THE FIANNA Fáil-Green Party Coalition is likely to shelve a property tax, as recommended by the Commission on Taxation, but it will adopt the proposals for a carbon tax and the taxation of child benefit, according to Government sources.
Ministers believe that the introduction of a property tax would prove politically impossible in the current climate and there is no stomach in Cabinet for a fight they believe cannot be won.
The proposal for a carbon tax will be accepted as the Coalition is committed to such a measure and it was one of the key Green Party elements in the programme for government.
The taxation of child benefit is also on the Government’s agenda, but there was some disappointment that the recommendation in the commission’s report was not stronger and more detailed.
Although the chairman of the commission, Frank Daly, said that the report should be implemented as a coherent package, this seems highly unlikely in view of the initial Government reaction.
The commission’s report contains 550 pages with more than 230 recommendations designed to broaden the tax base without increasing the overall tax take. Mr Daly said that some of the measures were radical and involved “taxing us in a way that we have avoided for decades”.
A property tax generating more than €1 billion a year, along with water charges and a carbon tax yielding about €500 million a year each, are among the main proposals.
Others include the taxation of child benefit, a third rate of tax for high-income earners and changes in the regime for tax exiles.
The report also proposes that tax relief for pension payments should be replaced with a scheme along the lines of the SSIA scheme to benefit lower earners and reduce the tax relief for middle and high earners.
Taoiseach Brian Cowen welcomed the report as “an important and timely contribution”, but he avoided giving any commitment to introducing its recommendations.
Speaking during a visit to New Ross, Co Wexford, he said the report would be considered by the Government in the weeks ahead but emphasised that no decisions had yet been made on which of its proposals would be accepted. Asked if he was keen to avoid the introduction of a property tax, the Taoiseach said there was “an inextricable link between the elimination of stamp duty and the introduction of a property tax”. He said any changes to the taxation system, including property taxes, would have to be “fair and equitable”.
Minister for Finance Brian Lenihan said the report would play a role in stabilising the public finances but stressed some of the key measures would take years to phase in. He said the report would set the framework within which tax policy would be set for the next decade. “This report will play a role in stabilising our public finances and improving our competitiveness,” he said.
The Greens pinpointed restrictions on tax reliefs for high earners and the introduction of a carbon levy as the most significant features of the report. Party finance spokesman Senator Dan Boyle said, however, that some of the findings would prove contentious and differed from the policies of the Greens.
“The report should hopefully kick-start a debate in the wider public arena about how we can create a taxation system that is fair, efficient and helps to protect the environment and our natural resources,” he said.
Fine Gael finance spokesman Richard Bruton said the last thing taxpayers needed at this time was a Government “dreaming up even more ways to tax them”. However, Mr Bruton said his party welcomed some of the ideas in the commission’s report on broadening the tax base.
Labour’s finance spokeswoman Joan Burton voiced disappointment that the commission had “sidelined” an in-depth examination of property tax reliefs, some of which would continue to cost the taxpayer hundreds of millions of euro.