The Commission on Taxation has recommended the introduction of a new property tax, a carbon tax, and domestic water charges as part of a comprehensive reform package of the Irish taxation system.
Unveiling the 550 page report, the chairman of the Commission Frank Daly said in Dublin today that it contained over 230 recommendations which would broaden the tax base without increasing the overall tax take.
Mr Daly said some of the measures proposed are radical and involve "taxing us in a way that we have avoided for decades".
He said that the measures would bring greater stability to tax revenues. “They will bring greater certainty to the capacity of the Sate to support those in need. They will reduce uncertainty about sudden changes in tax rates and structures.”
He said the report was coherent and that the best outcomes would follow from its recommendations being implemented as a package.
Among the other major features of the report are a third higher rate of tax (which the Commission has left to the Government to determine); tax on child benefit and new incentive packages (one based on the Special Savings Incentive Scheme) to encourage people to invest in pensions.
The three main provisions that will generate income are the property tax, estimated to yield between €1 billion and €1.2 billion per annum; the carbon tax (an annual yield of €500 million); and the new water charges. New restrictions on high earners would also lead to more taxes being collected by the Exchequer.
The introduction of a property tax will also result in the abolition of stamp duty. The Commission does not recommend a particular property tax but sets out two scenarios, one based on a 0.25 per cent of value tax and another on a 0.3 per cent of value tax.
Mr Daly said the tax would be paid on the value of the property and would be self-assessed.
A theoretical example of how such a tax could work is provided in the report. Properties in the €150,000 to €300,000 value range - the most common in the State - could face an annual charge per property of €593 per cent annum, raising €492 million for the Exchequer at the 0.25 per cent rate. This would rise to €675 a year if the 0.3 per cent rate were applied.
For properties in the next band - €300,000 to 450,000 - the annual charge would be €938 per year for each property in the 0.25 per cent band, according to the Commission. It says an "up-to-date" valuation base for all property and land in the State should be addressed as a priority.
He said that there would be exemptions and waivers for those on low incomes and also said that there should be different methods available to pay the tax.
House buyers who have paid stamp duty will be exempt from the property tax on their main residence for seven years from the date of purchase.
Taoiseach Brain Cowen said the report examined "what contribution can be made from taxes on income, taxes on capital and taxes on wealth and taxes on property in trying to find the best way forward".
"There is an inextricable link between the elimination of stamp duty and the creation of a property tax," Mr Cowen told RTÉ Radio's
The News at One.
The report also calls for the phased introduction of water charges over a five-year period, initially based on a flat rate charge but moving to a charge per use as meters are put in place.
Mr Daly said the situation in Ireland was anomalous and that Irish domestic users use a third more water than counterparts elsewhere.
He said that this cost between €680 to €700 million currently with no incentive in the system to encourage conservation of water. The measure would raise some €500 million after five years and could involve costs for households of several hundred euro per annum.
The Commission also recommends that, in principle, social welfare income should be taxed including child benefit. There are a number of exemptions and exceptions it recommends including maternity benefit, adoptive benefit and respite care. In relation to child benefit, the Commission recommends the introduction of a new child tax credit to offset the tax payable for those in lower income households.
If such a tax is introduced, the Commission says a child tax credit should be introduced to offset any additional tax payable.
The report also calls for the broadening of the PRSI tax base, saying a similar rate should apply to employees and the self-employed and says the current ceiling for employees should be abolished.
It adds that, as a general rule, those on the minimum wage should continue to be exempt from income tax.
"We are keeping Ireland a low tax country and do not recommend an overall increase in the levels of tax. The reforms are tax neutral overall with a balance between income, capital and spending," Mr Daly said.
The Commission also recommended the abolition of the health levy which confers no right or entitlement to benefit to the contributor, it said. This levy should be integrated into the income tax system when fiscal conditions allow.
With regard to consumption taxes, such as those on alcohol and tobacco products, it says the level of excise duty applied should take account of health outcomes, public order and cross-Border trade.
It says stamp duty on ATM, credit cards and debit cards should be phased out over time in the interests of "moving towards a cash-free society".
It says maintaining a "low, stable corporation tax rate" of 12.5 per cent sent an important signal that enterprise was important and should remain central to Irish taxation policy.
The Commission says a carbon tax should be introduced but does not recommend a rate. However, the often-quoted level of €20 per tonne of CO2 will result in increases in the price of petrol of between 5 cent and 8 cent depending on the current market price.
In an effort to make retirement savings more equitable it suggests that tax relief on all pension contributions should be given at a single rate. Under the current system a person liable for income tax at the 41 per cent rate gets relief at this level, while those paying income tax in the lower, 20 per cent, band get relief at this rate.
To encourage saving for retirement the Commission recommended scheme similar to the SSIA which would involve an exchequer contribution of €1 for every €2 saved.
Among the terms of reference for the Commission was an examination of local government funding. It found that the State provided €2 billion, or 45 per cent, of all income to local authorities this year and says over five years this percentage should fall to 25 per cent from their own sources such as commercial rates, rents and charges.
There are a number of recommendations that are targeted at the wealthiest in Irish society. The Government introduced measures in 2007 to restrict the benefit those earning over €500,000 per annum could achieve from tax breaks and exemptions.
The Commission recommends that this income limit be lowered to €250,000.In addition, it has introduced two new tough rules in relation to residency targeted at tax exiles.
A new permanent home test and well as an assessment of the individuals vital centre of interest would have a real effect, Mr Daly, a former head of the Revenue Commissioners, said at a briefing on the report this morning.
"These are two rigorous tests that have been applied successfully in other countries. We do no just mention them in passing," he said. He said that in the UK the test included where your main house was, where a person's social contacts were and where a family's children attended school. The new tests would have much the same effect he said.
He said the measures recommended would bring stability and greater certainty to the tax system as well as reducing uncertainty about sudden changes in the tax rates and structures.