Public Sector Reforms

The_Honeybadger

Riskymove wrote: »

EDIT: so in a sense while the gross would be reduced by the 12% opr whatever, you would gain back a bit in your net pay through a reduction in income tax

That is exactly what I am trying to say thank you. the 7.5% is immediately reduced to 4% before it is even deducted so I think it is fair to say the pension levy is not 7.5% but 4%. As I said it IS 4% off the GROSS

ZYX

If you want to look at the effect on net pay this site may be of help http://www.taxcalc.eu/ Based on this a single, public sector worker earning 50K in 2009 would have taken home 33,564 in 2009 and 32,323 in 2010 or a 3.7% reduction in takehome pay.

The_Honeybadger

ardmacha wrote: »

The point is that whether you get a tax relief or just don;t get taxed on income you don't have, the effect is exactly the same.

There is sometimes an attempt here is say that private sector wages have fallen by 10% or whatever and then compare that with net falls in the public sector. This is not a proper comparison.

Yeah absolutely, but nobody can tell you what the private sector is down on average. IMO what matters is what you take home but I guess opinions differ on this.

ZYX

mickeyk wrote: »

That is exactly what I am trying to say thank you. the 7.5% is immediately reduced to 4% before it is even deducted so I think it is fair to say the pension levy is not 7.5% but 4%. As I said it IS 4% off the GROSS

No mickeyk. You really are not getting this. It is not 4% off the gross.

Riskymove

ardmacha wrote: »

The point is that whether you get a tax relief or just don;t get taxed on income you don't have, the effect is exactly the same.

There is sometimes an attempt here is say that private sector wages have fallen by 10% or whatever and then compare that with net falls in the public sector. This is not a proper comparison.

in fairness, it is the levy that cause those issues....it affects net pay and not gross pay

has it (and the pay cut) effectively caused a 12% drop in gross...technically yes.....but private sector workers dont get a tax relief on half of their pay cut...so it does not compare directly

Firetrap

From RTÉ's website

The Taoiseach later explained the pension levy rates. He said a person earning €15,000 gross would pay a pension levy of 3%. The levy then rises gradually, to 5% on a salary of €25,000; 6.4% on €35,000; 7.2% on €45,000; 7.7% on €55,000; 8.1% on €65,000; 8.5% on €85,000; 8.8% on €100,000; 9.2% on €150,000; 9.4% on €200,000; and 9.6% on €300,000.

The_Honeybadger

ZYX wrote: »

No mickeyk. You really are not getting this. It is not 4% off the gross.

Do you know how tax relief for pensions works? It is given at source, therefore the 7.5% is never deducted, 4% is taken off the gross, please prove me wrong but stop telling me I am wrong until you can prove otherwise.
This benefit is also available to private sector in case you think I am PS bashing.

ParkRunner

ZYX wrote: »

If you want to look at the effect on net pay this site may be of help http://www.taxcalc.eu/ Based on this a single, public sector worker earning 50K in 2009 would have taken home 33,564 in 2009 and 32,323 in 2010 or a 3.7% reduction in takehome pay.

Just out of interest because I cant open that link..did you put in 50k for 2009 and 2010. The person earning 50k in 2009 would not be earning 50k in 2010, it would be more like €47k. Deductions can then be made from that.

ZYX

mickeyk wrote: »

Do you know how tax relief for pensions works? It is given at source, therefore the 7.5% is never deducted, 4% is taken off the gross, please prove me wrong but stop telling me I am wrong until you can prove otherwise.
This benefit is also available to private sector in case you think I am PS bashing.

Ok. Lets say you earn €50,000 a year andyour employer gives you a choice of a 10% pay cut or a 10% levy. Which will cost more.

Answer: Both cost you exactly the same. Your net pay is exactly the same after the pay cut or the pension levy. With a pay cut your taxable income is now 45,000. With a pension levy your taxable income is 45,000. Both have cut your pay by10%. Both have the same effect on your net income.

ZYX

EF wrote: »

Just out of interest because I cant open that link..did you put in 50k for 2009 and 2010. The person earning 50k in 2009 would not be earning 50k in 2010, it would be more like €47k. Deductions can then be made from that.

Yes. Person earned 50k in 2009 and 47k in 2010. Makes you think doesnt it. Is a 3.7% cut really that big a cut especially as in many cases it is cushioned by a pay increment and we have deflation of about 6%

The_Honeybadger

ZYX wrote: »

Ok. Lets say you earn €50,000 a year andyour employer gives you a choice of a 10% pay cut or a 10% levy. Which will cost more.

Answer: Both cost you exactly the same. Your net pay is exactly the same after the pay cut or the pension levy. With a pay cut your taxable income is now 45,000. With a pension levy your taxable income is 45,000. Both have cut your pay by10%. Both have the same effect on your net income.

Totally incorrect, a 10% paycut leaves you with a taxable income of 45k yes.

A 10% pension levy leaves you with a taxable income of 47k+ after tax relief, I don't have time to research the exact figure but you obviously don't know how tax relief works.

Riskymove

ZYX wrote: »

Ok. Lets say you earn €50,000 a year andyour employer gives you a choice of a 10% pay cut or a 10% levy. Which will cost more.

Answer: Both cost you exactly the same. Your net pay is exactly the same after the pay cut or the pension levy. With a pay cut your taxable income is now 45,000. With a pension levy your taxable income is 45,000. Both have cut your pay by10%. Both have the same effect on your net income.

?? that cannot be correct

Pay cut
pay before €50k pay after €45k then tax etc


Levy

Pay before €50k pay after €50k but €5,000 taken off so taxed as per €45k but tax bill then reduced by tax relief of €2,000......therefore €2,000 better off

ZYX

mickeyk wrote: »

Totally incorrect, a 10% paycut leaves you with a taxable income of 45k yes.

A 10% pension levy leaves you with a taxable income of 47k+ after tax relief, I don't have time to research the exact figure but you obviously don't know how tax relief works.

Oh for Gods sake go and work it out. I know how tax relief works. You do not.

The_Honeybadger

ZYX wrote: »

Oh for Gods sake go and work it out. I know how tax relief works. You do not.

Riskymove's calculations are the same as mine roughly, not going to argue any further, research tax relief on pension contributions if you like but I assure you will be proven wrong.

ZYX

Riskymove wrote: »

?? that cannot be correct

Pay cut
pay before €50k pay after €45k then tax etc


Levy

Pay before €50k pay after €50k but €5,000 taken off so taxed as per €45k but tax bill then reduced by tax relief of €2,000......therefore €2,000 better off

What tax relief?

The_Honeybadger

ZYX wrote: »

What tax relief?

OMG forget it :mad:

Riskymove

ZYX wrote: »

What tax relief?

oh dear



as mentioned a time or two, tax relief is given on the pension levy

therefore on a levy of €5,000 you get tax relief of €2,000 (assuming 40% tax rate)

ZYX

mickeyk wrote: »

Riskymove's calculations are the same as mine roughly, not going to argue any further, research tax relief on pension contributions if you like but I assure you will be proven wrong.

Seriously MickeyK you need to do the research.

CityCentreMan

Nidot wrote: »

Hi all,

I was just reviewing some of the agruments which have been ongoing about the levels of work in the public sector.

Alot of the agruments revolve around the issue of reform of our public services. This issue is also used by union leaders such as David Begg in order to explain why a paycut was not the way forward and rather a reform of the public service would of been better.

What I am wondering, and I would like geniune asnwers to this now, easpecially from public servants employed across the country, is what are these reforms he refers to?

Are these reforms in how work is carried out or assigned? Or are the reforms in how the public service is staffed?

Regards

Nidot

I am not in the PS!

The original post in this thread illustrates an interesting point which is that everybody has different ideas of what constitutes PS Reform and how this should be achieved.

For me, as a Taxpayer and Customer of the Public Service it is clear that Public Sector Reform required is primarily a need to reduce the cost of providing public services without having a negative impact on, indeed hopefully improving, the quality of the services received by the public.

Over the last 2 years most private sector companies have seen their revenues seriously reduced and have had no option but to either cut costs or go out of business. I don't have the numbers but I am pretty sure that this will be supported by the annual returns for VAT, Corporation Tax, Self Employed Income Tax & Overall Income Tax Returns.

For me, one of the most interesting things about this exercise has been the extent to which most people have been able to "REFORM" their businesses,to reduce their costs, particularly overheads, whilst largely maintaining the quality of service provided.

These "REFORMS" have consisted of:
a) Working harder and for longer hours;
b) Employing less people to do the same job;
c) Negotiating better & harder with suppliers & subcontractors;
d) Wage reductions, bonus reductions, layoffs & redundancies;
e) Reviewing work processes & adopting more efficient working methods;
f) Making more efficient use of expensive resources;
g) Etc etc....

In many ways, the view of the PS Unions viz REFORM of the Public Sector would be broadly similar in that they would like to achieve the same result but without having to address some of the points above, namely (a), (b),(d) & (e).

ZYX

Riskymove wrote: »

oh dear



as mentioned a time or two, tax relief is given on the pension levy

therefore on a levy of €5,000 you get tax relief of €2,000 (assuming 40% tax rate)

So if you had a pension levy of 100% you are saying you would actually get 20K. This is not the case

Riskymove

http://www.irishtimes.com/newspaper/opinion/2009/0205/1233713219253.html

However, the impact on take-home pay will be reduced because workers will receive tax relief on the amount deducted in the pension levy. Income tax, PRSI and the health levy will only be assessed on the amount of pay left after the levy has been deducted.

That will hit the Government coffers which are likely to receive closer to €900 million as a result of the levy.

For those earning above the marginal tax threshold – €36,000 for single people and €45,400 for married workers bringing in the only family income – tax relief means they will no longer be taxed at 41 per cent on the portion of their income taken in the Government pension levy.

The Department of Finance says average earnings in the public service amount to €50,000. At that point, the levy will amount to €3,750, or 7.5 per cent of earnings.

But that will be offset by the tax relief. Precisely how much tax will be paid depends on whether people are single or married with just one income.

People first recruited to the public service after 1995 already pay limited pension contributions and that will also affect their final take-home pay.

A single person who joined the public service after 1995 and is earning €50,000 will see his or her annual take-home pay drop only €1,998, rather than the €3,750 indicated by the levy – effectively a 4 per cent fall in take-home pay, not the 7.5 per cent headline rate.

FYI

Riskymove

ZYX wrote: »

So if you had a pension levy of 100% you are saying you would actually get 20K. This is not the case

oh dear + 1

obviously not as your income would be €0 and you would not be paying any tax therefore tax bill cannot be reduced

if you are paying tax, you get tax relief

Riskymove

CityCentreMan wrote: »

These "REFORMS" have consisted of:
a) Working harder and for longer hours;
b) Employing less people to do the same job;
c) Negotiating better & harder with suppliers & subcontractors;
d) Wage reductions, bonus reductions, layoffs & redundancies;
e) Reviewing work processes & adopting more efficient working methods;
f) Making more efficient use of expensive resources;
g) Etc etc....

In many ways, the view of the PS Unions viz REFORM of the Public Sector would be broadly similar in that they would like to achieve the same result but without having to address some of the points above, namely (a), (b),(d) & (e).

a an b have and continue to occur in the PS at present

c - certainly being done

d - pay cut, expenses cut, no overtime, pension levy, thousands of less public servants than before etc

e - much more needs to be done in the PS on this

ZYX

Riskymove wrote: »

http://www.irishtimes.com/newspaper/opinion/2009/0205/1233713219253.html




FYI

Yes the article says "take home pay" will not be reduced as much. Get it.

If you are a top rate tax payer earning 50k and put 5,000 into a pension fund, yes it will only cost you 3,000. This is because the pension contribution comes off your pre tax income.

So example 1. You earn 50 k and pay no pension levy but assume 40% on rest of income (I know it is less than that I am trying to make it simple for you) you take home 30,000

Example 2. So if you earn 50k, pay 5000 to pension levy and pay 40% on the rest you take home 27,000 (so yes if it was a private pension, you have only paid 3000 from your net pay and have a pension fund with 5000 in it. )

Example 3. You earn 50K and take a 10% pay cut down to 45,000. After 40% tax you take home 27,000. Which is exactly the same as in example 2

I cannot believe I have to explain pensions on an ecconomics forum

doc_17

ei.sdraob wrote: »

i said it before and i say it again

if public sector workers think they have it so bad

they are welcome to join the private sector

no? taught so

And if private sector workers think they have it so bad and the PS have it so good then they are welcome to try to get a job in the PS.

No?

Thought so.

ei.sdraob

doc_17 wrote: »

And if private sector workers think they have it so bad and the PS have it so good then they are welcome to try to get a job in the PS.

No?

Thought so.

where can we apply?

im looking forward to the day theres 100% PS employment, it worked out great for USSR before

Riskymove

ZYX wrote: »

Example 2. So if you earn 50k, pay 5000 to pension levy and pay 40% on the rest you take home 27,000 (so yes if it was a private pension, you have only paid 3000 from your net pay and have a pension fund with 5000 in it. )

no you dont get it, the levy is treated like a private pension contribution, but there is no "fund", the actual levy paid is just reduced by €2,000

you take home 29,000 in the case of a public servant in example 2

i.e. the levy paid is actually €3,000 not €5,000 but taxable income is still calculated as if its €5,000 (i.e. 45k)

thats enough of this for now...sleep on it

doc_17

there are teaching jobs everyday in the indo. why not go for one of them? I suppose it depends on your qualifictions? What are you qualified to do? Or what can you do?

ei.sdraob

doc_17 wrote: »

there are teaching jobs everyday in the indo. why not go for one of them? I suppose it depends on your qualifictions? What are you qualified to do? Or what can you do?

show me one? i've a bsc and meng degrees

ZYX

Riskymove wrote: »

no you dont get it, the levy is treated like a private pension contribution, but there is no "fund", the actual levy paid is just reduced by €2,000

you take home 29,000 in the case of a public servant in example 2

i.e. the levy paid is actually €3,000 not €5,000 but taxable income is still calculated as if its €5,000 (i.e. 45k)

thats enough of this for now...sleep on it

For God's sake. No it is not. How can you have any credibility on this site when you cannot grasp this basic concept. Net pay is reduced by 3000, gross pay is reduced by 5,000. I am absolutely astounded you do not know this.

You are now saying the 5000 pension levy will actually cost 1000 if take home pay is now 29000.