OVERVIEW:EVERYONE WILL have to pay more tax to restore balance to the public finances, Taoiseach Brian Cowen told the ardfheis at the weekend.
In a clear hint that the tax base will have to be widened to include a significant proportion of the 40 per cent of the workforce who are outside the tax net, Mr Cowen said all would have to bear some of the burden.
Speaking to more than 4,000 delegates in Citywest Hotel in Dublin, he said that having achieved the maximum savings from the public purse the scale of the deficit meant that taxes would have to be increased to close the gap.
“Our tax system needs to change. During the good times we developed a fairer and more progressive tax system that allowed people to keep more of their own money. Everyone had a better standard of living.
“That tax model was based on continuing growth. It works best when we have high employment and a thriving economy.
“Unfortunately, we are not a thriving economy for now, and we need to adapt our tax system to fit our new circumstances. Everyone will need to pay more,” said Mr Cowen.
He added that while no one could be insulated from this reality, the Government would seek to implement change in a fair way that was based on ability to pay.
“Those that can bear it best will have to bear it most. But all will have to bear some burden; the scale of the challenge is so big.
“Through this combination of higher taxes and increased cuts in spending we will restore balance to our public finances by 2013.”
Mr Cowen said the scale of the challenge facing the country was illustrated by the fact that the budget for spending in 2009 was €55 billion but the maximum amount that was now expected from taxes was €37 billion.
“This leaves a gap of €18 billion in the day-to-day costs of running our country. We must close this gap. We have decided to do this over the next five years, and we have submitted our targets and proposals for this to the European Commission. And they have accepted them. But now we must achieve those targets.”
The Taoiseach was strongly critical of the behaviour of the banks.
“There is huge anger and disgust out there at the way some of our bankers behaved.
“What they did was wrong, it was selfish and it caused a lot of pain and hardship to Irish people. They will not be forgiven easily.
“There is little return, however, in wasting anger slamming the banks. The Fraud Squad and the Director of Corporate Enforcement will look after that. They have my full support. What we need to do now is fix the damage they have caused.”
He said in the weeks ahead he would introduce new standards of banking regulation and new standards of corporate governance which would restore Ireland’s reputation and move the country to the forefront of best international practice.
Speaking on RTÉ radio’s This Week programme yesterday, Mr Cowen refused to rule out pay cuts in the public services, saying the Government would have to consider all options to bring order to the country’s finances.
He also said he believed the appropriate date for the two byelections in Dublin South and Dublin Central would be June 5th, the same day as the European and local elections. Asked if he would consider calling a general election, if he lost the June elections, he said: “No, we will continue on with the work we need to continue on with, and that is that this country is fighting for its economic survival. This country needs a government with coherence and the commitment to pursue what are in the short term unpopular policies but are necessary policies.
“You earn the respect of your electorate when you are prepared to make decisions which are necessary in the common good at this time. It would be a dereliction of duty not to do so,” Mr Cowen said.