Greatest need for widening basic tax band

THE priority in income tax should be to reduce the tax den on lower and middle income earners, according to the latest report from the National Economic and Social Council (NESC).

As a reduction in tax rates old provide only limited relief the lowest income earners, priority should be given to increasing basic tax allowances, according to the council.

The NESC includes the main representative bodies of the trade unions, employers, farmers, Government nominees and nominees from Government departments.

In its report, "Strategy into the 21st Century, Conclusions and Recommendations", published yesterday, the NESC calls for

. The reduction of the standard tax rate from 27 per cent to 25 per cent.

. The standard rating of all personal and certain discretionary allowances (excluding retirement contributions) and limiting the value of most discretionary allowances, as is the case at present for mortgage interest and health insurance. This would reduce the value of allowances to higher income taxpayers by meaning allowances could only be claimed at the standard rate.

. The widening of the standard tax band to compensate for the standard rating of personal allowances, and a significant increase in the (standard rated) personal allowance.

. The NESC "remains persuaded" of the advantages of a comprehensive residential property tax. Such a tax "would replace taxes on income, rather than increasing the total tax burden

. The reduction of the tax burden on smaller enterprises in the services sector, and the progressive reduction of corporation tax. It also calls for the reduction of the administrative burden on SMEs.

On wage bargaining, the report states that the case for coordinated wage bargaining is strong, and that it should be led by the private, exposed sector of the economy. A negotiated consensus should "include agreement on the evolution of pay, taxation, the public finances, the exchange rate and monetary policy, and the level of publicly provided services and social welfare". The main points of such a census should be

. The increase in current public expenditure should be "strictly limited" to a 2 per cent real ( ahead of inflation) increase. Public sector wage settlements should be in line with those in the private sector.

. An integrated programme on unemployment and social exclusion and enhanced measures tackle unemployment and poverty.

. Long term measures to promote inclusion in such areas as education, housing, transport and local government.

. Income support and related measures, including, as part of the next national programme, to bring welfare levels to the equivalent of the minimum recommended in the 1986 Commission on Social Welfare Report.

. Action on poverty traps, specifically in relation to child income support, tax exemption and marginal tax relief rates, and supplements for housing, rent or mortgages.

. On social welfare fraud, the report calls for a co-ordinated effort involving the Department of Social Welfare, the Revenue Commissioners, and FAS.

. For the first time in one of its policy reports, the NESC includes a section on crime. It calls for an adequately resourced strategy to combat crime, such as that announced by the Minister for Justice recently, and for the putting in place of an implementation and monitoring mechanism to ensure the effective use of resources.