Sir, – Fintan O'Toole ("Reality of Irish tax system is no escape at the bottom", Opinion & Analysis, September 29th) claims that Ireland's tax system is not progressive, citing research from the Nevin Institute that the bottom 10 per cent of people (by gross income) pay nearly 30 per cent of their income in indirect tax, as opposed to the top 10 per cent, who only pay 6 per cent.
However there is a fundamental problem with this analysis. The appropriate base for indirect taxes is total expenditure. Since richer households typically spend less than they earn, the use of total expenditure as a base would show a very different picture and reveal indirect taxes to be considerably less regressive than the Nevin Institute analysis.
The higher weighting of food (which is zero VAT rated) in the budgets of poorer households further augments this effect.
The single most regressive indirect tax in Ireland is that on tobacco. Perhaps Fintan thinks this should be cut in the upcoming budget? – Yours, etc,
DAVID MADDEN,
School of Economics,
University College Dublin,
Belfield, Dublin 4.