High earners will find it impossible to evade income levy, says Lenihan

TAXATION LEVELS:HIGHEST EARNERS who have been "notoriously" able to avail of tax breaks in the past will be the ones hardest hit by the new income levy, Minister for Finance Brian Lenihan has said.

Mr Lenihan said the levy which is 1 per cent on all incomes under €100,000 and 2 per cent for all those earning above that figure was "a progressive form of taxation".

He suggested it would be "impossible" under the scheme for wealthy people to avoid paying tax as they had done by availing of tax breaks in the past.

Speaking at a press briefing last night, Mr Lenihan said the Department of Finance had examined the possibility of taxing wealthy non-domiciles who are resident abroad for taxation purposes, but periods of residency are governed by international laws and reciprocal arrangements between countries.

"It is very easy to stand up on Budget day and say there are people who spend substantial amounts of time and should be taxed because they are Irish in origin. It is one thing to say that but it is quite something else to implement that policy.

"The position is that the periods of residency abroad are fixed by mutual arrangement between different countries," he said.

Had their been no tax rises in the Budget, the Government's opening deficit position would have been 7.25 per cent, Mr Lenihan said.

"I don't believe that is a viable signal for the Government to send to the outside world. The important part about this Budget is that we are stabilising the finances for the public sector," he said.

He also suggested the 10 per cent voluntary pay cut taken by Government ministers and secretary generals in Government departments could be extended by voluntary arrangement to the chief executives of semi-state agencies and those in command positions in local authorities.

"It is a matter for themselves. I think those who have been given the honour and the privilege of leading this country have to set an example in what are difficult times," he said.

Mr Lenihan also indicated there would be curbs put on executive pay in the banks which have availed of the Government's guarantee. Further details of the scheme will be given later today.

"We are looking at the control of remuneration as part of the bank scheme.

"Part of the problem in the banking sector is the incentivising of reckless lending and that will have to be dealt with.

"The whole idea that bonuses are paid through the advance of monies to individuals irrespective of the merits of the particular loan is a core issue that will have to be addressed in the context of the new system of banking . . ." he said.

He said the decrease in stamp duty on commercial property from 9 per cent to 6 per cent was an attempt to attract foreign investment and will be offset somewhat by an increase in capital gains tax from 20 per cent to 22 per cent.

"The stamp duty level was way in excess of the level in the UK or any other country. From what I'm hearing about the Irish construction industry, there are not many people in a position to put up the money to buy commercial property in this country at present."