Taoiseach Brian Cowen said today that resumption of talks with the social partners should not be seen as an indication that the Government is considering toning down changes to taxation in April’s supplementary budget.
Mr Cowen was speaking after attending a business seminar in Dublin this morning.
He said that the taxation system currently in place is one that is based on growth and that changes would have to be made to reflect the current situation.
“Obviously the budgetary situation that faces the country today in terms of the loss of tax revenues…will mean we will have to devise a tax system for the future that is sustainable and provides for sustainable revenues for the country,” he said.
“What I have been trying to convey in recent days is obviously the various scenarios being considered by the Government in this budgetary context. It obviously has to take into account the prospective economic impact, we have an economy that is contracting considerably this year,” he added.
The Taoiseach said that any changes would be informed by the recommendations of the Commission on Taxation and “will involve obviously a broadening of the tax base.”
Earlier today Mr Cowen attended a seminar to mark the publication of a white paper by business advisory firm FTI Consulting.
The Report entitled A Pathway to Recovery and Renewal for the Irish Economy, praises the Government for the action it has taken to date to address the decline in finances and outlines additional measures that need to be taken to sow the seeds of recovery.
“In some ways, Ireland finds itself economically trapped. The industry sectors which had helped fuel its record growth — real estate, financial services and export manufacturing — are the primary sources of its economic problems today," said the report's author Ronald Greenspan.
"Further increases in Government spending to stimulate the economy are impractical or unavailable due to the deterioration in the public finances, rising borrowing costs, and a perceived risk of default. However, the Government has taken strong action to date, and we believe additional action, if coordinated and communicated thoughtfully, can sow the seeds of genuine recovery," he added.
The paper looks at the creation of a system of evaluating, distinguishing and prioritising bank assets. It recommends the establishment of a clearing house or public exchange for transfer of distressed assets.
FTI has also highlighted the need for more effective regulatory oversight of the banking sector and believes this is a key element of a recovery strategy.
“We understand and agree with government’s proposed approach of maintaining a distance from bank management and demanding the boards of the institutions retain responsibility for the resolution process. However, the unprecedented government financial stakes in these institutions also demand a new structure of oversight”, said Mr Greenspan.
“Either through a newly formed oversight board or through an existing regulatory body, a singular guardian entity should be appointed to ensure that the agreed asset resolution strategy is actually being executed, that funding is getting to those who need it and that government imperatives are being delivered at the consumer level. This oversight panel in turn should be accountable to the legislature and the larger body politic”, he added.
FTI predicts that Ireland will emerge and recover from the current economic crisis. However, it warned that economic recovery was dependent on the stabilisation and reform of Ireland’s banking system, in terms of troubled asset resolution, recapitalisation and regulation, as well as the rapid re-building of confidence.