The National Competitiveness and Productivity Council (NCPC) has urged that expert group recommendations published this week to increase tax revenues should not be shelved, even as the keenly awaited report was met with a degree of pushback from Government Ministers and lobby groups.
The report from the Commission on Tax and Welfare, which was set up in the middle of last year, outlined a programme to increase Government revenues from inheritance tax and other capital taxes, VAT and property taxes as it faces increased spending on public services, an ageing population and the green transition.
‘Sinn Féin manifesto’
Minister for Finance Paschal Donohoe said that it would be “challenging” to increase taxes on households at this time. Tánaiste Leo Varadkar claimed that some of the recommendations in the report were “straight out of the Sinn Féin manifesto” and that certain proposals would never happen “while Fine Gael is in government”. Various lobby groups also came out against elements of the report.
However, the NCPC said in its latest annual publication it was important that “the actions put forward by the Commission on Taxation and Welfare are immediately addressed, with a view to Ireland having a tax and social protection system that enhances economic potential and promotes quality employment so that living standards and quality of life improve for all of society”.
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Corporate taxes
While the NCPC report was finalised before the tax group’s work was published, the competitiveness council, chaired by Frances Ruane, said that the work would “provide Government with the reasoning and evidence to address longstanding criticisms of the Irish tax system that were not subject to actions following previous reviews of the tax system in the 1980s and 2010s”.
The NCPC report highlighted that an ongoing propping-up of exchequer returns through forecast-beating corporate taxes, which stood at a record €8.8 billion for the first half of this year, remains a risk for the State finances, particularly when over half of such receipts are currently coming from 10 companies.
“It is important that core expenditure is not reliant on tax windfalls, such that the country can facilitate a sustained and planned reduction in the country’s debt,” the report. “Similarly, rising inflationary pressure and interest rates highlight the need for any additional government expenditure, beyond those already targeted at easing the cost of living, to be focused on areas which raise the productive capacity of the country.”
The Government is said to be planning a €2 billion-€3 billion, once-off, cost-of-living package to be announced when Budget 2023 is unveiled later this month.
