Business as Usual – Capital Programme to Proceed, No substantial changes to Tax Base

January 30, 2009


Taoiseach Brian Cowen has stated the introduction of a proposed property tax is “speculation” and a decision will be made by the Cabinet “in due course”.

Speaking at the Davos global economic summit in Switzerland, Mr Cowen said the issue would be considered by the Commission on Taxation which is due to report on taxation in September ahead of the December Budget.

Our discussions are ongoing on that but I think we have the Commission on Taxation report which is due mid-year – mid to autumn – to be ready for consideration in our Budget proposals from next year on,” Mr Cowen told reporters.

The Central Bank yesterday advised the Government to consider a tax on residential property.

The assistant director of the bank, Tom O’Connell, said yesterday at the launch of the bank’s first bulletin of the year that a residential property tax should be one of the options considered. Mr O’Connell said a €1,000 annual tax on the 1.7 million dwellings in the State would yield €1.7 billion per year.

However, the Irish Congress of Trade Unions (Ictu) made clear that it is not in favour of the introduction of a property tax on all homes, rather on investment properties and “trophy homes” only.

The Taoiseach went on to state that there were:  “various views about how soon this recession might end and how prolonged it would be depending on how optimistic or pessimistic people are about it.

“There is no doubt that 2009 is going to be a very difficult year and next year for some will see a return of some growth. For us we will have to face into 2010 with the same determination that we face into this year.”

It is clear from what we have seen in the last six months, from the downturn in economic activity, that we have to bridge the gap that has now arisen both in terms of expenditure cuts and taxation. It cannot be met by expenditure cuts alone, although they are an important factor in addressing the situation.

Broadening the (tax) base and seeing what way we can build up our taxation base and at the same time stay competitive, do all we can for creating and maintaining jobs – that is the trick, that is the balance and judgement that can only be made closer to budget time.”

Talks on an economic recovery plan involving the Government, unions and employers continued today. Ictu general secretary, David Begg, last night said unions would have to be able to show “some progress immediately” in relation to tax as part of the social partners’ talks with the Government.

Minister for Finance Brian Lenihan told the Dáil yesterday that a broadening of the tax base is on the agenda but he defended the current income tax system as fair and progressive. Mr. Lenihan reaffirmed the Government’s commitment to the 12.5 per cent rate of corporation tax.

In a speech at Davos yesterday, the Taoiseach stated that Ireland’s capital programme was the largest in Europe. The Taoiseach went on to state the following: 

“We consistently pursue a pro-business and pro-employment tax regime;
we maintain a fit-for-purpose business regulation environment that recognises the need for control and certainty whilst avoiding unnecessary bureaucracy;
We remain committed to very substantial investment in key areas such as infrastructure, education and, critically, R&D, innovation and commercialisation.”

Comment: More of the Same –

It is quite clear from these collective statements from the Taoiseach, the Minister for Finance and ICTU that there are to be no substantial changes in the tax system. I

It is also clear from the Taoiseach’s speech at Davos, that substantial cuts in expenditure, are to be expected, and that state services such as Health and Welfare, and not the capital programme will be axed.