Clear divisions have emerged between Fianna Fáil and the Progressive Democrats over taxation policy following proposals by the PD leader Michael McDowell for a major reform in the current stamp duty regime for private home purchases.
The reform of stamp duty was unveiled yesterday by the Tánaiste and Minister for Justice Mr McDowell as one of the PD flagship policies for the next election. He said the Government currently did not need the amount of revenue being generated by the tax.
However last night Minister for Finance Brian Cowen warned that any reduction in tax revenues from one source would need to be compensated for in other areas.
While refusing to comment specifically on the PD proposals, he said the increases in capital tax revenues, such as those from stamp duties, had been used to keep personal taxation low and to fund large increases in public service expenditures.
Stamp duty rates of up to 9 per cent on commercial and private property netted the Government more than €2 billion last year.This year revenues from the tax had already exceeded €2.3 billion by August.
Mr McDowell yesterday questioned the Government's current policy relating to stamp duty, which is paid on most homes sold. He suggested that couples trading up the property ladder to buy homes large enough to rear a family had to pay "crippling amounts on stamp duty" to the Government which, he said, did not need the money.
"That's the point we want to get across, the Government doesn't need this massive flow of stamp duty from house purchases," he said.
During a press conference at a special Progressive Democrat parliamentary party policy meeting in Malahide, Mr McDowell said the party had not at this stage identified how the reform of stamp duty should be carried out, but that it would outline detailed plans at a later stage.
The focus on stamp duty was a clear attempt by Mr McDowell to move the pre-election debate on to taxation issues.
"Taxation is a central issue and we reject entirely the notion that taxation is something which can be regarded as a non-issue because there is some sort of pseudo-consensus on it," he said.
Asked about Mr McDowell's comments yesterday, Mr Cowen, in Cork to attend a Union for Europe of the Nations group meeting, declined to comment on the specific PD proposals.
However he added: "As Minister for Finance, I am very conscious of the need to ensure that any proposals that would reduce revenue raising from one area would be compensated in some area."
He said the reform of capital taxes such as stamp duty was not part of the Government's current policy programme, as the large revenues from such taxes had enabled increases in Government expenditure on public services.
"We have seen an increased contribution from capital taxes so we have reduced the burden, if you like, on personal taxes and shifted that burden to a contribution from capital taxes," Mr Cowen said.
Mr McDowell's comments on stamp duty were seized upon by Labour leader Pat Rabbitte and Fine Gael leader Enda Kenny, as evidence of division within the two main Government parties.
Mr Kenny, who was in Cork as a guest at Labour's parliamentary party policy meeting, said Mr McDowell's comments on tax were in contrast to the Taoiseach Bertie Ahern's earlier this year.
"I would remind you that the Taoiseach said earlier on this year that the era of tax cuts is over," Mr Kenny said. "Listening to the latest proposals I wonder what the view of Fianna Fáil is in respect of that?"
Mr Rabbitte described the PD policy proposals as a "publicity stunt".