THE CENTRAL Bank has advised the Government to consider a tax on residential property.
The assistant director of the bank, Tom O’Connell, said yesterday at the launch of the bank’s first bulletin of the year that a residential property tax should be one of the options considered. Mr O’Connell said a €1,000 annual tax on the 1.7 million dwellings in the State would yield €1.7 billion per year.
“Ireland is an outlier internationally in not applying annual charges to residential property holdings . . . We don’t have that sort of revenue at the moment and the bank and the board would suggest that needs looking at,” he said.
The Central Bank advice came as tax emerges as a key issue in the social partnership talks on the economic recovery plan.
Speaking in Davos where he was making a brief visit to the World Economic Forum, Taoiseach Brian Cowen declined to say how the Government might broaden the tax base but said the discussions in Dublin with the social partners were “going well”.
“The engagement is sincere, deep and constant. We will keep at it,” said Mr Cowen.
The Taoiseach said the reduction of more than €8 billion in tax revenue last year meant that savings on State spending and public service reforms were required. “It will also require some taxation measures, that is clear, but we will make those decisions at the appropriate time.”
The general secretary of the Irish Congress of Trade Unions, David Begg, last night said unions would have to be able to show “some progress immediately” in relation to tax as part of the social partners’ talks with the Government.
He also asked why, if the current tax system was sufficiently progressive, the Government had introduced a new 1 per cent levy in the budget rather than increasing income tax. He said the Government’s own argument was that this was the only way it could be sure of capturing those at the upper end.
Minister for Finance Brian Lenihan told the Dáil earlier yesterday that a broadening of the tax base is on the agenda but he defended the current income tax system as fair and progressive.
Mr Lenihan pointed out the most recent data from the Revenue Commissioners showed that the top 20 per cent of income earners paid 77 per cent of all income tax, the top 12.5 per cent paid two-thirds of the total and the top 6.5 per cent of earners paid half of all income tax.
At the other end of the income scale, 38 per cent of income earners were exempt from income tax. “That data shows how progressive the income tax system in the State is,” said Mr Lenihan, who also reaffirmed the Government’s commitment to the 12.5 per cent rate of corporation tax.
His comments were echoed by Minister for Justice Dermot Ahern. Speaking in Templemore, Mr Ahern said: “The very stark figures in our society [indicate] that 38 per cent of the income earners in Ireland don’t pay a bob of tax, when 50 per cent of all tax is taken from only 6.5 per cent of the people . . . We have to be very careful in relation to putting tax on labour. Historically that has shown that it does depress the economy. So we are looking at other areas first.”
At the Central Bank bulletin launch, Mr O’Connell also said the Government should consider charging the public for services such as water, third-level education and free travel for pensioners.
“Within the current budget, the largest item of expenditure, the public-sector pay bill, must be addressed as, given the further deterioration of the fiscal position, the ability to fund it is beyond the scope of current resources,” he said.
The bank predicted yesterday the gross national product would shrink by 4.7 per cent next year.
