Income tax rates look set to rise

FEARGAL O'ROURKE:THE HOLLOWING out of the income tax system in the years after 2001 is now coming back to bite us, said Feargal O'Rourke, a partner with PricewaterhouseCoopers and a former member of the Commission on Taxation.

Mr O’Rourke said he had a sense that the Government would “deflate” tax bands and credits to bring more taxpayers into the system. He believed income tax rates would rise as well as the base being broadened.

Child benefit, pension reliefs and tax expenditures were areas he believed should be looked at.

The budget could become the issue over which the next election was fought, and so the problems in the tax system needed to be looked at in terms of what was possible politically. If some form of consensus emerged there might be a commitment to introduce a property tax and stamp duty reform.

He showed a graphic illustrating the most and the least harmful taxes, with corporate tax rises being the most harmful and property tax being the least harmful. Ireland is one of the few countries in the OECD not to have a property tax.

The minimum wage had increased by 54.8 per cent since 2000, but the entry point for the tax system had risen by 152.8 per cent. The structure had become unsustainable. The State’s income from taxes had dropped by one third since 2007 but expenditure had not come down.