THE INTRODUCTION of a valuation-based property tax on most residential properties in the Republic has been recommended by the National Competitiveness Council (NCC).
In a report entitled Getting Fit Again: The Short Term Priorities to Restore Competitivenesspublished yesterday, the NCC said that without "immediate and continuing action" to restore Ireland's international competitiveness, the economy runs the risk of entering "a prolonged period of depressed economic activity".
At the launch of the report, the council chairman, Dr Don Thornhill, said that targeting export-led growth was the key to securing Ireland’s long-term prosperity. He said that Irish exports were holding up relatively well in 2009 despite the steep drop in economic activity, and the sensitivity of small, open economies to changes in the world economy.
He said that Ireland “cannot return to a model where the construction industry drives growth”, but must focus on restoring competitiveness so that the country can compete internationally.
One of the key issues facing the economy, he said, is the sustainability of the public finances.
The report recommended that additional revenue should be raised by broadening the tax base through measures such as a property tax, rather than through further increases in taxes on income.
He said one positive feature of a property tax was that, unlike additional income tax, “it does not affect people’s incentive to work”.
The council’s proposal is that a property tax, based on the value of residential properties, would replace stamp duty. He also said that their proposal would possibly include an exemption for people who have recently paid substantial stamp duty on a property.
On the subject of reform of the public sector, the report said that the country must deliver “better public services with fewer resources”. When pressed, Mr Thornhill said that this may include a reduction in the public sector workforce, or a reduction in public servant salaries.
Yesterday’s report also recommended that the new National Asset Management Agency (Nama) should release the assets of failed developers onto the market sooner rather than later.
Mr Thornhill said there was a temptation to “release assets slowly onto the market to gain maximum return for the exchequer”. However, selling the assets sooner would provide opportunities for “strong and new businesses to purchase assets cheaply”, in the process helping economic recovery.
The council, which was established in 1997, is a body which reports to and advises the Taoiseach on competitiveness issues facing the economy. The council said that it would report later in the year on the longer-term issues facing the economy.
The Tánaiste and Minister for Enterprise, Mary Coughlan, yesterday welcomed the publication of the report. She described it as “both a balanced and realistic assessment of the challenges we face”, adding that it endorsed the actions the Government is taking to deal with the economy’s problems.
