Lenihan signals widening of tax base in budget

MINISTER FOR Finance Brian Lenihan has signalled that the 50 per cent of income earners who do not pay tax will have to make some contribution to the exchequer.

During a Dáil pre-budget debate, he said the Government will bring forward policies in the budget that "will ensure that the burden of adjustment is spread as evenly as possible".

But he said they were facing "tough challenges and to succeed in dealing with them, we must continue to pursue appropriate policies to position the economy to benefit from the global recovery".

In overall terms, "4 per cent of income earners contribute almost half of the income tax yield. Furthermore, for 2010, it is now estimated that around half of income earners will pay no income tax. While they may have some exposure to the income levy, having 50 per cent out of the tax net is not viable if we want to fund the range of services we expect Government to provide. "We must borrow €500 million each week to fund it" and last year "our national debt stood at about €50 billion. Next year it is now likely to be nearly €100 billion and without action would continue to spiral out of control".

The Minister said they had taken significant action in "curbing expenditure and raising additional tax revenue since July 2008 to address the crisis in our public finances. Our immediate priority is to stabilise the deficit and this we will do in the forthcoming budget."

Bank lending "must be facilitated and our actions in regard to the very difficult banking position are taking hold and are the right decisions". He believed "we are well on the way to a resolution of this most difficult crisis in our financial institutions".

There were interruptions when the Minister added that if the Opposition wanted to reflect on the figures they needed to look at the Pre-Budget Outlook figures. Shane McEntee (FG, Meath East) said "the Minister should reflect on the number unemployed".

But Mr Lenihan said it was essential to reflect on those figures and "take the necessary decisions which are essential to place this country on the road to economic recovery".

Taoiseach Brian Cowen said the €4 billion in spending cuts "does start to make a very important impact into the overall structural deficit which will not be eliminated regardless of the growth that will return to the economy.

"It is also true that the tax revenues that come from export-led growth will be less than the domestically driven growth we have seen in the past."

Minister for the Environment John Gormley said "unlike others involved in previous coalition governments, we in the Green Party are ready to apply those lessons from the 1980s.

"We are prepared to take hard political decisions to cut costs over the coming two years."

There was, he said, "a very simple sum at the heart of all this debate. It costs €58 billion per year to run this country. There is just €32 billion in tax revenue coming in.

"We are running a deficit four times the amount permitted under the membership rules of the euro."