When it came to the art of taxation, there were few more adept than the Roman emperor Vespasian, who understood that was better not to have all your eggs in one basket. So rather than taxing a few things a lot, he taxed many things a little, leading to some unusual sources of revenue.
When they weren’t cheering Christians being eaten alive by lions, Romans had other outmoded habits, including cleaning their teeth and togas with urine. As ammonia in urine removes stains, rich Romans brushed their teeth with a pee-and-water-based paste. Such was the value of ammonia that Rome’s gigantic public loos were home to a rather indelicate artisan: the urine collector.
Vespasian, the tax-base-broadening emperor, saw an opportunity to tax urine and levied a charge per bottle, meaning that not only were there pee collectors, but there were specialist taxmen who collected tax from them. Who says every problem doesn’t create its own solution?
Vespasian was an outsider, a soldier who took advantage of the chaos at the end of the Claudine dynasty. His dynasty, the Flavians, were not patrician. The local aristocrats looked down their Roman noses at him and regarded his enthusiasm for money, tax and commerce as coarse. To this day, aristocrats’ disdain for commerce is displayed like a badge of honour. No one pretends to dislike money more than the truly posh – particularly when they don’t have enough of it.
When the patricians complained that raising money from such a fetid source was beneath the glory of Rome, Vespasian observed the aristocrats’ contempt, relished it and retorted with equal disdain: “pecunia non olet” (money has no smell). When it comes to taxation, it doesn’t matter where the money comes from, provided it raises revenue. With a row erupting this week over a so-called Dublin tourist tax, the expression “pecunia non olet” came to mind.
[ The Irish Times view on dereliction in Dublin: a blight on the city landscapeOpens in new window ]
The idea of local authorities raising pennies from tourists to fund Dublin’s crucial infrastructure – an idea the Government seems not keen on – prompts deeper questions about how we raise money in Ireland, particularly for our cities, which are in dire need of significant investment as they gradually descend into dereliction. Irish cities represent the economic engines driving national prosperity, but when it comes to money the central government treats them like children.
Cities raise the money but don’t get to spend it. Dublin epitomises this imbalance with remarkable clarity. The €40.9 billion worth of tax receipts collected from Dublin accounts for more than half (54 per cent) of the national intake and dwarfs the receipts collected in Cork (€12.5 billion), Galway (€2 billion) and Limerick (€1.8 billion). In 2023 Dublin’s gross value added was €235.8 billion – 48.7 per cent of the national total, despite accounting for only 28.4 per cent of the population (1,501,500 of 5,281,600).
Dublin accounts for more than a third (34.9 per cent or 937,470 workers) of total employment (2.684 million) in the country, again exceeding its share of the population more broadly. The city remains the primary magnet for foreign direct investment, supporting hundreds of thousands of jobs and the lion’s share of corporate tax receipts. Indeed, Dublin remained the primary focus for FDI site visits (46.5 per cent of all IDA visits) and investments generally (40 per cent of all IDA investments) in 2024.
The people who make decisions about how much is spent and where are never or rarely the people who are close to the problem
Now consider how much Dublin City Council receives to run the city and address its evident problems. Dublin City Council’s budget is €1.5 billion or €2,506 per person, but the city raises more than €40 billion or €65,100 per person. Put simply, the city raises about 26 times more money than the council is given to run the place. Admittedly, the budgets of Dún Laoghaire-Rathdown and Fingal – both centrally funded – bring this disparity down, but the gulf between what is raised by Dublin and what is spent directly on Dublin is still nonsensical and goes most of the way to explain why our capital city looks like it does, blighted by dereliction, vacancy and vandalism.
For any local council to function well, taxes should be raised locally and spent locally. In Ireland, taxes are raised locally but go to central coffers and are doled out centrally, inserting a bloated bureaucracy and wedge of political middlemen between those who are taxed and where their tax money goes. Generally speaking, in Ireland local authority revenue is split 45 per cent from government grants, 22 per cent from fees for goods and services, 25 per cent from commercial rates and a paltry 7 per cent from the local property tax. While Dublin suffers most, the same gulf between the local and national remains.
In all, the 31 local authorities in Ireland had a total budget of €7.4 billion for 2024; by contrast, central government spending is estimated at €84 billion – more than 11 times local government’s budget.
[ No European city would tolerate the decay and dereliction visible in DublinOpens in new window ]
What this means is that the people who make decisions about how much is spent and where are never or rarely the people who are close to the problem. Such a gulf contravenes the first rule of management, which is that the people dealing with a problem every day are the best equipped to solve it. They understand what is wrong, the source of the challenge and the complexity of the terrain, and are best placed to fix the trouble if given the means to do so.
Most other countries have twigged this central rule of management and local government in other major cities raises its own revenue and spends it locally. Denmark’s municipal authorities control about 65 per cent of public spending with substantial taxation powers. Swiss cantons and municipalities together raise 61 per cent of all general-government tax revenue – the third-highest share in the OECD – reflecting deep devolution of tax bases. In Sweden, municipalities and regions jointly collect 36.9 per cent of total government tax revenues. Other notable examples are Spain’s autonomous communities and Belgium’s regions. In all these countries, cities tend to be well run, well managed and blights such as dereliction and large-scale homelessness are rarer.
There are many creative ways that cities can raise revenue for projects from congestion charges to site value taxes. Booming Ireland is about to go on a public building and investment bonanza, where millions of euro look like they will go to benefit land hoarders as land is rezoned by the State. Contrast this with Hong Kong, where the rise in value from land that is rezoned by the state for housing and infrastructure doesn’t go to the owners as a windfall but to the state as the result of state intervention, which is precisely what it is. Why should a landowner who does nothing but hoard get the upside from state policy, which is paid for by the rest of the citizens?
When Hong Kong was building its metro system, the city paid for 40 per cent of it by capturing the increases in value of land when it was rezoned from agricultural to residential along the route of the new lines. Hong Kong’s railway system covers 221km and is used by more than five million people each day.
It is time for a complete overhaul of the Irish tax and reward system to allow the country to operate more fairly and more efficiently. We are about to embark on the biggest building programme the State has ever seen while still operating under a Mickey Mouse fiscal system that would’ve made Vespasian weep. Change it.
