A tax plan for the rich

A Commission on Taxation has recommended the taxation of child benefit and water charges as part of a reform package of the 26-County taxation system.

The proposals, which have largely endorsed the existing Fianna Fail policy of accruing taxes from the general public rather than high earners, have been criticised as outdated and building on on existing unfair system.

The chairman of the Commission, Frank Daly said the measures recommended would bring “stability” and “greater certainty” to the tax system as well as reducing uncertainty about sudden changes in tax rates and structures in future.

But the fate of the 230 recommendations contained in the 55-page report being implemented is uncertain, with the Dublin government already signalling it will take an ‘a la carte’ approach to the proposals in the face of its massive budget deficit.

The commission was set up before the current economic crisis in Ireland.

Launching the report today, the chairman of the Commission Frank Daly said that it would “broaden the tax base” without increasing the overall tax take.

It wrestled and ultimately failed to recommend a plan to tax those earning over a quarter of a million Euros at an effective rate of 20%.

Instead, it favoured new indirect taxes such as those on child benefits and water charges.

It did refer to a possible third higher rate of tax, but without little discussion and no detail.

One of the commission’s members, trade union official Brendan Hayes, refused to sign the document.

Mr Hayes said the manner which the low-tax policy was applied to the economy and informed the commission’s findings was “fundamentally flawed and is inhibiting economic growth, exacerbating social and economic inequality and inequitably distributing the tax burden”.

Another main provision is a plan to generate income from property, while eliminating stamp duty.

It controversially includes first homes and private residences as well as those held for the purposes of speculation or landlordism. The tax would be either 0.25 per cent or 0.3 per cent on the value of the property, and self-assessed.

A carbon tax and other taxes on motorists are also planned, with the goal of replacing the Vehicle Registration Tax.

Taoiseach Bran Cowen said the report examined “what contribution can be made from taxes on income, taxes on capital and taxes on wealth and taxes on property in trying to find the best way forward”.

Fine Gael finance spokesperson Richard Bruton said the last thing families and taxpayers needed at this time of deepening economic crisis “was dreaming up even more ways to tax them to pay for an unreformed, often dysfunctional and high-cost public service.”

“No country has ever taxed its way back to recovery, but that is exactly what Fianna Fail is trying to do.”

Sinn Fein Finance spokesperson Arthur Morgan TD said the report was “deeply flawed”.

“Instead of making the tax system fairer, the majority of the recommendations would further squeeze ordinary householders,” he said.

The Sinn Fein TD said the Government has shown with NAMA, An Bord Snip and now the Commission on Taxation report that it was “determined to exploit the economic crisis for which it is responsible to further its own agenda of creating a system where lower and middle income earners are ripped off by the state.”

Mr Morgan said the report unfairly targeted households to pay for the government’s mismanagement of the economy.

“It is not a restructuring of the tax system based on fairness - it is an attempt to squeeze even further ordinary people struggling to make ends meet.

“The recommendations for water charges, property and carbon taxes and the taxation of child benefit will all hit low to middle income earners disproportionately.

“At the same time, the Commission, by its Fianna Fail terms of reference, was refused permission to examine corporation tax.

“The fact that a so-called independent body of experts would allow itself to be constrained to the point that it would not even make suggestions on corporation tax, such as the potential for bands to be introduced that could essentially help and foster indigenous small to medium enterprise, is a sorry reflection on the integrity of the entire report.

“The terms of reference for this report are so outdated that they are laughable. The report completely ignores the gaping hole in the public finances stating that the extra revenue raised by measures to broaden the tax base will be available to reduce existing tax rates.

“The Commission states repeatedly that it wishes to keep the overall tax take low.

“It fails to take account of the fact that for the last number of years we have had the 3rd lowest tax to GDP ratio in Europe. Other countries have pursued the model of a fairer tax system that provides for proper public services.

“We have one of the fastest growing deficits in Europe. We cannot keep the overall tax take low, unless we are prepared to completely sacrifice all our public expenditure on services like health and education.”

MAIN POINTS

Domestic water charges to be phased in over a five year period. Initially there will be a standard change, changing to a usage-based charge when metres are rolled out.

Social welfare payments should be subject to taxation with exemptions for maternity benefit, adoptive benefit and health and safety benefit

Introduction of a property tax to create “a sounder base from which the property market can develop”. The development of an “up-to-date valuation base” for all residential, business, commercial and industrial property in Ireland.

A recurrent property tax should be introduced on land zoned for development that is not used for the zoned development.

Windfall gains arising from increases in land values due to rezoning decisions should be subject to an additional capital gains tax charge.

Abolish stamp duty on share transactions.

The artist’s exemption should be discontinued; consideration should be given to introducing income averaging in the taxation of income from creative work.

Income tax relief for trade union subscriptions should be discontinued.

People made unemployed should be entitled to offset the retraining costs they incur on certified training courses against income for the previous six years.

The Vehicle Registration Tax system should be replaced by a system based on car usage. Such a system should be introduced over a 10 year period.

The introduction of a carbon tax which should apply to fossil fuels consumed in Ireland. It should be based on tonnes of carbon dioxide (CO2) emitted by each fuel and it should be collected upstream, at the earliest point of supply. It should be visible at the point of final consumption, to help ensure that behavioural change aspects are maximised and it is not seen as ‘just another tax’.

Change in tax rules for non-residents with existing residency test to be supplemented by additional criteria including tests relating to a permanent home and an individual’s centre of vital interests.

Amendments to VAT (sales tax) to allow lower rates for energy efficient goods and services.

The first O200,000 of lump sum given on retirement should be tax-free, while anything above that should be taxable at the standard rate.

Phasing out of stamp duty on ATM, credit and debit cards to promote a cash-free society.

Water meters should be installed in all new housing units.

Urgent Appeal