Little scope for further tax increases, warns Taoiseach

TAOISEACH BRIAN Cowenhas warned against the perception that there is scope for further tax increases in the budget.

He said that the Government, and the Minister for Finance, had made it clear that 95 per cent of tax revenues came from the four main heads of income tax, VAT, excise and corporation tax.

“That there is available to us a big range of tax revenues in current circumstances, over and above what we are already receiving in view of the fragile nature of the economy . . . is an option that would have to be carefully considered,” he said. “One would have to be slow to do that in an effort to maintain jobs and competitiveness.”

Mr Cowen said that the suggestion had been made that there existed a range of people who could provide sufficient funds to fill the gap.

“Taking the example of people earning €150,000 upwards, one would be required to increase the marginal rate to 67 per cent to raise €1 billion in that area. The impact this would have on the enterprise economy and maintaining jobs would have to be taken into account.”

Mr Cowen said that the marginal rate had already been raised to 52 per cent. Considerable tax impositions had been already introduced in the two budgets of October 2008 and April 2009.

“It has been recognised that this was the correct action to take in the short-term as we sought to investigate every area of expenditure, which was the whole purpose of the exercise undertaken by the McCarthy group,” he said.

“The McCarthy report is now forming the basis of further political discussions.”

He repeated that the Government would have to look at every area of expenditure in the budget, including the overall social welfare budget and the public sector pay and pension Bill.

Mr Cowen said the Government was spending more than €55 billion and taking in only €32 billion. There was need for a serious correction in the Budget.

“[The necessary] correction is of the order of €4 billion,” he said. “One cannot reduce expenditure by that amount simply by looking at the cost of providing services.”

Labour leader Eamon Gilmoresaid it was difficult to imagine that the two Government parties, in discussing the revised programme for government, would not have agreed how the big issues were to be dealt with.

Mr Cowen said the Labour leader was asking for the outcome of the estimates’ discussions, which were ongoing. “Every area of expenditure will have to make a contribution towards the solution to this problem,” he added.

Asked by Fine Gael leader Enda Kennyto estimate the cost of the revised programme for government, the Taoiseach said it was subject "to the overall financial parameters in which we operate".

He said that “what will emerge from the budgetary and estimates’ process are those areas of activity we are prioritising in the various departments of State next year based on the resources that are available to us”.