Cowen says introduction of property tax is 'speculation'

 

Taoiseach Brian Cowen has said the introduction of a proposed property tax is “speculation” and a decision will be made by the Cabinet “in due course”.

Speaking at the Davos global economic meeting, Mr Cowen said the issue would be considered by the Commission on Taxation which is due to report on taxation in September ahead of the December Budget.

“Our discussions are ongoing on that but I think we have the Commission on Taxation report which is due mid-year – mid to autumn – to be ready for consideration in our Budget proposals from next year on,” Mr Cowen told reporters.

The Central Bank yesterday advised the Government to consider a tax on residential property.

The assistant director of the bank, Tom O’Connell, said yesterday at the launch of the bank’s first bulletin of the year that a residential property tax should be one of the options considered. Mr O’Connell said a €1,000 annual tax on the 1.7 million dwellings in the State would yield €1.7 billion per year.

But the Irish Congress of Trade Unions (Ictu) said this morning it is no in favour of the introduction of a property tax on all homes, rather on investment properties and “trophy homes” only.

Mr Cowen said there were “various views about how soon this recession might end and how prolonged it would be depending on how optimistic or pessimistic people are about it.

“There is no doubt that 2009 is going to be a very difficult year and next year for some will see a return of some growth. For us we will have to face into 2010 with the same determination that we face into this year.”

“It is clear from what we have seen in the last six months, from the downturn in economic activity, that we have to bridge the gap that has now arisen both in terms of expenditure cuts and taxation. It cannot be met by expenditure cuts alone, although they are an important factor in addressing the situation.

“Broadening the (tax) base and seeing what way we can build up our taxation base and at the same time stay competitive, do all we can for creating and maintaining jobs – that is the trick, that is the balance and judgement that can only be made closer to budget time.

“As I have said, to have a systemic and systematic review of our taxation code by the Commission on Taxation will be a very important input into that consideration.”

Talks on an economic recovery plan involving the Government, unions and employers continued today.

Ictu general secretary, David Begg, last night said unions would have to be able to show “some progress immediately” in relation to tax as part of the social partners’ talks with the Government.

He also asked why, if the current tax system was sufficiently progressive, the Government had introduced a new 1 per cent levy in the budget rather than increasing income tax. He said the Government’s own argument was that this was the only way it could be sure of capturing those at the upper end.

Speaking as the Central Bank published its Winter Bulletin yesterday, Mr O’Connell, said Ireland was “an outlier internationally in not applying annual charges to residential property holdings”.

“We don’t have that sort of revenue at the moment and the bank and the board would suggest that needs looking at,” he said.

Minister for Finance Brian Lenihan told the Dáil yesterday that a broadening of the tax base is on the agenda but he defended the current income tax system as fair and progressive.

Mr Lenihan pointed out the most recent data from the Revenue Commissioners showed that the top 20 per cent of income earners paid 77 per cent of all income tax, the top 12.5 per cent paid two-thirds of the total and the top 6.5 per cent of earners paid half of all income tax.

At the other end of the income scale, 38 per cent of income earners were exempt from income tax. “That data shows how progressive the income tax system in the State is,” said Mr Lenihan, who also reaffirmed the Government’s commitment to the 12.5 per cent rate of corporation tax.