Taxes on wealth and property must be increased, says Commission on Taxation
Expert group calls for new site value tax, increases to property tax and congestion charges
Taxes on wealth and property are low and should be increased to broaden the tax base and protect the tax system from future challenges, the Commission on Taxation has recommended.
The recommendations were among a sweeping range of proposed increases in taxation and changes in the tax system proposed by the independent expert group aimed at widening the tax base over five to 15 years to be able to continue funding public services for an ageing population.
Budget 2025 main points: Energy credits, bonus welfare payments, higher minimum wage and tax changes
Budget 2025 calculator: How this year’s budget will affect your income
VAT cuts for restaurants were a bad idea last month. Why are they a good idea now?
Got a mortgage? There is up to €2,500 in tax relief waiting for you
Among the other proposals advised by the commission were the phasing out of tax relief for private health insurance, increases in VAT, the extension of PRSI to all sources of employment income, and new road usage and congestion charges as taxes from fossil fuels declines.
The commission also recommends “an accommodation tax” on visiting tourists, equalising the excise duty on car diesel and petrol, and introducing a capital charge on inheritance and gifts.
The group, which was set up last year to advise Government on how taxation can best support economic activity, called for substantial increases on capital gains tax and capital acquisitions tax and on taxes on land and property but it stops short of recommending a wealth tax.
Launching the report at Dublin City University, Minister for Finance Paschal Donohoe said the report posed “serious considerations” for the Government and contained “difficult and challenging recommendations” but that they would not be acted upon in this month’s Budget.
In a reference to the cost of living crisis, he noted that the context around the commission’s work had “completely changed” since it was established and that the change was “on a far bigger level and far more profound” than even he or the commission had anticipated.
Mr Donohoe ruled out any changes to the tax-free limits on inheritance.
The commission’s chair, Professor Niamh Moloney, said the report was “not a political statement” but a reflection of the age profile of the population and the need in the medium to long term to raise significant additional taxes to provide the level of services currently expected.
“This is absolutely not the big-bang of reforms that needs to be done in this budgetary cycle, over the next year. We are acutely conscious of where we are in terms of cost of living,” she said.
In its report, Foundations for the Future, the group says the local property tax should be “increased materially” and that a site value tax should be applied to all land that is not subject to local property tax, replacing the existing system of commercial rates.
The group advises against tax incentives to be used to stimulate housing supply.
The commission’s report, running to more than 500 pages, contains 116 recommendations.
Warning of risks ahead, the group said: “Ireland faces major fiscal sustainability challenges. Over time, the overall level of taxation as a share of national income will have to increase.”
The group said that a “number of substantial reforms”, including a shift away from taxes on labour and towards taxes on capital, wealth and consumption and strengthening the PRSI system.
“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 states.
The changes will involve widening the tax net within tax heads and increasing taxes that “least distortionary, promote environmental goals and enhance the overall progressively of the system.”
To promote equity and sustainability, preferential income tax or universal social charge treatment based on age or personal circumstances should be phased out.
“As far as possible, and with limited exceptions, income tax and PRSI charges should be based on income only and different types of income should be treated equally,” the group says.
