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\n Gavan Reilly<\/p>\n
In Politics by Numbers, broadcaster, author and spreadsheet stan Gavan Reilly takes a data deep dive into a political point of the week.<\/p>\n
THE REGULAR DEBATE around inheritance tax, and whether it should be reformed to be less punitive on childless adults, is a good example of the power of the status quo.<\/p>\n
Why should a child be able to inherit \u20ac400,000 tax-free from their father, but only \u20ac40,000 if it comes from an uncle? What if the uncle had experienced infertility, didn\u2019t want children of their own, or simply never met the right person to start a family with?<\/p>\n
Why should the State get a bigger cut of the uncle\u2019s estate simply because their next-of-kin was born to someone else? Should the tax paid by a child on their inheritance be influenced by which adult changed their nappies, or brought them to more soft play centres?<\/p>\n
If you were designing a tax system on a blank sheet of paper you might consider the current system to be unfair \u2013 but if you were responsible for running Ireland\u2019s tax system today, you could find it hard to unpick and reform.<\/p>\n
The reason is that once a tax has started to bring in a steady and significant income, it\u2019s harder to forego that revenue and introduce something that you might consider objectively fairer. Inheritance taxes in Ireland yield somewhere between \u20ac850 million and \u20ac1 billion a year \u2013 so while there is almost universal consensus<\/a> that the status quo could be fairer, it\u2019s harder to make do without the cash it brings in.<\/p>\n The power of the status quo<\/p>\n I draw this analogy because I think it\u2019s a useful illustration of the difficulty faced by the government as it now stands at another strategic crossroads: how much tax to put on motor fuels.<\/p>\n Most readers will not need reminding that the temporary cuts to fuel taxes, introduced in March and increased in the wake of national protests at Easter, are due to start reverting from next week.<\/p>\n Excise on petrol will rise by 7c, and diesel by 8c, per litre from 1 September, while a 2c per litre levy to fund the National Oil Reserves Agency will also be restored.<\/p>\n When you include separate pre-scheduled increases to carbon taxes from mid-October, the overall taxes on a litre of diesel will be about 34c higher on 2 December than they are now.<\/p>\n It hardly needs spelling out so long as the cost of fuel remains at present levels, that this is a total non-runner. Everyone hopes that the conflict in Iran can be resolved, one way or another, so that oil shipments can leave the Strait of Hormuz and the imbalance between supply and demand can be resolved in the customer\u2019s favour. But the only governments capable of resolving the row are the United States and Iran \u2013 and it\u2019s not as if Washington radiates clarity, what with its simultaneous claims that Iran is actually defeated, while still threatening to bomb allies<\/a> if they get in the way.<\/p>\n So what\u2019s a country like Ireland to do?<\/p>\n Objectively, if modern-day prices are the \u2018new normal\u2019, it\u2019s a non-runner to restore the taxes to their previous traditional levels.<\/p>\n But can it afford to go without those taxes? That much is far less clear. For the full year 2025, excise on petrol, diesel and green diesel brought in over \u20ac2 billion. It\u2019s already cost the State \u20ac750 million to lower those taxes for some of 2026, and to introduce time-limited supports for high-using industrial sectors.<\/p>\n It might be affordable for the State to defer some of the pre-scheduled increases for the months to come \u2013 but the key word is \u2018might\u2019. The status quo has turned out to be rather lucrative.<\/p>\n When is a contingency not a contingency?<\/p>\n Budget 2026 included a \u20ac1 billion contingency fund, ostensibly continuing a habit of leaving money aside for the ongoing unknown costs of the pandemic or the war in Ukraine. But even as this cash was set aside, ministers already knew where much of it would go.<\/p>\n About a quarter would go on the one-off costs of hosting the EU Presidency this year. Separately, because 1 January was a payday for the public sector, there are 27 public sector payrolls to run this year instead of 26 \u2013 costing another \u20ac400 million or so. Take out \u20ac200 million for the mid-year bailout of the Department of Education as it scrambles to make adequate provision for children with additional needs, and there\u2019s no contingency left.<\/p>\n So the temporary tax cut on motor fuels isn\u2019t being paid for through contingencies.<\/p>\n Rather, it\u2019s simply being funded by the surplus: rather famously, Ireland is running an exchequer surplus of about \u20ac9 billion this year, so there\u2019s plenty of scope to forego taxes. Isn\u2019t there?<\/p>\n