The National Economic and Social Council (Nesc) has said any policy response to the banking crisis must convince Irish society and those making sacrifices that the people who caused the problems in the financial sector and who were major beneficiaries of the boom are being held accountable for their actions and bearing their share of the cutbacks.
It also said the country needed to show internationally that a new regulatory regime and governance culture was being created in the financial and business sectors.
In a report published today the Nesc said it seemed certain that a medium–term strategy to restore balance in the public finances would require an increase in the tax share of GNP if satisfactory levels of service provision and benefits were to be achieved.
Nesc said Ireland was facing not one but five closely related crises and that an integrated national response to these is now needed.
It said that these were a banking crisis, a fiscal crisis, an economic crisis of competitiveness and job losses, a social crisis of unemployment, income loss and indebtedness, and a reputational crisis.
“An effective Irish response would have a number of characteristics: address all five dimensions of the crisis, be based on social solidarity and a positive perspective on Ireland’s future prosperity, combine high levels coherence with maximum engagement and local problem-solving and take short-tem measures that have a long-term logic," it said.
In dealing with the problem in the public finances, Nesc said that one way of doing this would be to widen the tax base.
“A long standing feature of the Irish tax system is a complex range of discretionary tax reliefs. There continues to be a wide range of tax reliefs. Reliefs should be further critically assessed and there is likely to be scope to both increase revenue and improve the rationality of public policy.”
“There should be additional progressive tax measures consistent with the social solidarity approach so that those who benefited most from the economic boom will contribute to the adjustments required”, it said.
It said the largest single area of tax expenditure was on pensions – estimated at €2.9 billion in 2006. It also said that there was potential for increased revenue in the environmental tax area.
The Nesc report also suggested that there was scope for the State to raise revenue through auctioning assets such as mobile phone licences, radio licences and non-EU import quotas.
The report also stressed the need for public service reform.
The role of Nesc is to report to the Taoiseach on strategic issues relating to the efficient development of the economy, the achievement of social justice and the establishment of a framework for the conduct of negotiations between the Government and the social partners. It is chaired by the secretary general to the Department of the Taoiseach Dermot McCarthy and comprises representatives of trade unions, employer bodies, the farming sector and community and voluntary organisations.