 2009)

But why would we trust them? We called off a strike last week because they said there would be no pay cuts, but a cut in hours. Then the reneged. No one in here will believe anything they say and I cna't see the Unions calling off industrial action again just on the word of the Government.


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## Caveat (10 Dec 2009)

liaconn said:


> But why would we trust them? We called off a strike last week because they said there would be no pay cuts, but a cut in hours. Then the reneged. No one in here will believe anything they say and I cna't see the Unions calling off industrial action again just on the word of the Government.


 
And everyone else should believe the unions??

The strike was called off because it appeared that progress was being made for common agreement blah blah blah.

Who says the government reneged on anything? who says they promised anything? 

Yes, the unions. No-one else.

I wouldn't put a lot of faith in the government by any stretch but I'd take their word over the hypocritical chancers and woefully uninformed hotheads that many unions have shown themselves to be.


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## z107 (10 Dec 2009)

> It would be a smart move by the government to state something to this effect. Something like "we have done as much as we need with cutting pay and are confident that future savings can be made through reform, numbers etc".


The unfortunate position we're in means that the government probably will have to cut public sector pay again. This Budget only (at best) keeps us steady.

That €4billion will be gobbled up by the banks fairly sharpish.


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## TarfHead (10 Dec 2009)

umop3p!sdn said:


> That €4billion will be gobbled up by the banks fairly sharpish.


 
The €4bn has already been gobbled up by Government expenditure commitments. The money for the banks is coming from a '_different wallet_' .

The cuts announced yesterday mean the Government will have to borrow less to finance current expenditure, but will still be borrowing an unsustainable amount, hence the need for another hard Budget next year and in further years.


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## VOR (10 Dec 2009)

I just had a very disheartening experience at lunch and need to get this off my chest. I went in to a shop I visit most days. There were two other customers in front of me. One works for the Citizens Info Bureau. The other is a public servant but she did not say where. They were discussing the budget when I arrived.

The girl from the C.I.B said that their phone is ringing all morning with people asking about the cuts to social welfare and health. I said that I was glad that, for once, I personally got a light “doing” in this budget compared to the last two.

The public servant said that it was a disgrace that people on “only” €30K a year were losing 5%. I retorted (as I said on this site) that the 4% for those with no job must hurt more surely. I explained that we all have to take some pain during this time and hopefully that will be the last of it for the public sector.

She landed an unbelievable line on me next claiming that “those on the dole” contribute nothing to this country and most of them “sit around all day watching TV”. She went on to say that it is the “poor souls” who are working in the PS that are bearing the brunt. 

I looked at the other girl who has had calls streaming in today to her office from people who are worried about losing €8. We said nothing, bit our lips and left (_after paying_  ). The shopkeeper looked stunned at the outburst.

I said nothing of my wife who has a PhD and desperate for a chance. Her company have moved their R&D process abroad and the best and brightest of our “4th level education system” got the bullet. That was 6 weeks ago and she has sent a letter to a different company every day since then. She has offered to work for free on a 6 months basis hoping beyond all hope that she will get once chance to prove her worth. We drove around industrial estates in Galway, Ennis, Shannon and Limerick writing down the names of companies to apply to. She waits today for a call from a company 100 miles away from our home that might offer her maternity cover. She prays they give her an interview. She also waits to hear from Bray and Ballina, Co. Mayo. She’ll travel to either for work and any salary from min wage up.

I never said to her that my wife agreed with the cut of €8 yesterday even as a once proud daughter with 8 years of college got ready to face her family this Christmas and explain how she had no prospects of a job …yet.

I didn’t tell the woman about my friend who has an MBA and PhD. He is also without a job. He is emigrating as soon as he can. His redundancy payment went to pay off his loan for his MBA. 

I didn’t speak of the couple I know with two kids. He is out of work as his multi-nat “downsized”. She was in a bank that did the same.

I said nothing of my many colleagues who now work 3 day weeks and sign on for the other days. 

I said nothing for the other 165,000 people who have lost their job in the last year and a bit. 

I just said nothing. It was a mixture of shock, sadness and anger. But, I still said nothing. I would have wasted my time. She just didn’t get it. She just didn’t have it in her to show empathy or sympathy for those who had lost a job. After all, in her world they didn’t “contribute”. I wondered if she had forgotten that many were taxpayers once.

Many of you on this site may disagree with a great deal I say. That is your prerogative. However, I for one am glad that we can at least discuss it without resorting to such shameful opinions about over 400,000 adults in our society. I have a great respect for all opinions on this site ( even when I am disagreeing with Complainer ). Sure, I don’t agree with some of them but they are your opinions. 

We have all lost during this downturn and will inevitably suffer financially from it for years to come. I am sure that we all have the good sense to acknowledge that.


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## Purple (10 Dec 2009)

VOR, that's the best post I have read on AAM in a long time.


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## Caveat (10 Dec 2009)

+1


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## TarfHead (10 Dec 2009)

VOR said:


> She landed an unbelievable line on me next claiming that “those on the dole” contribute nothing to this country and most of them “sit around all day watching TV”. She went on to say that it is the “poor souls” who are working in the PS that are bearing the brunt.


 
I would give her the benefit of the doubt and factor in that emotions are high today for public sector workers. She may not express such a forthright statement tomorrow, or next week.

One would hope ..


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## ney001 (10 Dec 2009)

VOR - sobering post, well done!


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## liaconn (10 Dec 2009)

VOR said:


> I
> She landed an unbelievable line on me next claiming that “those on the dole” contribute nothing to this country and most of them “sit around all day watching TV”. She went on to say that it is the “poor souls” who are working in the PS that are bearing the brunt.
> 
> I She just didn’t have it in her to show empathy or sympathy for those who had lost a job. After all, in her world they didn’t “contribute”. I wondered if she had forgotten that many were taxpayers once.


 
VOR

Are you saying that all Public Servants think like this and have no sympathy for those on the dole. I haven't heard one single (of the many upset and worried) persons in here say anything like that today. You're generalising. I have often heard the odd person make unfeelling remarks about those who have lost their job. I just think they're ignorant or arrogant, I don't think they're typical of private sector workers, of people in their twenties, or middle class people or whatever. For instance, a cousin of mine was complaining that, if they bring back third level fees they'd have to sell their second car. When her brother pointed out that some people couldnt' afford a first car she replied 'that's their own fault. If they got up off their a*ses and tried to find another job instead of sitting around getting benefits and moaning, blah blah'. Like you I was disgusted and couldn't believe what I was hearing but I didn't think 'typical private sector' I just thought 'what a bitch'.


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## VOR (10 Dec 2009)

liaconn said:


> Are you saying that all Public Servants think like this and have no sympathy for those on the dole.


 
Certainly not. I don't think for one second that she spoke for PS workers. I said that all contributors on AAM, meaning public and private sector alike, "can at least discuss it without resorting to such shameful opinions about over 400,000 adults in our society".

I was just shocked by the attitude of this one person. Please don't take it as a go at *ALL* PS workers. It was not meant like that. 

I had earlier said that context and perspective should be given to the cuts. My post was a LOS moment after encountering a staggeringly dislikable person. I just hope that all who read my post apply some perspective to the cuts and realise that it is not always what you have lost but what you have kept that counts. And I hope for all our sakes that the cuts pay off for this country.

Hopefully, when the dust settles in years to come we will have a more robust, efficient, manageable public service and a more competitive, export driven private sector.

Otherwise, we will hand a far worse country to our children than the one we inherited. That will be to all our shame.

PS. I agreed with the cuts in social welfare also.


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## thedaras (10 Dec 2009)

I asked my kids today was there any reaction from their teachers or discussion about the budget in school today..

2 teachers made snide comments and one said that the sweets she gave out would have to stop to make up the difference in pay..

Now this is 3 different schools ,so much for the caring/concerned teacher who just wants to look after the pupils..

Im aware emotions are high today but having said that I never mentioned to my kids what I think of their teachers and the public service yet they seem contented enough to let the kids know..


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## thedaras (10 Dec 2009)

csirl said:


> The net effect of the cut will be more competition for the few private sector jobs out there. From talking to PS workers I know there are a lot with one eye on the door.


 
That sums it up the PS for me!!

A person whom has a permanent pensionable well paid job,now looking to leave it and to go to an uncertain,having to pay for your pension,work all hours job...absolute poppycock..

This is the kind of statement that gets peoples back up when its clear that this will never happen!

However if it does well,welcome to my world lets see how you get on...


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## smiley (10 Dec 2009)

thedaras said:


> Im aware emotions are high today but having said that I never mentioned to my kids what I think of their teachers and the public service yet they seem contented enough to let the kids know..



This statement is absolute poppycock all right!


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## Sconhome (10 Dec 2009)

VOR - top of the class!! Excellent post, well written.


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## Lex Foutish (10 Dec 2009)

thedaras said:


> I asked my kids today was there any reaction from their teachers or discussion about the budget in school today..
> 
> 2 teachers made snide comments and one said that the sweets she gave out would have to stop to make up the difference in pay..
> 
> ...


 
You never mentioned to your kids what you think of their teachers???? You probably don't have to. I think that if they *were *the most "caring/concerned teachers" in the world, you still wouldn't be happy with them. This isn't the first or second anti-teacher or anti-P.S. post you've put on AAM, as is your right, but there's very little balance in a lot of them.

I think that this post really shows you up and does you little credit. You sound like you waited in the long grass for the evidence you needed to share with us. And I'm sure that, if the teachers *did* give out sweets, you'd be posting here straight away, telling us that they were unfit to do their job because of the anti healthy eating signals they were sending to your children. 

Why not go into the schools and speak to the teachers in question? 

Oh, maybe you can't because those awful teachers would then take out their anger on your children...........


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## boris (10 Dec 2009)

VOR said:


> Hopefully, when the dust settles in years to come we will have a more robust, efficient, manageable public service and a more competitive, export driven private sector.


 
VOR a damned interesting post and speaking as a CS I did not think your comment was anti public service but there has been such a barrage of abuse against us lately that we cannot help to go on the defensive first.  There are people out there who are completely insensitive about the situation that we are now in.

Over your comment above I do think the Government were handed the  large part of reform of the CS/PS last week and foresaked it for other gains.  I would suffer the pay cuts that we got yesterday if it had incorporated the reforms that are badly need but I do think that other parties probably interfered out of hysteria etc.


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## DonDub (10 Dec 2009)

boris said:


> VOR a damned interesting post and speaking as a CS I did not think your comment was anti public service but there has been such a barrage of abuse against us lately that we cannot help to go on the defensive first. There are people out there who are completely insensitive about the situation that we are now in.
> 
> Over your comment above I do think the Government were handed the large part of reform of the CS/PS last week and foresaked it for other gains. I would suffer the pay cuts that we got yesterday if it had incorporated the reforms that are badly need but I do think that other parties probably interfered out of hysteria etc.


 
Speaking as someone who had advocated for PS reform for many years,  I take no joy in seeing people taking a hit to their income. However, I believe that these cuts were absolutely necessary - based on the simple premise that the country is effectively broke. 
Its interesting to hear PS union reps wax lyrical about the major reforms that 'would' have been implemented had the deal been done last week - this gives the lie to the self-same unions' mantra over decades, that 'their' members were, flexible, efficient etc, and that they warranted significant pay increases to catch-up with their private sector equivalents.
If PS employees fight the cuts through industrial action, they are effectively making the point that someone else should  carry the cost of the required fiscal adjustment - the mythical hordes of millionaires, or more likely, many more  'real' private sector employees....


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## Complainer (10 Dec 2009)

All the same oul guff on this thread as on all the other - no alternative - cant afford it - no other option etc.

The Minister had plenty of other options - like cutting the €2bn tax relief on pensions, most of which goes to high earners, or cutting the €500m mortgage interest relief to landlords, or cutting any of the 100+ tax reliefs used by high earners to avoid tax (as detailed in the Commission on Taxation report. But instead, he hit social welfare and public servants, including those earning under €30k. This is not about sharing of pain or putting shoulders to the wheel. Big man, Brian.


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## DerKaiser (10 Dec 2009)

Complainer said:


> All the same oul guff......€2bn tax relief on pensions...€500m mortgage interest relief to landlords...Big man, Brian.



yep, same old guff from all the usual suspects


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## orka (10 Dec 2009)

Complainer said:


> The Minister had plenty of other options - like .... or cutting any of the 100+ tax reliefs used by high earners to avoid tax (as detailed in the Commission on Taxation report.


I agree it would be better and would simplify the taxation system if all reliefs were abolished but he has taken a big step in reducing the effectiveness of these as a way of avoiding all/most tax. By ensuring that all very high earners must pay a minimum 30% effective tax rate (up from less than 10% by the looks of the most recent 2006 data), he is forcing higher earners to either use fewer reliefs or else invest in whatever schemes (can't say I know much about them) attract reliefs but not get the actual reliefs. It's actually not the worst of an idea. If the reliefs are supposed to be of some benefit (encourage investments in certain areas maybe?), then maybe they should be left but the overall use by individuals capped as is now happening.


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## DonDub (11 Dec 2009)

Complainer said:


> All the same oul guff on this thread as on all the other - no alternative - cant afford it - no other option etc.
> 
> The Minister had plenty of other options - like cutting the €2bn tax relief on pensions, most of which goes to high earners, or cutting the €500m mortgage interest relief to landlords, or cutting any of the 100+ tax reliefs used by high earners to avoid tax (as detailed in the Commission on Taxation report. But instead, he hit social welfare and public servants, including those earning under €30k. This is not about sharing of pain or putting shoulders to the wheel. Big man, Brian.



Same oul poor PS guff here, insulate the insulated.....why not ask the 420,000  unemployed (+ the 50,000 expected to lose their jobs in 2010) - not one of whom was a permanent PS employee, what they feel about this guff.
Or ask the thousands of private sector employees, whose pension funds are in deficit, of which many will have to wind-up, or slash benefits - what they feel about this guff.
We simply cannot afford a boom time PS infrastructure - 54 billion into 32 billion, will not go.....basic maths....basic economics....


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## Complainer (11 Dec 2009)

DonDub said:


> Same oul poor PS guff here, insulate the insulated.....why not ask the 420,000  unemployed (+ the 50,000 expected to lose their jobs in 2010) - not one of whom was a permanent PS employee, what they feel about this guff.
> Or ask the thousands of private sector employees, whose pension funds are in deficit, of which many will have to wind-up, or slash benefits - what they feel about this guff.
> We simply cannot afford a boom time PS infrastructure - 54 billion into 32 billion, will not go.....basic maths....basic economics....


It's not an either/or choice. He has explicitly chosen to put the entire burden of our Govt finances onto public sector staff.

This will come back to haunt him, and FF/Greens.


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## Mpsox (11 Dec 2009)

Complainer said:


> It's not an either/or choice. He has explicitly chosen to put the entire burden of our Govt finances onto public sector staff.
> 
> This will come back to haunt him, and FF/Greens.


 
Should he not have done both? That would have made an even better dent in the state of the public finances. 

I do have some sympathy for those on a lower salary, but against that, I look at some of the jobs they do and have to ask, are you getting paid €30K a year for that?


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## Purple (11 Dec 2009)

The judgement was made that increasing taxes further would be counterproductive. I think this was the correct decision.


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## haminka1 (11 Dec 2009)

Complainer said:


> It's not an either/or choice. He has explicitly chosen to put the entire burden of our Govt finances onto public sector staff.
> 
> This will come back to haunt him, and FF/Greens.



with the elections approaching one might suspect he relies on two alternatives : 

1. it's nice for a political party to be in opposition from time to time - there's always someone else to blame, you don't need to be constructive for a while and with all the stress from the crisis cowen simply might feel like a nice vacation in opposition seats and let somebody else take the blame 
2. look at FG - they have never been a constructive opposition, they lack a proper leadership, they did not grasp the chance to get to power when it was there. is this really the opposition anyone should be afraid of?


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## Sunny (11 Dec 2009)

Complainer said:


> This will come back to haunt him, and FF/Greens.


 
Do you mean that FF might not win the next election?


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## Shawady (11 Dec 2009)

Purple said:


> The judgement was made that increasing taxes further would be counterproductive. I think this was the correct decision.


 
I think they have gone as far as they can with actual tax rates but they could bring more people into the tax take.
I can't understand why taking 10 or 20 euro a week of people on minimum wage would be any worse for econmoy than taking 8 euro off unemployed.
In saying that, I agree social welfare rates have to be reduced but I am not convinced nothing could be done on the taxation side.


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## Purple (11 Dec 2009)

Complainer said:


> All the same oul guff on this thread as on all the other - no alternative - cant afford it - no other option etc.
> 
> The Minister had plenty of other options - like cutting the €2bn tax relief on pensions, most of which goes to high earners, or cutting the €500m mortgage interest relief to landlords, or cutting any of the 100+ tax reliefs used by high earners to avoid tax (as detailed in the Commission on Taxation report. But instead, he hit social welfare and public servants, including those earning under €30k. This is not about sharing of pain or putting shoulders to the wheel. Big man, Brian.



The only substantial thing that you mention above is the €2 billion in tax relief on pensions. If that relief were not there people would just not put their money into pensions so the state wouldn't get it either way. The rest isn't worth a damn in the context of the problems we face so what, in detail, are you proposing as an alternative? … or is it just bar-stool socialist economics?


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## Sunny (11 Dec 2009)

Shawady said:


> I think they have gone as far as they can with actual tax rates but they could bring more people into the tax take.
> I can't understand why taking 10 or 20 euro a week of people on minimum wage would be any worse for econmoy than taking 8 euro off unemployed.
> In saying that, I agree social welfare rates have to be reduced but I am not convinced nothing could be done on the taxation side.


 
It will be done but I think FF have been quiet clever and have learnt the lessons from last years debacle. People would have been reluctant to accept higher taxation if no effort or a limited effort was made to cut expenditure. Property taxes, water charges, lower paid people are coming into the tax net, pension tax relief will be changed (b.t.w. I won't be investing at 30% tax relief), PRSI ceiling will be abolished etc etc are all coming. This was just the first step.


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## VOR (11 Dec 2009)

Complainer said:


> All the same oul guff on this thread as on all the other - no alternative - cant afford it - no other option etc.
> 
> The Minister had plenty of other options - like cutting the €2bn tax relief on pensions, most of which goes to high earners, or cutting the €500m mortgage interest relief to landlords, or cutting any of the 100+ tax reliefs used by high earners to avoid tax (as detailed in the Commission on Taxation report. But instead, he hit social welfare and public servants, including those earning under €30k. This is not about sharing of pain or putting shoulders to the wheel. Big man, Brian.


 
Welcome Complainer! You have some valid points but I believe he dealt with all three. 

Lenihan announced that the tax treatment of the lump sum available at retirement and the rate of tax relief available on an individual’s pension contributions will be dealt with in the Government’s National Pensions Framework, which is soon to be published by the Minister for Social & Family Affairs.  He accepted the Commission on Taxation’s recommendation that pension lump sums below €200,000 should not be taxed. Consolidated 33% rate of relief will be considered. Hopefully, that will increase pension contributions and not cause a bigger problem as Purple outlined.

Mortgage Interest Relief for Landlords was reduced at the last budget. 

Orka has closed off the tax relief treatment.


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## ashambles (11 Dec 2009)

> €2 billion in tax relief on pensions


The unions used be big supporters of axing pension relief, until it was explained to them that the most egregious tax relief is the one that operates on tax free lump sums. This is used by the wealthy but mostly as it happens by retiring public servants (think it's a tax giveaway of around 200m+ per annum).

Average private sector workers aren't too pushed about the lump sum, a big tax free lump sum even if they've managed to accumulate it means a smaller annuity. Personally I'd have no trouble at all seeing the tax free lump either reduced to 0 or to the average industrial wage - let alone the figures of 200k mentioned.

Also the tax relief on contributions if changed will have a larger short term impact on public sector workers, i.e they'll have to pay the extra tax while the private sector worker will see a smaller amount going into the fund. I'd see this as a huge problem if I was a public sector worker.

Same thing of course in the long term but in the short term - very different.

The proposals mooted of a 33% tax relief mean that average public servants will be need to pay another 700 euro or so a year in tax. (49%-33%) * (7.5% of 50,000. Drop it to 0% tax relief and public sector workers will have to pay almost 2000 a year extra in tax. 

In theory private sector workers might increase contribution to make up the shortfall but I'd expect if anything they'd contribute less - not an option open to the public sector. Ouch.


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## Firefly (11 Dec 2009)

Hi VOR.

Superb post. Your wife will find something I'm sure as anyone who tries this hard IMO will. Give her a hug. 

Complainer...Some of the reliefes could have been looked at I agree, but these are there to encourage investment/growth etc so need to be examined carefully. Also, given the lack of any investment at the moment, cutting these would IMO have no material impact on tax revenues anyway.

Firefly


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## thedaras (11 Dec 2009)

Lex Foutish said:


> > You never mentioned to your kids what you think of their teachers???? You probably don't have to
> 
> 
> .
> ...


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## liaconn (11 Dec 2009)

thedaras said:


> [
> 
> 
> *Ah wrong again,This happened in a secondary school where they do not give out sweets,the teacher used the anology to make a point *
> ...


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## Complainer (11 Dec 2009)

VOR said:


> Mortgage Interest Relief for Landlords was reduced at the last budget.
> 
> Orka has closed off the tax relief treatment.


Mortgage Interest Relief was reduced all right - to 75% of an unlimited sum for an unlimited duration, by stark contrast to the relief available to families for their own house. This is still a state subsidy to landlords at a time when we can't afford the basics. The relief needs to go.

Orka didn't 'close off' anything. Orka gave the usual ould 'we need investment' line which is conveniently forgotten when lecturing the public sector about the importance of free market competition and standing on your own feet. If these investments need state subsidies, this is a luxury we can't afford.



Sunny said:


> Do you mean that FF might not win the next election?


No - what is mean is that the current generation of public servants who have traditionally voted fairly heavily for FF will not be doing so for the foreseeable future. Irish voters have long memories. FF will not just find themselves in opposition - they will find themselves as the 3rd place party (if they are lucky). They have nothing to offer by way of ideaology or principles. The only thing they had to offer the electorate was power. Now they've lost their USP.


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## DerKaiser (11 Dec 2009)

Complainer said:


> All the same oul guff on this thread as on all the other - no alternative - cant afford it - no other option etc.
> 
> The Minister had plenty of other options - like cutting the €2bn tax relief on pensions, most of which goes to high earners, or cutting the €500m mortgage interest relief to landlords, or cutting any of the 100+ tax reliefs used by high earners to avoid tax (as detailed in the Commission on Taxation report. But instead, he hit social welfare and public servants, including those earning under €30k. This is not about sharing of pain or putting shoulders to the wheel. Big man, Brian.



Firstly I don't see where you're going with the "big man, Brian" quote, that just sounds like a bitter attack on a man whose hand are effectively tied in all of this.

Secondly, there is no concerted campaign by government to turn a blind eye to all kinds of pots of gold you seem to think are out there.

The pension tax relief cost is an estimate of taxation foregone.  About €1bn of this is in respect of the fact that investment income on pension funds is not taxed i.e. if they were in a bank account there would be DIRT payable on the money.  This cannot be cut as it is already invested in tax free funds.  

Of the remainder, I'd suspect public servants would again be hardest hit as their average employee contributions to pension schemes would be higher than the general population, as would their tax free lump sums on retirement.

Quick example is that an average public servant on €50k pays about 12-13% as pension contribution with 41% tax relief.  Scrapping this relief would therefore be tantamount to a 5% pay cut.  Not exactly spreading the burden away from public servants is it?

As for the interest offset on investment properties, we've been through this.  Taxing rental income rather than rental income after interest costs is unfair in that it's not based on the actual gain.  

In any case there's a lot of ordinary people, many in the public service (seems to be a lot of guards for some reason), with investment properties and lots of negative equity who are a far cry from the fat untaxed landlords you envisage.  If they have to pay full marginal tax on rental incomes whilst at the same time paying the mortgage repayments on a property they've already paid massive stamp duty on then something is going to give.  I'd stick by the general rule that if someone had made a loss on an investment they should not be screwed by the taxation system.


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## Sunny (11 Dec 2009)

Complainer said:


> No - what is mean is that the current generation of public servants who have traditionally voted fairly heavily for FF will not be doing so for the foreseeable future. Irish voters have long memories. FF will not just find themselves in opposition - they will find themselves as the 3rd place party (if they are lucky).


 
See I knew the crisis was all the public sectors fault. They are responsible for FF being in power!!

If you are right and I am no FF supporter but then I think the budget actually reflects well on them that they made the cuts knowing that they were committing political suicide. Shows they learnt from last year. 

FG have actually done well recently because they managed to keep Enda quiet. Their pre budget plans were well thought out. Labour have been abysmal starting with their pre budget proposals which was the usual waffle. Its a shame because I was beginning to think Eamonn Gilmore had something about him. As for Joan Burton, if she thinks making Tiger Wood jokes during her budget speech reflects well on her and her party, she is sadly mistaken.


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## VOR (11 Dec 2009)

DerKaiser said:


> Taxing rental income rather than rental income after interest costs is unfair in that it's not based on the actual gain.


 
Agreed. This has implications for all business. If we take it that an individual renting a property is undertaking a commercial venture then, under normal accounting rules, interest paid can be offset against earned income. 

One can ask why let a retail/manufacturing business offset interest paid and not this type of commercial undertaking? And as you said, there is no actual gain to tax. 

It could be a far deal fairer to tax the sale of the asset (if at a profit) as opposed to the income earned.


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## Complainer (12 Dec 2009)

DerKaiser said:


> Firstly I don't see where you're going with the "big man, Brian" quote, that just sounds like a bitter attack on a man whose hand are effectively tied in all of this.


This (admittedly bitter) quote relates to Brian's attack on the blind persons allowance and the disability allowance, while providing an extra subsidy to imported products (car scrappage) and continuing the existing subsidy to landlords.




DerKaiser said:


> Secondly, there is no concerted campaign by government to turn a blind eye to all kinds of pots of gold you seem to think are out there.
> 
> The pension tax relief cost is an estimate of taxation foregone. About €1bn of this is in respect of the fact that investment income on pension funds is not taxed i.e. if they were in a bank account there would be DIRT payable on the money. This cannot be cut as it is already invested in tax free funds.
> 
> ...


1 billion could be saved by standard rating tax relief on pension contributions. You don't consider 1 billion per annum to be significant in the light of our current situation? Currently, over €8 out of every €10 of tax relief goes to taxpayers in the top one-fifth of the income distribution. I don't really care whether they are public or private sector - to leave this tax relief in place while attacking people with disabilities and those on social welfare is outrageous.



DerKaiser said:


> As for the interest offset on investment properties, we've been through this. Taxing rental income rather than rental income after interest costs is unfair in that it's not based on the actual gain.
> 
> In any case there's a lot of ordinary people, many in the public service (seems to be a lot of guards for some reason), with investment properties and lots of negative equity who are a far cry from the fat untaxed landlords you envisage. If they have to pay full marginal tax on rental incomes whilst at the same time paying the mortgage repayments on a property they've already paid massive stamp duty on then something is going to give. I'd stick by the general rule that if someone had made a loss on an investment they should not be screwed by the taxation system.






VOR said:


> Agreed. This has implications for all business. If we take it that an individual renting a property is undertaking a commercial venture then, under normal accounting rules, interest paid can be offset against earned income.
> 
> One can ask why let a retail/manufacturing business offset interest paid and not this type of commercial undertaking? And as you said, there is no actual gain to tax.
> 
> It could be a far deal fairer to tax the sale of the asset (if at a profit) as opposed to the income earned.



All fine and dandy in theory, until you look at what actually happens on the ground. Look at the advice from this esteemed expert. The interest being paid on the mortgage is not a legitimate business expense. It is a financial device used to maximise tax relief - the interest is maximised on the investment property while other loans are paid off. This subsidy used by investors had a huge inflationery effect, and pushed prices out of reach of many ordinary couples trying to put a roof over their heads. And Brian has ensured that this subsidy continues, which he cuts back on the blind persons allowance.

Brian's hands were not tied. He had many other options, and he chose the soft targets.


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## z107 (12 Dec 2009)

> Brian's hands were not tied. He had many other options, and he chose the soft targets.


Soft targets? Are you joking?
You mean the most represented group the country, who will now no doubt be going on strike?

The real soft targets are not the well represented public sector, but people like SMEs, and micro-enterprises who can't afford IBEC or ISME membership. You know that these are soft targets because they've always been hit in the past. They weren't hit this time because there's nothing left to take from them.


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## Complainer (12 Dec 2009)

umop3p!sdn said:


> Soft targets? Are you joking?
> You mean the most represented group the country, who will now no doubt be going on strike?
> 
> The real soft targets are not the well represented public sector, but people like SMEs, and micro-enterprises who can't afford IBEC or ISME membership. You know that these are soft targets because they've always been hit in the past. They weren't hit this time because there's nothing left to take from them.


Who represented blind people in the talks? Who represented disabled people in the talks? And given that the 'most represented group' is the only group that has been hit with two across-the-board cuts within 12 months, I'm not sure that the value of representation os so obvious.

Interesting to note that you ignored the €1.5 billion left on the table in the property and pensions area - €1.5 billion is considered 'nothing left to take' while swiping the last few coins from the pockets of blind people and disabled people.


----------



## sandrat (12 Dec 2009)

This budget is leaving me with 50 euro less a week take home but i'd rather it was 60 euro if it meant that blind and disabled people could keep the current rate. I agree that pensions should have been changed to marginal rate like the medical expenses were. There was no huge hit for the higher paid whereas when you are on social welfare due to blindness or a disability you cannot work to improve your income and cutting it like this is harsh.


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## z107 (12 Dec 2009)

> Who represented blind people in the talks? Who represented disabled people in the talks? And given that the 'most represented group' is the only group that has been hit with two across-the-board cuts within 12 months, I'm not sure that the value of representation os so obvious.


Sorry. I misread your post, I thought you were implying that public sector were the soft targets.



> Interesting to note that you ignored the €1.5 billion left on the table in the property and pensions area - €1.5 billion is considered 'nothing left to take' while swiping the last few coins from the pockets of blind people and disabled people.


I'm sure they'll eventually give this €1.5billion to the banks over the next couple of years as well. It won't impact me anyway.


----------



## Complainer (13 Dec 2009)

umop3p!sdn said:


> Sorry. I misread your post, I thought you were implying that public sector were the soft targets.


I was referring to all of the above.


umop3p!sdn said:


> I'm sure they'll eventually give this €1.5billion to the banks over the next couple of years as well. It won't impact me anyway.


Here's a mad suggestion - don't just get concerned about the things that impact you. Try getting concerned about things that impact others unfairly.


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## Purple (13 Dec 2009)

Complainer said:


> Interesting to note that you ignored the €1.5 billion left on the table in the property and pensions area - €1.5 billion is considered 'nothing left to take' while swiping the last few coins from the pockets of blind people and disabled people.



It has already been explained to you that your proposal on pensions is naive and unworkable since people would just not put the money in if the tax-deferral was not there. 

The same for property; taxes are levelled on profits, not turn-over. The problem with the investment sector is that banks gave out mortgages designed for PPR's on commercial loans. The term on an investment loan should be shorter than that on a mortgage for a home that the owner will live in and the interest rate should be higher since the risk to the bank is greater.


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## Purple (13 Dec 2009)

Complainer said:


> Here's a mad suggestion - don't just get concerned about the things that impact you. Try getting concerned about things that impact others unfairly.



Good advice, I agree. That's why I was so against Benchmarking.


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## DerKaiser (13 Dec 2009)

Complainer said:


> 1 billion could be saved by standard rating tax relief on pension contributions. Currently, over €8 out of every €10 of tax relief goes to taxpayers in the top one-fifth of the income distribution.



Could you give us a source for this?  I just wonder if the figures you quote are:
a) Reflective of the fact that pensions contributions are down significantly over the last couple of years
b) Reflective of the pensions levy introduced in last year's budget?





Complainer said:


> All fine and dandy in theory, until you look at what actually happens on the ground. Look at the advice from this esteemed expert. The interest being paid on the mortgage is not a legitimate business expense. It is a financial device used to maximise tax relief



No complainer, it's not a device, it's actually real money.  

The reality on the ground is that you have people who paid tens of thousands in stamp duties up front and are now having to cough up money to subsidise their loss making investments because their interest _and capital repayment_ costs are far higher than any rent they might earn.  

But the fairest thing to do is take half of their revenues in tax and let them shoulder 100% of their costs?


----------



## Complainer (13 Dec 2009)

DerKaiser said:


> Could you give us a source for this?  I just wonder if the figures you quote are:
> a) Reflective of the fact that pensions contributions are down significantly over the last couple of years
> b) Reflective of the pensions levy introduced in last year's budget?


Source is here: [broken link removed]

The pensions levy has no relevance here because it has nothing to do with pensions. It was just a device to cut salary without calling it a salary cut. But yes, it was considered in the report.



DerKaiser said:


> No complainer, it's not a device, it's actually real money.
> 
> The reality on the ground is that you have people who paid tens of thousands in stamp duties up front and are now having to cough up money to subsidise their loss making investments because their interest _and capital repayment_ costs are far higher than any rent they might earn.
> 
> But the fairest thing to do is take half of their revenues in tax and let them shoulder 100% of their costs?


And perhaps you could give your source for your claim of tens of thousands of loss making investments. Are you forgettting about the many landlords who bought their properties before prices peaked and are doing quite nicely thank you?


----------



## DerKaiser (13 Dec 2009)

Complainer said:


> Source is here: [broken link removed]
> 
> The pensions levy has no relevance here because it has nothing to do with pensions. It was just a device to cut salary without calling it a salary cut. But yes, it was considered in the report.



Thanks for the link.  

I checked out the original publication. The information is a bit dated so I'm not sure the €1bn would be very accurate.  In any case it does not consider the future tax revenues lost or, more importantly, increased dependency on medical cards, etc.  But then again, how could it?  In 50 years time we may have even more means testing of benefits.

The one thing that is sure is that we can certainly reduce the reliefs that are availed of by higher income earners, and it would save money now.  It's a step that needs to be seriously considered, however, in the context of giving people incentives to engage in socially desirable behaviour i.e. working harder now to provide for themselves in retirement.

I see the levy was considered.  I don't think it would automatically be exempted from standardisation of relief on pension contributions without specific action.  There is also the issue of employer contributions being potentially considered as benefit in kind for taxation purposes.  From a legal and fair point of view, we must be consistent in our application of taxation changes i.e. the taxation system should not discriminate against those trying to fund retirement from their own income versus those whose employers provide them with retirement benefits.



Complainer said:


> And perhaps you could give your source for your claim of tens of thousands of loss making investments. Are you forgettting about the many landlords who bought their properties before prices peaked and are doing quite nicely thank you?



I don't think i need a source to say that there are many people who've paid tens of thousands in stamp duty who've lost money on their investments.

I'm not quoting any numbers here just the observation that many of these people exist.  It's never justifiable to impose unfair taxes, but in practical terms at the moment it would be an even less sensible course of action given the amount of ordinary people who have bought investment properties in recent years. 

I'm not forgetting about people who are making a gain.  They currently pay tax on their actual monetary gains through the normal channels.  Any excess of income over expenses is taxed at marginal rates and capital gains on sale are also taxed


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## Complainer (13 Dec 2009)

DerKaiser said:


> Thanks for the link.
> 
> I checked out the original publication. The information is a bit dated so I'm not sure the €1bn would be very accurate.  In any case it does not consider the future tax revenues lost or, more importantly, increased dependency on medical cards, etc.  But then again, how could it?  In 50 years time we may have even more means testing of benefits.
> 
> ...


Strange how when it came to public sector cuts, or blind persons allowance cuts, or disablity allowance cuts, there was no huge clamour to investigate the downstream impacts of these cuts. But when it comes to pension relief (largely used by high earners), the downstream impact is suddenly so important as to delay proceeding. Some double-standards going on here, I think.

But regardless, if the €1bn is not accurate, what's your best bet ? €800m? Maybe just €500m? How much money do you reckon Brian has left on the table here?



DerKaiser said:


> I don't think i need a source to say that there are many people who've paid tens of thousands in stamp duty who've lost money on their investments.
> 
> I'm not quoting any numbers here just the observation that many of these people exist. It's never justifiable to impose unfair taxes, but in practical terms at the moment it would be an even less sensible course of action given the amount of ordinary people who have bought investment properties in recent years.
> 
> I'm not forgetting about people who are making a gain. They currently pay tax on their actual monetary gains through the normal channels. Any excess of income over expenses is taxed at marginal rates and capital gains on sale are also taxed


Sorry, I thought you had said that there were tens of thousands of investors in loss-making situations. My error. I'm sure there are some property investors in loss-making situations, just as there are many other investors and ordinary home-owners in loss-making situations. So maybe there should be some phasing out of this relief over 2-3 years.

But once again, it is simply untrue to say that the expenses claimed are "legitimate expenses". Any accountant with a grain of sense will advise their property investor clients to maximise the interest on their property investments for tax relief purposes. These are not real costs - just an atrifical device. The real costs are much lower, and decline steadily over time.


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## Purple (14 Dec 2009)

Complainer said:


> But once again, it is simply untrue to say that the expenses claimed are "legitimate expenses". Any accountant with a grain of sense will advise their property investor clients to maximise the interest on their property investments for tax relief purposes.


 So accountanta have been advising people to buy expensive loans in order to minimise their profit so that they pay less tax... are there any accountants out there like to explain that one?


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## Bronte (14 Dec 2009)

Complainer said:


> . Are you forgettting about the many landlords who bought their properties before prices peaked and are doing quite nicely thank you?


 
Sorry, I do believe property has nearly halved in value?  What have you got against landlords, it's just a normal business like any other?  Do you not like to see anyone suceed or just landlords?

You have implied that landlords don't have real costs only make believe artificial devices to avoid tax, do you have any idea of the cost of buying, maintaining and running an investment property?  There's hefty stamp duty on purchase, income tax on profit and capital gains on sale, what more taxes do you think should be paid.  If you can't write off the interest, a legitimate business expense, the business would not be viable.


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## DerKaiser (14 Dec 2009)

Complainer said:


> But regardless, if the €1bn is not accurate, what's your best bet ? €800m? Maybe just €500m? How much money do you reckon Brian has left on the table here?


 
I actually think that more than €1bn would be raised due to the recent introduction of the public service pension levy


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## Complainer (14 Dec 2009)

DerKaiser said:


> I actually think that more than €1bn would be raised due to the recent introduction of the public service pension levy



Bring it on....(though we really have to do something about the damned levy!)



Bronte said:


> Sorry, I do believe property has nearly halved in value?  What have you got against landlords, it's just a normal business like any other?  Do you not like to see anyone suceed or just landlords?


I love to see people succeed, provided that they pay a fair share of tax on their gains. Landlords are a long way from paying their fair share. Yes indeed, some property property prices have come close to halving, but this comes after the prices have tripled over the preceeding ten years. Some landlords are in loss-making situations, but many are still making very good money. 



Bronte said:


> You have implied that landlords don't have real costs only make believe artificial devices to avoid tax, do you have any idea of the cost of buying, maintaining and running an investment property? There's hefty stamp duty on purchase, income tax on profit and capital gains on sale, what more taxes do you think should be paid. If you can't write off the interest, a legitimate business expense, the business would not be viable.



I didn't say that landlords 'don't have real costs'. What I did say was that the standard accountant's advice to landlords to maximise their borrowings on their rental property and invest elsewhere rather than paying off their loan is indeed an artificial devise, not a legitimate business expense. 

And don't get me started on CGT - the 20% rate fuelled our property bubble, and encouraged investment in non-productive property assets over productive businesses. But that's a thread for another day.


----------



## Bronte (14 Dec 2009)

You say that Brendan's post is standard accountant's advice, that's a big leap.  I have never had an interest only mortgage on an investment property and nor do many others so I don't see where you get the confirmation that all accountant's advise this.  Personally I think that not paying back capital is mad as you risk negative equity should property fall and rents decrease (like we have now) and it gives the business no room for manoeuvre.

How exactly do you think that landlords don't pay their fair share of tax as compared to any other business?  I think you should back that up rather than throwing  it out there as a statement of fact.  CGT is a hefty tax if your property had tripled in value, also if property triples in value your stamp duty costs go up likewise.

CGT did not fuel the property bubble, it was people outbidding each other in the race to pay as much as possible for property without any thought as to affordability, price and interest rates rises and what would happen if they overpaid and lost some of their earning power.


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## DerKaiser (14 Dec 2009)

Complainer said:


> Landlords are a long way from paying their fair share


 
Well if you want to up capital gains on property to 40%, most people wouldn't have a problem with that. That would be the fairest way of targetting those who have gained.  Trying to get at capital gains through changes to taxation of revenues is simply too crude and will not target those who have gained the most without catching those who have not gained at all.

Similarly for pensions, if you want to make sure the rich don't gain inordinately then cap the annual contibution at €10k i.e. max tax relief of €4k.

I neither own an investment property nor contribute a significant amount to a pension.  I believe appropriate pensions contributions limits and higher capital gains tax on residential property would hit those who genuinely can afford it.

Scrapping tax reliefs on pension contributions and interest offset on investment properties will hit many on moderate incomes who have contributed handsomely to the exchequer but have now been hit by falling pension values and property prices


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## Bronte (14 Dec 2009)

DerKaiser said:


> Well if you want to up capital gains on property to 40%, most people wouldn't have a problem with that.


 
This didn't work in the past because when you make people contribute 40% most people will do everything to 'avoid' the tax.  When they reduced it to a more manageble 20/25% more people complied. 

It was the same when income tax was 70%, everybody was doing everything for cash where possible.

If people perceive tax to be grossly unfair they will do everything to avoid it.  

Anyway 40% on capital gains , what capital gains in the current market?


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## DerKaiser (14 Dec 2009)

Bronte said:


> This didn't work in the past because when you make people contribute 40% most people will do everything to 'avoid' the tax. When they reduced it to a more manageble 20/25% more people complied.
> 
> It was the same when income tax was 70%, everybody was doing everything for cash where possible.
> 
> ...


 
That's the catch.  If you set the tax too high it will only encourage people to avoid it and you might actually reduce the capital gains tax take.


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## Complainer (14 Dec 2009)

Bronte said:


> This didn't work in the past because when you make people contribute 40% most people will do everything to 'avoid' the tax.  When they reduced it to a more manageble 20/25% more people complied.


This is an over-simplification - it is true to say that the overall CGT take rose around the time that the rate was cut, but this does not mean that cutting the rate caused the rise. There were lots of other things happening at that time, including the dot-com boom and the early days of the Celtic tiger/property boom.

In fairness, it is a fairly hard tax to avoid - you can't really hide a house.


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## Bronte (14 Dec 2009)

Complainer said:


> .
> 
> In fairness, it is a fairly hard tax to avoid - you can't really hide a house.


 
I've been around a while and you'd be amazed at what people will do to avoid crippling taxes (even during the boom when by any stretch of the imagination taxes weren't onerous). 

DerKaiser and Complainer it is a fact that CGT compliance rose when it came down to 20%

Complainer you still have not stated how landlords as versus any other business do not pay their fair share of tax.


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## Complainer (14 Dec 2009)

Bronte said:


> DerKaiser and Complainer it is a fact that CGT compliance rose when it came down to 20%


Source, please.


Bronte said:


> Complainer you still have not stated how landlords as versus any other business do not pay their fair share of tax.


Oh yes I have (for the panto season) - see above re abuse of mortgage interest relief by maximising borrowings.


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## Bronte (14 Dec 2009)

Complainer said:


> Source, please.
> 
> Oh yes I have (for the panto season) - see above re abuse of mortgage interest relief by maximising borrowings.


 
Ask revenue to prove the CGT compliance if you don't believe me.  

And no you have not proved that landlords pay any less tax than other businesses.  All you have stated and continue to state is that they abuse mortgage interest relief and you also said they don't pay their fair share of tax.  And I've asked you how they do not pay their fair share of tax in comparsion with any other business.


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## Towger (14 Dec 2009)

In fact it is far harder for landlords to hide earning than in many other businesses.


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## Complainer (14 Dec 2009)

Bronte said:


> Ask revenue to prove the CGT compliance if you don't believe me.


Given that you underlined the 'fact' in "it is a fact that CGT compliance rose when it came down to 20%", I thought that you had some hard evidence, such as a Revenue report or a C&AG report to back this up. Perhaps not. Silly me.



Bronte said:


> And no you have not proved that landlords pay any less tax than other businesses. All you have stated and continue to state is that they abuse mortgage interest relief and you also said they don't pay their fair share of tax. And I've asked you how they do not pay their fair share of tax in comparsion with any other business.



Sorry if this is not patently obvious, but the two things are connected. They don't pay their fair share of tax BECAUSE they abuse mortgage interest relief. And that is without even looking at the ongoing 'black economy' landlords, as evidenced by the fairly regular threads on AAM showing landlords still refusing to give the PPS number.



Towger said:


> In fact it is far harder for landlords to hide earning than in many other businesses.


True, but that's not to say that tax evasion by landlords doesn't happen.


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## Graham_07 (14 Dec 2009)

Complainer said:


> They don't pay their fair share of tax BECAUSE they abuse mortgage interest relief.


 
By abusing mortgage interest relief do you mean they are claiming something which they are not presently entitled to claim under existing legislation? If that is the case and you have appropriate factual evidence to back this up then a complaint to Revenue might be the way to go. However if you mean they don't pay their fair share just because they choose to maximise reliefs legally available to them then  would that argument not also apply to, for example those maximising pension contributions to reduce tax. Are they abusing pensions relief?


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## Complainer (14 Dec 2009)

Graham_07 said:


> By abusing mortgage interest relief do you mean they are claiming something which they are not presently entitled to claim under existing legislation? If that is the case and you have appropriate factual evidence to back this up then a complaint to Revenue might be the way to go. However if you mean they don't pay their fair share just because they choose to maximise reliefs legally available to them then  would that argument not also apply to, for example those maximising pension contributions to reduce tax. Are they abusing pensions relief?


I've explained what I mean clearly above. Is there some part of this that you don't understand?


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## DerKaiser (14 Dec 2009)

Complainer said:


> Oh yes I have (for the panto season) - see above re abuse of mortgage interest relief by maximising borrowings.


 
All businesses have loans. The trick is to try generate enough revenue to cover borrowing costs (interest) and hopefully make a profit, which can then be taxed.

You cannot simply look at taxing revenues with no reference to costs for businesses.

It is a well known fact in business that you can leverage your gains through borrowing if you can generate a return higher than the cost of debt. This is a pretty basic economic idea that has been in vogue for decades, it's not a device or a trick.  It's cetainly not abuse, Graham is rightfully confused as to how you see this basic fact of business as abuse.


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## Graham_07 (14 Dec 2009)

Complainer said:


> I've explained what I mean clearly above. Is there some part of this that you don't understand?


 
Clear as mud.


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## Complainer (14 Dec 2009)

DerKaiser said:


> All businesses have loans. The trick is to try generate enough revenue to cover borrowing costs (interest) and hopefully make a profit, which can then be taxed.
> 
> You cannot simply look at taxing revenues with no reference to costs for businesses.
> 
> It is a well known fact in business that you can leverage your gains through borrowing if you can generate a return higher than the cost of debt. This is a pretty basic economic idea that has been in vogue for decades, it's not a device or a trick.  It's cetainly not abuse, Graham is rightfully confused as to how you see this basic fact of business as abuse.



This is abused because (as recommended by Brendan B), landlords can and will keep their borrowings *artificially *high to maximise their tax relief.

THis scam was quite obvious to everyone, including the Govt that pulled this relief some time back, following the Bacon report. Pity they didn't have the guts to stand up to the lobbyists and hold their line - we mightened be in the mess we are in now in the property market.


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## Sunny (14 Dec 2009)

Complainer said:


> This is abused because (as recommended by Brendan B), landlords can and will keep their borrowings *artificially *high to maximise their tax relief.
> 
> THis scam was quite obvious to everyone, including the Govt that pulled this relief some time back, following the Bacon report. Pity they didn't have the guts to stand up to the lobbyists and hold their line - we mightened be in the mess we are in now in the property market.


 
Didn't that lead to a shortage of rental properties and an increase in rents. Those lobbyists included many charities that were helping poorer people. I think even Bacon changed his tune in later times. I will try and find a link.


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## DerKaiser (14 Dec 2009)

Sunny said:


> Didn't that lead to a shortage of rental properties and an increase in rents. Those lobbyists included many charities that were helping poorer people. I think even Bacon changed his tune in later times. I will try and find a link.


Yes, and complainer knows this.  What with the number of posts he's been involved in on this issue, he should the the most educated man in Ireland with regard to all these points.


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## DerKaiser (14 Dec 2009)

Complainer said:


> This is abused because (as recommended by Brendan B), landlords can and will keep their borrowings *artificially *high to maximise their tax relief.
> 
> THis scam was quite obvious to everyone, including the Govt that pulled this relief some time back, following the Bacon report. Pity they didn't have the guts to stand up to the lobbyists and hold their line - we mightened be in the mess we are in now in the property market.



There is nothing artificial about the borrowings.  The definition of the interest you can offset is:

_Mortgage Interest paid “on monies borrowed for the purchase, improvement or repair” of the property._

There is no obligation to pay down the capital.  If you do choose to pay it down then you will benefit from reduced interest costs.  Not the full value of interest because of the tax relief, but you will still reduce your total interest bill after allowing for tax relief. 

Your point of view is that there is effectively a moral obligation on the purchaser of a residential property to subsidise the undertaking out of wealth gained independently of the property itself.  It is a view that is completely at odds with the accepted wisdom of investing any form of enterprise.


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## Complainer (14 Dec 2009)

DerKaiser said:


> There is nothing artificial about the borrowings.  The definition of the interest you can offset is:
> 
> _Mortgage Interest paid “on monies borrowed for the purchase, improvement or repair” of the property._
> 
> ...


That is absolutely NOT what I've said - please don't put words into my mouth. 

The current situation is that the tax relief makes it in the landlord's best financial interest NOT to repay the capital, even where the investment is making good money. The landlord will make more money by putting his profits on deposit then by using it to repay capital, thanks to the state subsidy.



Sunny said:


> Didn't that lead to a shortage of rental properties and an increase in rents. Those lobbyists included many charities that were helping poorer people. I think even Bacon changed his tune in later times. I will try and find a link.


Certainly rents did increase around that time. But very interestingly, house price growth dropped from a bubbling 20% in 2000 to a level-headed 3% in 2001. 

However, we are in very different circumstances now. For a start, we have a huge oversupply of rental properties at the moment. Also, given our current economic woes, the rental market will simply not bear substantial increases. The money just isn't there. This is a unique one-off opportunity to address this problem without hitting renters.

At a bare minimum, interest should only be allowed in line with the repayment schedule for a traditional repayment mortgage over a reasonable period, say 10-15 years.


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## DerKaiser (14 Dec 2009)

Complainer said:


> The current situation is that the tax relief makes it in the landlord's best financial interest NOT to repay the capital, even where the investment is making good money.



If the investment is making good money then the investor will pay tax on that at their marginal rate and if they choose not to use this taxed money to repay their capital I certainly wouldn't label that as abuse of the system


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## Complainer (14 Dec 2009)

DerKaiser said:


> If the investment is making good money then the investor will pay tax on that at their marginal rate


Nope - you're still not getting it. The investor will artificially ensure that the investment doesn't make good money - he will maximise his interest and take the state subsidy tax relief. 

So where he is making a good profit, he avoids tax by making it look on paper like he is not making a profit, by diverting his capital elsewhere. He is better off keeping it on deposit then repaying his loan, thanks to the tax relief.


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## Howitzer (14 Dec 2009)

Complainer said:


> Nope - you're still not getting it. The investor will artificially ensure that the investment doesn't make good money - he will maximise his interest and take the state subsidy tax relief.
> 
> So where he is making a good profit, he avoids tax by making it look on paper like he is not making a profit, by diverting his capital elsewhere. He is better off keeping it on deposit then repaying his loan, thanks to the tax relief.



Complainer, really, I want to agree with you. I thought as you once. Then I talked to people who knew what they were talking about. I've had second thoughts and want to be convinced but I have to agree with the landlords.

From what I can see you either accept mortgage interest as a legitimate expense or you don't.

If it isn't then how so?

If it is, but you want to disallow it or a percentage of it, for tax purposes then why? Are there other examples of apparently legitimate expenses that
are disallowed for tax purposes that you are aware of?

I do want to be convinced on this but ultimately your tax system has to be fair and transparent.

What you've described is a person who's made an investment that doesn't make him any money on a day to day basis, who never pays for the property that forms the investment, who has paid up front a huge tax bill in stamp duty.

I'm sorry but that's not someone to envy. This person has no income. Their business model is predicated on a false assumption that there is no risk, that property prices only go one way, that they'll always have tenants, that the maintenance costs / management fees don't exist. This isn't 2006. The investor you describe has artificially bankrupted himself.

This is the argument of the newly converted. Those who didn't see the property bubble for what it was, when it was, and now zealously want their pound of flesh for falling for all the bull.


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## Complainer (15 Dec 2009)

Howitzer said:


> This is the argument of the newly converted. Those who didn't see the property bubble for what it was, when it was, and now zealously want their pound of flesh for falling for all the bull.


This is offensive. I've been beating this particular drum for many years now, before and after the bubble. 



Howitzer said:


> From what I can see you either accept mortgage interest as a legitimate expense or you don't.
> 
> If it isn't then how so?
> 
> ...


The problem is that in many cases, particularly with interest-only mortgages, the mortgage interest is artificial and unnecessary. The investor may well have the funds from his profitable investment to repay the capital, but he chooses not to do so for tax reasons (as per Brendan's advice. It is that simple.

It is not unusual for tax law to be specific about write-off/depreciation periods for particular assets. Why should it not be specific about interest periods allowed for this kind of asset?


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## Protocol (15 Dec 2009)

I'm no fan of landlords.

I think commercial rents are *way, way too high in Ireland*.  Many need to fall by up to 50%.

They are one of the main causes of our high price level.

But, all businesses are and should be allowed to deduct interest as an expense. Landlords should be treated equally.

I think that TRS on mortgage interest should be abolished.


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## Graham_07 (15 Dec 2009)

Howitzer said:


> If it is, but you want to disallow it or a percentage of it, for tax purposes then why? Are there other examples of apparently legitimate expenses that
> are disallowed for tax purposes that you are aware of?


 


Complainer said:


> It is not unusual for tax law to be specific about write-off/depreciation periods for particular assets. Why should it not be specific about interest periods allowed for this kind of asset?


 
While I do not object to any landlord making use of existing tax deductions/reliefs ( as is their right under law ), there are examples of business expenses being restricted. Motoring expenses and the CO2 emissions would be an example where Revenue restrict the expense depending on value and emission. It is up to the self-employed individual to use that which maximises his relief within the legislation. If they want a gas guzzler, then be prepared for less tax deductions.


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## Howitzer (15 Dec 2009)

Complainer said:


> It is not unusual for tax law to be specific about write-off/depreciation periods for particular assets. Why should it not be specific about interest periods allowed for this kind of asset?


That sort of idea definately works for me. Mortgage interest only being tax deductable once the principle is paid within, say, 20 years. You'd need some fairly watertight legislation. What happens if the owner sells within that period - a clawback similar to the S23 presumably? Only specific investor motgages allowed - no balloom payments.

Under those circumstances you'd also probably have to raise the relief back up to 100%. I think it would be a very progressive move from the point of view of our rental housing market but I don't think it would raise much capital - certainly in the short term. And I reckon it would take quite a bit og time to implement, ideally done in a more holistic fashion.


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## DerKaiser (15 Dec 2009)

Complainer said:


> Nope - you're still not getting it. The investor will artificially ensure that the investment doesn't make good money - he will maximise his interest and take the state subsidy tax relief.
> 
> So where he is making a good profit, he avoids tax by making it look on paper like he is not making a profit, by diverting his capital elsewhere. He is better off keeping it on deposit then repaying his loan, thanks to the tax relief.


 
Please read this very carefully and tell me where I am not getting it.

The bottom line is that the only borrowings you can take into account are those used in the purchase or improvement of the property. 

It is real money has been used for no purpose other than to acquire the property in the first place.  There is no other way of looking at it.

So whether you pay off the loan or not, any interest incurred is an actual cost of owning that property.  What you do with any excess of rent over loan repayments and other expenses (after it has been taxed at your marginal rate) is entirely up to you.


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## DerKaiser (15 Dec 2009)

Complainer said:


> It is not unusual for tax law to be specific about write-off/depreciation periods for particular assets. Why should it not be specific about interest periods allowed for this kind of asset?


 
What period would you allow?

I basically think that a lot of PAYE workers have bought investment properties as a provision retirement.  And I believe most of them would pay down the capital before they retire so that they are left with a rental income stream with no significant costs in retirement.

I think taxing the rent at the full marginal rate of taxation whilst these people are paying off their mortgages is very unfair.

So yes, maybe it would be fair to finally settle on a tax treatment whereby the interest offset is reduced in a straight line from 100% to 0% over 20 years.  This will not save a fraction of the €500m in the short term, however.

The main thing for me is that you stick to a single basis to give people certainty i.e. if my marginal tax rate is 50% moving from a 100% interest offset to a 0% offset halves the value of the property to me.  We can't just mess around with this every few years.  

If we decided to abolish the interest offset now and reintroduce it at a later point (It's not inconceiveable that we'd need to encourage property investment again at some point in the medium to long term) we would reintroduce the same cycle of fluctuating property prices.


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## Firefly (15 Dec 2009)

Complainer said:


> he avoids tax by making it look on paper like he is not making a profit, by diverting his capital elsewhere. He is better off keeping it on deposit then repaying his loan, thanks to the tax relief.


 
Could anyone in any business not do this? Say for example I own a flower shop and it's making 100k profit per year on 300k turnover. Included in the expenses are interest payments of 50k a year on a big extension built recently. If I can put my profit into a dep account paying more interest than the interest I'm charged then I would opt to keep my loan as big as possible..


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## Buckshee (16 Dec 2009)

VOR said:


> Many of you on this site may disagree with a great deal I say.


 
Can't see how they could or would.... excellent post.


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## Bronte (17 Dec 2009)

Complainer said:


> Given that you underlined the 'fact' in "it is a fact that CGT compliance rose when it came down to 20%", I thought that you had some hard evidence, such as a Revenue report or a C&AG report to back this up. Perhaps not. Silly me.
> 
> 
> 
> ...


 

How many landlords as a percentage of landlords 'abuse' mortgage interest relief? Zero is the answer because even if some do not pay back the capital it is not abuse, it is not illegal and it is not tax evasion. In fact the landlord is taking a huge risk which you don't seem to appreciate. You also have no statistics to prove that the vast majority of landlords in fact do not pay back capital which you are constantly alleging on AAM. These type of loans are in any case only a relatively new phenomenon (celtic tiger ) and landlords prior to and currently purchasing would not have access to interest only loans (banks want capital repayments) so it cannot apply to very many landlords or only those who purchased at the heights of the market and they can't be making any profit between reduced rents and property that has halved in value. 

In fact it is difficult to even maximise the 75% interest relief because banks are giving out only 50% loans on investment purchases.

Of course this has no effect I suppose on the property market currently whereby the dreaded investors have disappeared. You cannot blame us for the upswing if you dont agree that they are out of the market now and causing the downswing. Not ordinary purchasers borrowing too much and now not being able to do so I suppose.

I don't think some landlords on AAM refusing to give their PPS number is statistically important, they will in any case be caught by the Revenue checks on the PRTB listing or the HSE payments of rents and the Revenue has time on it's side in this regard. It is very difficult for a landlord to hide income as versus other cash business. I imagine that it is one of the more tax complaint sectors. 

You should do the figures on a fictious landlord to see how a strategy of not paying back the capital can have serious repercussions for a landlord. The reason there is no time limit on the interest (which incidentally I would have no issue with) is because property owners borrow extra money to do up property as over time renovations have to be done. You seem to think that landlords are raking in thousands in profit and putting it into what exactly to make vast sums of money on it?   Deposit accounts/equities/shares other property? 

In relation to CGT the reason this has never gone back up to 40% is because the low rate ensured complaince in the vast majority of cases, I don't need statistics for this. I think proof of a reasonableness variety on AAM suffices.


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## Firefly (22 Dec 2009)

Complainer said:


> This is abused because (as recommended by Brendan B), landlords can and will keep their borrowings *artificially *high to maximise their tax relief.
> 
> THis scam was quite obvious to everyone, including the Govt that pulled this relief some time back, following the Bacon report. Pity they didn't have the guts to stand up to the lobbyists and hold their line - we mightened be in the mess we are in now in the property market.


 

eh?

http://www.askaboutmoney.com/showthread.php?t=128337


Today, 10:03 AM  
Complainer  
Frequent Poster   Location: South Dublin
Posts: 2,330  

 Re: Fulltime public service employees :Keep Saving or put lump sum towards Mortgage 
--------------------------------------------------------------------------------
For tax reasons, you should concentrate your repayments on your home mortgage, and not the rental property. You may well be financially better off going 'interest only' on the rental property, and letting the state subsidise you with uncapped mortgage interest tax relief.
Given your future life changes (kids etc), I would be inclined to keep the cash on hand for the time being.


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## Complainer (22 Dec 2009)

Firefly said:


> eh?


Like I say to my 5-year-old when she grunts or groans at me, if you have a question, please talk to me and explain it to me. I don't respond to grunts.


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## Firefly (22 Dec 2009)

Complainer said:


> Like I say to my 5-year-old when she grunts or groans at me, if you have a question, please talk to me and explain it to me. I don't respond to grunts.


 
If you can't spot the irony in my post maybe you should ask your 5 year old.


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## Complainer (22 Dec 2009)

Firefly said:


> If you can't spot the irony in my post maybe you should ask your 5 year old.


I'll take it then that you're not interested in any serious discussion on this issue so.


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## DB74 (22 Dec 2009)

Giving solid tax advice to somebody doesn't necessarily mean that you actually agree with the fairness of the legislation


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## Firefly (22 Dec 2009)

Complainer said:


> I'll take it then that you're not interested in any serious discussion on this issue so.


 
In previous posts you argue that the interest on investment properties is not a "legitimate business expense" and coupled with tax deductions from pension contributions have resulted in cutbacks to the blind persons allowance. You then provide this advice to a PS collegue in a different thread.


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## Complainer (22 Dec 2009)

See this post.


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## Firefly (22 Dec 2009)

So you're providing solid tax advice by recommending a relief you deem is not a legitimate business expense. This has to be the best ad to see a professional tax accountant for tax advice I've ever seen.


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## Howitzer (22 Dec 2009)

They'd probably say the same, though would be less likely to suffer the qualms.


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## Firefly (22 Dec 2009)

Howitzer said:


> They'd probably say the same, though would be less likely to suffer the qualms.


 
True, but as a legitimate tax expense. Also, they probably wouldn't say I'm taking money off blind people either.


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## Complainer (23 Dec 2009)

I do intend to come back on some of the detail points in this thread, when I can build up a little motivation. In the meantime, Vincent says it much better than I can;

[broken link removed]


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## Firefly (24 Dec 2009)

Can't open that page and eventually being directed to sign up to the Irish Times Archive. 10 euro to read this article - don't think so.


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