Cowen says fall in tax revenues makes change in system 'imperative'

THE DEPLETION of tax revenues last year in the order of 14 per cent, followed by an expected further depletion this year of 9 per cent, makes redesign of the tax system “imperative”, Taoiseach Brian Cowen said yesterday.

Addressing an Engineers Ireland conference on the subject of the future of Ireland’s economy, Mr Cowen said the gap in public finances would be addressed by “reductions in expenditure, efficiencies, reorganisation and innovation”, but also “by the Commission on Taxation recommendations about broadening the taxation base”.

Mr Cowen said the depletion of a quarter of the tax revenue over the two years made it imperative that the tax system be redesigned in a way “which will still be pro-enterprise, which will still ensure that those who take risks will reap rewards and gain wealth and create employment”.

“But we do need to recognise,” he said, “that there will be a need for changes to stabilise the public finances.”

Mr Cowen took issue with “commentators in the public debate” who blamed the current crisis entirely on an overreliance on revenues from the construction industry. He described that analysis as “futile and facile”.

He argued Ireland’s achievements over recent decades should not be relegated by those “who would suggest that this country is little more then a building site with a flag at its mast”. He added: “This country is a far more sophisticated and diverse economy than that.”

Mr Cowan said: “Even the people who were talking about the reliance on construction as representing 14 per cent of output, as being too high . . . that indicates there has been 86 per cent of output in the Irish economy, which has been totally ignored in this debate in trying to assess where we go from here.”

In his address, which marked Engineers Week, Mr Cowen said there were opportunities even in a recession to invest in infrastructure, while encouraging areas such as the green economy and innovation.

“It is important to recognise that we have developed a more entrepreneurial society in Ireland,” he said. “We have been seeing the benefits of rewarding capital and labour in terms of a taxation system which has been incentivising effort and reward.”

Mr Cowen added that the Government’s policy on the “smart economy” would see investment in infrastructure, in the green and smart economy, and would create the conditions where those with innovative ideas had access to finance in order to develop those ideas.

“We need to keep faith with what we have achieved” said Mr Cowen, adding that future challenges must be faced with “resilience, capacity and intelligence”.