FURTHER TAX rises are needed in order to fill a “huge gap” in public finances, according to a Government think tank.
The National Economic and Social Council (NESC), which reports to the Taoiseach on social and economic issues, says in a new report that Ireland’s tax burden remains significantly below the European Union’s average.
It says an increase in the tax share of gross national product from 2009 levels will be needed to provide satisfactory public services and welfare benefits.
The report advocates widening the tax base rather than increasing personal income taxes which, it says, could affect labour and enterprise. These findings come at a time of mounting debate over the scale of new taxes likely to be contained in December’s budget.
Minister for Finance Brian Lenihan said in recent weeks he was not planning to raise taxes for 2010, apart from the introduction of the carbon tax.
However, the revised programme for government includes site valuation tax and water charges, as well as a new single rate of tax relief on private pension contributions and the abolition of the PRSI ceiling.
Government sources indicated yesterday that new taxes such as water rates and site valuation taxes will not be introduced next year.
The NESC recommendations on tax form part of a series of wide-ranging recommendations on addressing the economic “crisis” facing the Government.
Among its recommendations are for a “21st century equivalent” to the labour market programmes of the 1980s and early 1990s.
In addition, it says employment and training programmes should be reassessed to remove any potential obstacles, such as financial or eligibility impediments.
Reforming the welfare system is another key area. It says many welfare schemes and “activation” measures can be recast to achieve better outcomes.
Despite important steps to address the crisis in recent months, the report says a nationally supported and widely understood response has yet to be achieved.
On tax, the report notes that some, if not all, of our EU trading partners will increase their tax take over the coming year.
On a positive note, the report says that it was a search for positive responses to a severe unemployment crisis that set Denmark on the road that led to the principles of its “flexicurity” system.
It also says there are signs that the international perception towards Ireland has improved.
