Originally posted on Business Post 04 June 2022.  Many other developed countries would give their right arm to be in the solid economic position we are in. Yet we seem afraid to spend that largesse on causes that desperately need it.  We have emerged from the pandemic with an economy stronger than it has been for many years, a debt-to-GDP ratio hovering somewhere around 50 per cent, and full employment. We have suffered terrible loss and endured much misery, but much less so than other nations. Yet the advice from the Irish Fiscal Advisory Council (Ifac) for the future can be summarised in just two words: “Careful now.” Ifac has its job to do, but there’s more to economic life than is apparent in the ratios of tax-and-spend. Prominent among the the council’s concerns is our reliance on corporation tax. Yes, we do rely on a relatively small number of companies to pay corporation tax. But then we always did. That’s a phenomenon that has lasted more than 40 years. Only the names of the companies have changed and in some cases that was merely by virtue of merger, acquisition or simple rebranding. And yes, corporation tax receipts are higher than would be expected from domestic economic activity. But there’s a reason for that too. It’s called globalisation. If anything, the reliance on a small number of firms for corporation tax take is less flimsy than in the past. The corporation tax yield no longer stems from the availability of cheap manufacturing facilities and generous investment allowances in machinery and buildings. It flows from intellectual capital, which Ireland is uniquely qualified to host, and not just for tax reasons. No one locates intangible property in a country with a dodgy legal or political system. This is why the council’s call for the re-establishment of the rainy-day fund is unwarranted. Two decades ago, Irish taxpayers missed out on social services in their communities, special needs assistants in their schools, hospital care and decent roads to drive on, in favour of building a National Pensions Reserve Fund. The proceeds of their state-enforced frugality evaporated under the heat of the 2008 banking crisis. That cohort of taxpayers, and in the interests of full transparency I am among them, paid for the financial collapse twice – through reduced government investment pre-collapse and higher taxes post-collapse. And why should any group, however eminent, expect current ministers to build up a bank of cash for future ministers to spend after the next election? The injustice would not just be political. Why should anyone not have a home, or a university go underfunded, or a school not have a playground, or a hospital not have additional nurses and beds, in the interests of our totemic fear of the national debt? Many other developed countries would give their right arm to be in the solid economic position we find ourselves in. Yet we seem to be afraid even to recognise how well we are doing. We no longer measure ourselves by reference to the long established and international yardstick of gross domestic product (GDP). Instead, we have created a humbler measure called modified gross national income (GNI*) so that we don’t look quite as good, just in case we get above ourselves. We do not, British-style, have to think about imposing windfall taxes on industry to help our citizens with the rising cost of living. Our windfall taxes are already built into the existing system. We support industry in the pharmaceutical and technology sectors and benefit from their profitability through corporation tax receipts. We levy Vat at high rates on our hard-working consumers so that when prices rise, so too does the Vat take. Against that we may not be collecting sufficient social welfare contributions to provide the robust safety nets our citizens deserve against misfortune. There can be no argument against the economic benefits of such safety nets given the positive impacts of both the Pandemic Unemployment Payment and the Employer Wage Support Scheme. A key lesson from the pandemic surely is that targeted social welfare is not largesse. It makes good economic as well as social sense. It is better to spend money on our people than to build up rainy day funds which merely penalise the most productive elements of the economy while taking out of the equation money which could be better applied elsewhere. We have made that mistake in the past. It is strange that it be suggested again. A competent and influential body such as Ifac deserves our attention, but it seems to me that its May report is only contributing to a keening national imposter syndrome, perhaps inadvertently. We have problems with our health and welfare systems, and we need to invest more in housing and utilities, primarily water and power supply, but in the main we do well. We need to be mindful of what still has to be done, yet proud of what is already accomplished. We don’t need a “careful now” mindset. It is strange that anyone should believe we do. Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

Conal Kennedy, Head of Practice Consulting, writes: In Practice Consulting, we often take calls and emails from members about difficulties and challenges that arise in practice. One of the most common queries surrounds the rights and obligations of the various parties when there is a change of professional adviser. When a client decides to move from one accounting firm to another, both parties should cooperate to make the transition as smooth as possible. However, complications and difficulties can arise when one of the parties has a grievance. Sometimes, the relationship between the firm and the client may have lasted many years, and its ending can come as an unpleasant surprise to the existing accountant, the worse so if they have not been fully paid for all work done. On the other hand, the new accountant may be very pleased to gain a new client, and may be surprised in their turn by difficulties posed by the incumbent. In some rare instances, incoming accountants do not do all that is required of them under the Code of Ethics, particularly around professional enquiries. In Practice Consulting, we receive communications from members on both sides of the fence. We provide information and guidance to the member, bearing in mind of course that there are two sides to every issue. Let’s look at a typical scenario and discuss some of the issues and possible misconceptions, with the details anonymised but addressing problems that are common enough. As always, we need to concentrate on the key matters in a generalised way, so if you are faced with this scenario yourself, please go to the Sections 320 of the Code of Ethics for the full requirements and guidance. In our example, a firm has made contact with Practice Consulting, explaining that they have recently taken on a new client. The client is a limited company, who needs a non-audit accounts preparation assignment and tax compliance work carried out. The firm has sent the professional enquiry letter to the previous accountant. However, the outgoing accountant has written back to the firm and the client to say that they have not been paid for a certain piece of work, and are withholding clearance and keeping possession of all records until they have been paid in full. What are the rights and obligations of the parties? In the first instance, there is no such thing as “professional clearance” as such. No accounting firm can prevent another accounting firm from working for a client, and therefore no firm can give or withhold clearance. The incoming accountant is obliged to carry out professional enquiries to determine if there is any professional reason why they should not take up the appointment. This is the purpose of the “any professional reason” letter, to which the outgoing accountant should respond, with the approval of the client. The new agent should make their best efforts to obtain responses to the letter, including re-sending the letter by registered mail, if necessary. However, if they do not receive a response following reasonable efforts, and their other enquiries are sufficient to indicate that there is no valid reason not to take up the assignment, then they may proceed. In this instance, the existing accountant would appear to be attempting to take a lien, meaning a right to retain possession over certain documents that they have in their possession until they have been paid. Whilst this right still exists, it is really only applicable in quite narrow circumstances. Firstly, the outgoing accountant is obliged to co-operate with the successor to ensure that the client’s interests are not prejudiced, including the client’s obligation to comply with its legal obligations if there is no other means to do so. This may in effect mean the that the incumbent accountant is obliged to forward any missing information to ensure that tax compliance and filing obligations are met, or other interests are protected, and therefore the right of lien may be largely irrelevant in respect of the core accounting records of the entity. Secondly, in the case of an incorporated client, insofar as any of the documents held by the outgoing accountant constitute the accounting records of the company, then company law requires that these should be returned to the directors of the company. The fact that the outgoing accountant has not been paid does not affect either of the obligations mentioned above. Insofar as the accountant proposes to take a lien, this only applies to documents that have been worked on and for which the accountant has not been paid. In the case above, it would appear that the outgoing accountant is obliged to hand over the key accounting records that it holds, and to separately seek payment of the outstanding fees. The outgoing accountant should also respond to the professional enquiry letter. When we discuss the above rights and obligations with members who contact us, the members occasionally observe that the advantage appears to be with the incoming accountant. In fact, the Code of Ethics cannot override the obligation of the client to comply with legislation, or give the existing accountant rights that contradict company law. The message that members should draw is that their rights to refuse cooperation in the event of non-payment are quite limited, and they should organise their credit control policies accordingly. Many firms have a policy of limiting their exposure to large outstanding fees through direct debit and staged payment arrangements with clients. In the case of audit clients, the incoming auditor has certain rights to access information held by the outgoing auditor. The circumstances in which these rights apply differ slightly between ROI and UK, but are a legal right of the incoming auditor, and the application of them differs somewhat from the ethical obligations discussed above. If you have questions in connection with this issue or other practice related issues or dilemmas, please contact Practice Consulting and we will endeavour to give you the information and guidance that you need.

The role of the charity director is an onerous one, but what about performance? David Brady considers the characteristics of an effective charity director, and future challenges and opportunities. The implementation in 2021 of the Charities Governance Code poses important questions for the effective governance of charity boards in Ireland, including the challenging, and occasionally sensitive, review of board performance and the performance of individual constituent directors.  Compliance with the Code is, however, a baseline measure of effectiveness. Beyond the legal requirements for directors under the Charities Act 2009 and the Companies Act 2014, the qualities, roles and responsibilities of the ideal charity director are largely undefined. Are charity directors different? Is being a director of a charity really that different to being a private sector director? Directors of charities and private sector directors have shared experience in overseeing the challenges: of recruiting, motivating, and retaining the right people; of there being sufficient funds to pay salaries; and of competitors in the same sub-sector.  There are also similarities in how the business of the board is conducted; the calendar of board meetings, sub-committee meetings, and annual general meeting; the annual audit; the risk register; and—increasingly common—evaluation of the board itself.  In both contexts, the chairperson is often selected for their relevant experience, ability to guide decisions or bring order in the face of complexity or challenge. There are, however, factors that are unique to charities, including: charities legislation and guidance from the Charities Regulator; compliance with the Charities Governance Code; a mixed-income revenue model, whereby funding is derived from a combination of restricted-purpose and unrestricted-purpose revenue sources; a volunteer, unpaid board of directors; staff members who may be unfamiliar with private sector/commercial work environments and practices; volunteers, who assist the organisation on an unpaid basis, but who may feel they have a stake/voice equivalent to employed members of staff or even board directors; functioning as public benefit entities, with accountability to end users and the public in general, and the fulfilment of a public-benefit purpose;  service-level agreements with funders. None of this makes life easy for the charity director and can be reason enough for some to shy away from holding board positions.  Nonetheless, there are many experienced and qualified people who wish to give something back to organisations that have positively impacted their lives or to causes aligned with their beliefs and values — often donating significant amounts of their time. How good is good? As noted above, the implementation of the Charites Governance Code has heightened awareness of governance standards in the sector and the importance of the role of the charity director in achieving these standards.  However, beyond meeting base-level compliance with the Code, the debate on how to define highly effective charity boards and directors, and their ability to impact on the success or effectiveness of their governed organisations, has yet to commence in earnest.  In this article, I propose a five-level model for evaluating charity boards in terms of their ‘maturity’ or otherwise (see Figure 1), from a non-compliant to an elite standard. I suggest applying the same model to the evaluations of individual directors. In devising and articulating this charity board maturity model, I considered the following: How mature is a charity board? What aspects of a board’s conduct define its maturity, or otherwise? What is the evidence of a board achieving the higher levels of maturity? For example, is it aware of charity sector challenges and opportunities in Ireland and internationally? What does this mean for director competencies and performance? Is it possible to connect board maturity with the related, distinctive competencies required of individual board members? Non-compliant boards typically have a negative attitude towards governance. They are often unaware of strategic developments within the sub-sector and have a short-term funding focus, relying on basic financial information and outdated policies and procedures. They have no board rotation or succession planning processes. Their AGM processes are weak, and they do not insist on the maintenance of a risk register. Compliant boards adopt a tolerant attitude to governance; however, strategically, they are largely closed to sector developments other than matters of self-interest. Their policies and risk register are compliant rather than effective; their rotation policy is not fully implemented, and the AGM is limited to board members only.   Effective boards see the benefits of good governance and revise board and staff structures to exploit opportunities. They seek funding opportunities to support strategy and use risk registers to manage risk and plan contingencies. They ensure that board appraisals and rotation of directors policies are implemented. AGMs include the attendance of, and participation by, non-board, external members of the charity.  Progressive boards seek continuous improvement in their governance of the organisation. They are keen to benchmark their maturity against the boards of peers. They seek collaboration in new initiatives that reflect market changes. Policies are updated in line with current business/market changes. The organisation’s risk appetite is determined and defined, and the board ensures that its skills gaps are identified and addressed. Board rotations are planned and implemented. Elite boards deliver strategic programmes resulting in significant impact and/or funding. Board members and staff have a collective problem-solving mindset. The charity’s performance is managed using both financial and non-financial KPIs. At the elite level, the board employs long-term resource planning, promotes a robust risk management culture, and reviews strategy regularly. Succession planning includes pro-active identification of new chair and board members, as well as key executive management positions. They embrace and learn from occasional failure positively. Benchmarking director performance As suggested, the five-levels of maturity model can be applied by analogy to the evaluation or benchmarking of individual board directors. The articulation of competencies, or rather their absence, of the ‘non-compliant’ director is straightforward.  They are unfamiliar with the sector or sector trends. They bring no valuable experience or expertise to the board, are unfamiliar with governance frameworks, and generally blame others for problems rather than take responsibility themselves. The compliant director has an up-to-date understanding of the charity, brings technical knowledge to the position, is familiar with the Charities Governance Code and brings governance oversight to the organisation.  Moving up a level, the effective director will have served previously on multiple charity boards and brings valuable experience. Other board members will be aware of their specialist knowledge and draw on their expertise to derive solutions for organisational issues.  Their awareness of internal and external stakeholders will be strong and their input to decision-making will reflect this. The progressive director is a strategic thinker. In addition to having specialist knowledge, they bring a strategic understanding of the niche in which the charity operates and its competitive advantages.  Their leadership qualities are also evident from previous directorships, and they are skilled in multiple business and/or charity sectors.  Accepting change as normal and necessary, a key characteristic is their desire to introduce innovations to the charity’s operations, particularly ideas that are working well in the commercial sector. Finally, the elite director provides economic, political, and social thought leadership to the charity, in addition to the strategic leadership attributes of the progressive director. They possess the qualities required to chair either the board or one of its sub-committees.  Through a broad network of private and public sector collaborators, they are well positioned to plan for the sustainability and growth of the charity.  They set the tone of communication within the board, between the board and the staff of the charity, and between the board and the sector and broader public arena. The style of the ‘elite’ charity director is, paradoxically, non-elitist, collaborative and influential, with an evident social purpose. What next for charity directors? As well as understanding the characteristics, competencies and behaviour of the ideal charity director, and applying these when evaluating boards and their individual members, there are several critical issues that pose important challenges and questions for the sector as a whole: Should there be mandatory term limits for holding the position of charity director and/or defined limits for the role of chairperson and secretary? Should charity directors be paid, and if so, in what circumstances, how much, and under what terms and conditions? How can more experienced businesspeople, qualified professionals and members of the public be encouraged to hold board positions in charities? What can the sector do to facilitate this? What training and development, beyond the compliance level, do charity directors need? Should mandatory, accredited training be introduced before board positions are offered and accepted? What can Irish charities learn from international experience and best practice regarding governance? Should the legislation be changed to make it easier to identify, caution, penalise or remove ineffective charity directors? The implementation of the Charities Governance Code has given an important boost to the raising of standards across the sector and the priority must be to ensure this happens promptly and comprehensively.  The extension of governance into territory beyond compliance is an exciting and challenging move with long-term benefits for all stakeholders.  Defining charity boards in terms of their maturity, from non-compliant through effective to elite, and evaluating director competencies by analogy, will serve to both challenge and develop a trusted and vibrant charity sector.   David Brady is a principal at DB Consulting.  (Views expressed in the article are strictly those of the author.)

Originally posted on Business Post 08 May 2022.  As a country, we consistently ask the wrong questions about our industrial and investment policy. The current row over turf tells us much about Ireland’s body politic, and it isn’t a good story. Bad policy does damage, but we don’t have enough politicians with sufficient ambition for their constituents to do it a better way. Surely, the real question is why any citizen of one of the wealthiest countries in the world has to rely on turf to heat their homes. The wrong questions are also being asked about our industrial and investment policy. The focus, post-Brexit and the Northern Ireland protocol, has been our trade in goods with Britain and the wider world, but Ireland exports just as much in services. Services can only be provided if we have people to provide them. Investment policy in this country has traditionally focused on how we tax employers. Having resolved the tax status of the body corporate, it is now time to think about the body in the office sitting at the keyboard, providing the financial management, systems programming and business support facilities which fuel so much of our prosperity. We have issues with the retention of qualified talent in this country. This seems to be particularly pronounced in the medical profession, where, as an OECD study of health systems pre-pandemic rather dryly observed, a high number of medical graduates who qualify here will never work here. It is difficult to resolve retention challenges in any particular sector, but we have to slow if not completely halt the brain drain. While not every problem can be solved by throwing money at it, should we start thinking again about how we tax our working population? What might the effect on the workforce be if we increased the personal tax allowances available to those under 30, while reducing the personal allowances available to those over 50 by a similar amount? That would, in effect, frontload the personal tax allowances people receive across their lifetime of work in the country to ensure they are less taxed in their early careers. Such an initiative would be a long-term project, and history suggests that while it wouldn’t be ineffective, it may not be permitted to be effective. The last attempt at engineering the make-up of the workforce with income tax policy was individualisation – lower taxes for working couples – and that failed for little better reason than a political resistance to any form of change. There was no ambition for the wellbeing of working couples, or for the resourcing of national growth. Turf fire thinking is not a new phenomenon. Yet there are some grounds for optimism. There have been positive developments in providing apprenticeship opportunities and in education syllabus reform. One area where the government has made considerable progress in dealing with the challenge is in the granting of critical work visas for skilled personnel coming into the country. Waiting time has dropped from almost six months to, in some cases, less than a month. Many knowledge workers do not need to be physically located in this country. International tax conventions preclude the possibility of special tax dispensations for workers resident outside the country but employed by an Irish firm. They do not, however, preclude simplifying the whole process of calculating and offsetting the correct amount of taxes due between countries. Making administration easier can make all the difference in ensuring ready supplies of goods, as post-Brexit Britain is finding to its cost. The same holds true in ensuring the ready availability of talent. This time last year, Ireland was an outlier from the international consensus was when the government sought to protect the country from the loss of one of our key investment incentives – the 12.5 per cent corporate tax rate. The outcome was an international rate of 15 per cent that would not go any higher, while persuading the European institutions that it was tenable to run a tax regime with different rates depending on the size of the industry. But the other side of the international reform agenda, which garnered less attention was that some corporate tax revenues would migrate from countries of production to countries where markets were to be found. This would mean that Western economies such as the US, France and Britain would in effect be surrendering part of their corporation tax take to countries with large markets such as Russia, China and India. There is now little to no chance of that happening any time soon. Future success will not be achieved by attempting to mirror the patterns of the past. It has often been pointed out that money tends to flow to locations where it is most welcome, and the same is true of professional talent. It is not terribly long ago since we systematically impoverished our country by restrictive trade and industrial policies which did little other than prompt people with get up and go to get up and go from our shores. We now need to do exactly the opposite. It’s time to stop the turf fire thinking. Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland

As people across the world condemn the attack by Russia on Ukraine, they also want to show their support through donations and using their influence for humanitarian intervention. Professional accountants will find themselves in positions of influence with many stakeholders including clients, employers, employees, and local communities.  Níall Fitzgerald, Head of Ethics and Governance outlines some practical considerations for accountants and business leaders in this context:    Fundraising for humanitarian or other reliefs People and organisations are looking to help the millions of Ukrainians displaced by the invasion by donating directly or running fundraiser events. Be aware of fraud risk and recommend controls that ensure the safeguard of any monies raised and that they are used for the purpose for which they were raised. Ensure the necessary licences are obtained for any public fundraising activity. Be clear on the purpose for the funds and how they will be channelled to the beneficiaries. Ensure compliance with national charity law and check that charitable donations are only made to a properly registered charity in your jurisdiction. Social media Understandably, many people and corporates are sharing their views on Russia's  invasion of Ukraine via social media. The distinction between when a view is a personal view or that of the organisation where a person works is not always clear. If you are an officer of a company, e.g. a director, chief executive, or the public relations officer, and you are commenting on a matter related to your area of responsibility, then it is very difficult to separate your view from the corporate view. For this reason, many organisations will have clear corporate social media policies in place and that is the first reference point if in doubt. However, before reacting to a colleague's personal post, it is important to also consider their right to hold and express an opinion. There can be a cultural aspect to this within an organisation, especially where respect, tolerance, diversity and inclusion, and psychological safety are highly valued. The specific circumstances of the person expressing the view might also be taken into account, for example their emotional proximity to the issue.  Developing corporate positions Many organisations are using their influence for good by publicly denouncing the invasion of Ukraine, with some going further to withdraw from investments and business operations in Russia, and any dealings with Russian state-owned entities. These decisions are not always the most straightforward to implement. Legal and other expert advice should be sought to consider how an organisation can address contractual obligations, restructure, and relocate operations. Many Russian citizens are against the actions of the Russian Government, and Russian employees, contractors, etc., should receive fair treatment and not be discriminated against. Reporting progress and being transparent on these positions, including any setbacks, is very important as corporates will be held to account by stakeholders and members of the public to honour their commitments. Careful thought should be given before making any wide-sweeping statements. The global economy, with its complex interconnected markets, creates practical difficulties when seeking to divest of everything connected to Russia.   Whistleblowing and speaking up Clearly defined and well-communicated whistleblowing and speaking-up policies and procedures can increase an organisation’s awareness of any weaknesses in it’s internal controls and practices relating to sanctions, anti-money and anti-bribery and corruption compliance. Communicating to employees the organisation’s position in relation to this crisis and reminding them about whistleblowing and speaking-up policies and procedures, promotes a safe environment in which individuals feel comfortable to raise any concerns about the organisation’s actions, or inactions. Corporate reporting While the scale of the impact of this crisis on organisations will differ, it will dwarfed by the impact on millions of Ukrainians. Organisations have important social obligations and responsibilities to corporate stakeholders. Accountants should ensure transparency and accountability in corporate reporting by highlighting the impact of the crisis on the organisation’s operations, asset valuations and exposure to liabilities. Examples of the sources of this impact include: supply-chain disruption; the cost of ceasing operations in Russia or the conflict/invasion zones; rising commodity prices; inaccessibility of certain markets due to trade or travel restrictions; difficulty maintaining required levels of capital reserves; and loss of key customers. Accountants will have a central role in collecting, measuring, and reporting the necessary information and ensuring it is reported in accordance with legal and regulatory requirements and relevant reporting frameworks. They should also understand the limitations to their expertise and call for the involvement of experts where necessary. Directors and senior management will need to consider expert advice when making highly judgemental decisions on values and estimates and in determining the future implications for the organisation.    Boundaries between personal life and professional life Negative emotions, such as anger and fear, increase the risk of self-defeating behaviours. The developing situation in Ukraine will understandably evoke such emotions in many. In this context, it is useful to refer to guidance issued by the CCAB bodies, in July 2021, to help accountants consider and distinguish if their personal behaviour could be viewed as conduct that might discredit the profession. While the facts and circumstances of every situation will differ, the CCAB guidance provides some examples of such behaviours, including the use of seriously offensive or threatening language causing distress, or threatening behaviour, towards a client or a member of the public outside of the work environment.  This non-exhaustive list of considerations may need to be reconsidered as the crisis in Ukraine develops. In many situations, increasing ethical awareness or the ability to address an ethical dilemma requires reflection. Professional accountants may find it useful to refer to, or circulate to professional accountancy staff, the Chartered Accountants Ireland Ethics Quick Reference Guide available from our Ethics Resource Centre. This article was adapted for members overseas from an article written by Níall Fitzgerald on the Institute’s Ethics Resource Centre.

Originally posted on Business Post 03 April 2022. A wage increase would generate hundreds of millions of euro in tax yield without much political or social pushback. Are wages in Ireland really too low? It would appear the emerging consensus is that they are. There have been recent debates in the Dáil over the level of the national minimum wage. Trade unions are signalling the need to achieve increases in pay in the order of 5 per cent or more. Even President Michael D Higgins has engaged in the discussions, with his observation last week at the Siptu Biennial Conference that we should be entering a new era of worker engagement and negotiations over pay and conditions. Last week, there was progress on issues such as pensions auto-enrolment and minimum statutory sick pay. Both of these are entirely laudable and necessary social reforms, but both also create further inflationary wage pressures and extra costly demands on employers. Every household in the country is feeling the pinch of higher fuel prices and other essentials, a wave of price increases prompted initially by the rapid economic recovery post-pandemic, and now perpetuated by the miserable and evil war in Ukraine. No one can be in any doubt that Ireland is an expensive country to govern. The pandemic has added to our national debt servicing costs. There are legitimate calls for additional funding for health, education and social services, along with the need to provide aid and support for the war refugees. But these calls are not being matched by a willingness among the Irish population to pay for the enhanced government services. In February, a Red C poll in this newspaper found that while the majority of the population were keen to ensure that the retirement age would not be raised, a similar majority would not be willing to pay the tax price of what undeniably is a social good. This tax reticence is nothing new. It took two attempts for a modest local property tax, to fund essential local council services, to stick. When LPT revaluations fell due last year, the system was tweaked in such a fashion that the tax burden would only increase on very few people. In 2012 the nation jibbed at paying a levy for septic tank inspections, and then many refused point blank to pay the water charges which were needed to repair a (literally) leaky public service infrastructure. Ireland collects tax and social welfare in the order of 20 per cent of our GDP. In most other developed economies, according to OECD statistics from 2020, the figure is closer to 34 per cent. As of now, we don’t raise enough taxes to pay for current and future government services, but we don’t have the collective national will to introduce new taxes or allow existing tax rates to get any higher. One possibility is that instead of changing the tax rates, the government might change how much gets taxed. The easiest way to do that politically is to levy additional taxes from higher wages. If wages increase in both the public and private sectors, but allowances and reliefs do not, a higher proportion goes in income tax, USC and PRSI. This would not be a new strategy. In the 2016 Programme for Partnership Government, a stated tax policy was not to increase tax bands and allowances as wages increased, so that additional revenue could flow to the exchequer. This phenomenon is known as fiscal drag and is a form of taxation by stealth. It seems that stealth taxation is the only way in which an Irish finance minister can raise funds without being deflected by a political headwind. The effect of fiscal drag can be quite dramatic, particularly as the Irish tax system is very much skewed in favour of the lower-paid, as indeed it should be. Calculations are frequently wheeled out around budget time on the impact of a 1 per cent change up or down in an income tax rate. We rarely see tax calculations which involve changes in wages. Tax projections are not an exact science, especially given the distortions in income levels from the pandemic, but what might be the effect of everyone in the country receiving a 5 per cent wage increase? A rough and conservative calculation, based on the most recent publicly available figures, suggests an increase in income tax yield alone in the order of €800 million. Additional USC and PRSI yields would likely drive the total yield over €1 billion. That’s a huge amount of recurring tax money to raise with possibly little enough outcry. Of course, wage increases bring their own problems, not least the challenge of competitiveness. Nor would a general wage increase be a rising tide that can lift all boats. Increases in disposable income are all very well until met with higher costs of goods and services and last week’s inflation figures are a genuine cause for concern. When government addresses wage claims either in the public sector or for that matter in the private sector, the bigger exchequer picture will be factored in. What might be lost on the roundabouts could be gained on the swings. Dr Brian Keegan is Director of Public Policy at Chartered Accountants Ireland