Ireland - Politics, government, and taxation

The Republic of Ireland is governed by a parliamentary democracy. Parliament consists of a Lower House, the Dáil (pronounced "doyl") and an upper house, the Seanad (pronounced "shinad"), or Senate. Together, the 2 houses and the president form the Oireachtas (pronounced "irrocktos"), or government. The Irish president, although directly elected, has relatively few formal powers and the government, elected by the Dáil from its membership, is led by the Taoiseach (pronounced "Teeshock"), or prime minister, who presides over a 15-member cabinet of ministers.

Fianna Fáil (pronounced "foil"), a highly organized, center-right party, dominates the party system, with popular support of between 35 and 45 percent in 2001. It leads a minority center-right coalition government (with the Progressive Democrats) that depends on the support of a number of independent TDs (member of parliament) in the Dáil for the 1997-2002 term. Fine Gael (pronounced "feena gale"), the second largest political party and commanding between 20 and 30 percent of the popular vote, also occupies the political center-right, though it has shifted more to the center and has developed a social-democratic and liberal agenda over the last 3 decades. Its support base is generally among the more affluent, but these class trends are not especially strong overall and many wealthy people, particularly from the business sector, support Fianna Fáil. Fine Gael led the 1995-97 "Rainbow" coalition government, thus referred to because of its inclusion of 3 parties and representation across the political spectrum. The Rainbow coalition included the Labor Party and the Democratic Left (a party further to the left), which has since merged with Labor.

Unlike practically all other European party systems, the Irish party system exhibits no strong left-right division. The 2 largest parties have not traditionally defined themselves in terms of ideology, but grew out of differences over the nationalist agenda at the time of independence. The Labor party, weak in comparison with its European counterparts, has consistently been the third largest party, commanding between 10 and 15 (some-times more) percent of support nationally, and has considerable power in a system dominated by coalitions.

A number of tribunals have been in operation since 1997-98, investigating allegations of political corruption. The allegations involve unacceptable links between politicians and big business, corrupt practices in the planning process, and inept and negligent public service on sensitive health issues from the 1970s to the 1990s. The ensuing revelations are assumed to have adversely affected Fianna Fáil's popularity, but opinion polls have proved inconclusive in measuring the amount of support the party might have lost.

A number of smaller political parties are also important in Ireland. Polls conducted in 2000-01 gave the Progressive Democrats 4 to 5 percent support, the Green Party 3 to 4 percent and Sinn Féin (pronounced "shin fane"), an all-Ireland Republican party with links to the Irish Republican Army (IRA), between 2 and 6 percent. Sinn Féin's association with the provisional IRA, which is responsible for punishment beatings in Northern Ireland and vigilante activity in the Republic, could, with its increase in popular support, present larger parties with controversial questions over coalition formation.

There is currently a broad consensus among the major political parties on how to run the economy. It is unlikely that a new government coalition would significantly alter the current pro-business economic policy.

The tax system incorporates standard elements of tax on income, goods and services, capital transfers, business profits, and property, and operates a system of social insurance contributions. Income tax has been reduced substantially, to 20 percent and 40 percent, with incomes over I£17,000 subject to the higher rate (2000 budget). A controversial individualization of income tax was introduced in the 2000 budget, with the object of encouraging more women to enter the labor force. Goods bought and sold are subject to value-added tax (VAT) at 20 percent, which is comparatively high, while luxury goods such as alcohol, tobacco, and petrol are subject to high government excise tax . Capital gains tax on profits has been reduced to 20 percent, and corporation tax, levied at between 10 percent and 28 percent, is to change to 12.5 percent across the board by 2003. Both employers and employees are subject to a social insurance tax, pay-related social insurance (PSRI), and an unusual business-unfriendly measure shifted the burden of the contributions to business in the 2001 budget. In terms of social spending, a means-tested (eligibility determined by financial status) system operates, resulting in about a third of the population receiving free medical and dental treatment. However, state medical-card holders suffer from long waiting lists for treatment, as opposed to the more than 50 percent or so of the population who have private medical insurance.

In line with EU policy, recent governments stress the importance of competition. A competition authority with enhanced powers is responsible for investigating alleged breaches of competition law in all sectors. This affects overly regulated private service providers such as taxicab companies, and it is anticipated that the restrictive pub licensing laws will be tackled next.

Government control over the economy is restricted by Ireland's membership in the EU and the euro zone, as well as by its own policy that has made Ireland one of the most open economies in the world. While the European Central Bank (ECB) controls monetary policy and largely controls interest rates, the government does retain control over fiscal policy.