THE TÁNAISTE HAS dismissed several conclusions in a major tax report published today, describing them as “straight out of the Sinn Féin manifesto”.
The new report by the Commission on Taxation and Welfare examined Ireland’s fiscal position and future possibilities for tax and social welfare, and offered recommendations on how the government should proceed.
The Commission made several recommendations on taxes on inherited wealth, including that the Capital Gains Tax Principal Private Residence Relief should be restricted.
Speaking to reporters today, Varadkar said he agreed with some elements of the report but disagreed with others.
“I can categorically say that there are no plans to increase employer PRSI in the forthcoming Budget,” the Tánaiste said.
He said the Commission did “some really good work” and that it “looked at every idea that people have about how taxes might change in the future and they’ve come down on one side or the other”.
“But it is an independent report, it’s not government policy,” Varadkar said.
“I see some things in it that I absolutely agree with, like not taxing child benefit; they advocate that we stick to our low corporate tax regime; the fact that they don’t recommend any increases in income tax, so a lot of things that I support.
“There are other things that, quite frankly, are straight out of the Sinn Féin manifesto. Increasing inheritance tax, for example, increasing taxes on people’s savings. There’s no way that’s going to happen while Fine Gael in Government.
“You have a mixed bag of things that I agree with, things that simply won’t happen, certainly not under this government. But I would hope that people would give the report a proper reading, because the leaks and stories you’ve seen in the papers today don’t do it justice. It really is high quality, detailed, objective analysis of our taxes.”
Later, a spokesperson for Tánaiste said Varadkar was indicating that there are some things that the government would be keen to progress and other things that it would not be keen to progress.
It is understood that his remarks were namely about the inheritance tax recommendation.
The Government Press Secretary said that the Commission report is a comprehensive piece of work that will be considered by Government, stating that some aspects of the report are very supportive of what Government is doing.
He said items can’t be simply cherry-picked from the report, adding that the report will be considered in detail but that it is Government that makes policy.
The report by the Commission on Taxation and Welfare concluded that Ireland has major problems with fiscal sustainability – that is, the government’s capacity to maintain public finances at an appropriate level – and needs substantial reforms.
It suggested increasing the amount of people liable to pay tax by reducing reliefs or removing exemptions.
“It is necessary to broaden the tax base so as to limit the need for increases in tax rates and to secure the sustainability of the taxation system against future challenges,” the report argued.
“This will entail widening the base within taxheads and increasing the yield from taxes which are least distortionary, promote environmental goals and enhance the overall progressivity of the system.
“The balance of taxation needs to shift away from taxes on labour and towards taxes on capital, wealth and consumption.
“A strengthening of the PRSI system is also required. Over-reliance on Corporation Tax receipts to narrow the tax base or increase public spending needs to be curtailed.”
In its report, the Commission addresses specific types of taxes and how, if necessary, it believes they should be reformed.
Income Tax and PRSI should be based only on income and exemptions or reduced rates based on age or personal characteristics, the report calls for.
Tax revenues from property and wealth are low and should increase, the report says.
The Local Property Tax should be increased and a Site Value Tax should be introduced on all land not subject to the former tax, it argued.
It recommended that the Carbon Tax should increase up to 2030 as planned and that fossil fuels should be taxed relative to the emissions they produce.
VAT should be reformed to take in more revenue; corporate tax should continue to be used to promote “enterprise, innovation and investment” and tax reliefs for people in retirement should only be available up to a specified level of retirement income, it said.
On social welfare, the Commission said that income support payments should be regularly reviewed and targets set for increases in rates, but that it did not support the idea of introducing a Universal Basic Income.
The Commission said it is “mindful that its report is being published during a period of rapid inflation which is having a serious impact on household living standards”.
“This report, however, is about the medium and longer-term needs of the Irish economy, and the Commission has sought to look through the present difficulties and to take a longer-term perspective,” it said.
“Given this approach, it is not expected, or realistic, that the Commission’s recommendations, while interconnected, should be implemented all at once. Rather the Commission’s recommendations are made in the expectation that detailed planning and distributional impact analysis (with the benefit of improved tools) will be required as necessary changes are phased in over time.
It said that “action should be taken in a measured and deliberate way to reduce risk and minimise the costs to society of higher taxes”.
The Commission supports the introduction of congestion charges that would require vehicles entering certain areas, such as cities, to pay a fee.
It also supports an accommodation tax – also known as a city tax in some countries – that would be applied to short-term stays in paid accommodation.
Speaking at the launch of the report this afternoon, Minister for Finance Paschal Donohoe said there are “a number of recommendations here within this report that of course the government will consider for the short-term and for decisions that we may make in the time ahead”.
“But all of those are part of the budgetary process that is underway, that is some way short of conclusion,” Donohoe said.
“In relation to the long-term status of this report, this report is one that does have difficult and challenging recommendations.
He said the context since the Commission was set up had “completely changed”, from “grappling with the impact of Covid” to the current economic situation.
“While we did expect some further disruption and while we did expect probably a change in inflationary dynamics we have become used to, clearly the changes are on a far bigger level and far more profound than either I or the Commission could have anticipated,” the minister said.
“What the government will do is we will outline how we will consider this report and what could be the output that will emerge.”
Additional reporting by Christina Finn and Jane Moore
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