The National Competitiveness Council has urged the Government to reintroduce property tax and limited third level tuition fees, writes Marc Coleman, Economics Editor
The council's annual Competitiveness Challenge report suggests a property tax would raise funds for the Exchequer that would help keep other taxes down and that the share of tax collected from property sources is relatively low in Ireland.
While the report argues that maintaining Ireland’s low tax status is essential to preserve competitiveness, two trade unionists on the council entered an objection to this finding, arguing that high taxation and regulation are not incompatible with competitiveness.
The burden of property taxation should shift from being based on transactions (stamp duty) to being value based, according to the report. It argues that property tax breaks have outlived their usefulness.
Tax reliefs, such as section 23, are due to expire next year and the general operation of tax reliefs is being reviewed by the Department of Finance in preparation for the next budget. However, last night, a Government source ruled out any possibility that the Council’s recommendation to create a new property tax would be implemented. The Minister for Finance, Brian Cowen has repeatedly rejected any suggestion he should impose annual taxes on properties.
The report cites evidence suggesting spending on higher education and research should increase by ¤450 million a year. It argues that funding for higher education should partly come from private tuition fees as university graduates gain significantly from such education. "The NCCrecognises the political and social difficulties of reintroducing fees. One possible way forward is to introduce low levels of fees for students in the early years of tertiary education, followed by higher fees as students enter postgraduate, professional or other advanced courses."
The council's Annual Competitiveness Review, published earlier this year, found that despite low rates of income and corporation tax, the burden of income and corporation tax is high in Ireland is relatively high. "Ireland's success in attracting foreign direct investment and encouraging entrepreneurship over the past decade has been assisted by the tax policies of successive governments," the report says. "Ireland's low corporation tax has been a significant factor, but Ireland's competitive advantage in this regard is under pressure, as the global trend is towards lower corporation tax rates."
The report cites evidence that the efficiency of Ireland’s public sector is low and calls for a vigorous review of public expenditure. Increases in Government-administered prices in the energy, health and education sectors have contributed to high non-pay costs to weaker competitiveness in the economy. It expresses concern over the decline of manufacturing competitiveness and calls on the Government to stimulate the services sector by supporting the draft EU Directive on Services.
The Competitiveness Challenge report contains an open dissension from its findings on taxation and regulation from two of the council's members. While agreeing with the need to broaden the tax base, Ictu president Peter McLoone and Paul Sweeney, economic adviser to Ictu, argue that high taxation and regulation are not incompatible with competitiveness. "The leading position of all the Nordic countries, with high public spending funded by high taxes, in the World Competitiveness Forum of 117 countries, demonstrates that high taxes and competitiveness are not incompatible," their joint statement said