One of the most positive developments over the past year has been the marked and dramatic change in the international coverage of Ireland.
The general view is that Ireland reacted most quickly to the collapse in the global economy and immediately started to put its house in order.
Since 2008 we have endured incredible fiscal pain and unfortunately we are still only two thirds of the way through the process. One way or another the pain associated with fiscal austerity will persist until at least 2015. Unfortunately also, there is little alternative. We had created a totally unsustainable fiscal situation characterised by unsustainable levels of spending and a tax base that is way too narrow.
On the upside, the austerity programme has helped re-establish Ireland’s very tarnished reputation and this is helping foreign direct investment and tourism, and of course bond yields have been steadily declining.
In the context of all that has been achieved, it is somewhat unfortunate that the row over the household charge has aroused such a negative reaction. This issue is attracting overseas coverage and there is now a danger that this issue will be perceived as the first chink in the armour and possibly the unravelling of the consensus that has allowed the Irish authorities plough ahead with what needs to be done. It is particularly sad that a measure that will raise just €160m at most threatens to derail Ireland’s progress.
Many governments in Ireland and elsewhere have learned a hard lesson over the years that the taxation of one’s domestic residence is an incredibly emotive issue.
For the current government there is now a distinct possibility that this issue will cast a dark cloud over the numerous positive achievements of the past year. That is a real pity.
The reality is that Ireland is one of the few countries in the developed world where some form of residential tax is not paid. If one lived in Westborough, Boston for example, one could expect to pay up to $8,000 per annum, which includes refuse, water and a household tax. The notion that $100 is excessive and unfair is quite laughable. If this tax is deemed excessive, god help the Government next year when it attempts to do what the last two Commissions on Taxation have recommended and which the troika is insisting upon, namely the introduction of a fully fledged residential property tax.
The current campaign against the minimal household charge will set a very dangerous precedent if it is successful. It raises the spectre of somebody who deems any aspect of the law of the land as unfair to decide to ignore it. Imagine the implications of this for drink-driving laws for example. If we go down the road of breaking the law because we believe it to be unfair, we will create a total disrespect for the law and the logical conclusion is that we will gradually descend into a state of anarchy.
From an international reputation perspective, failure to collect the tax could also send out a message that the fiscal austerity programme is starting to slip. Likewise, one would have to be concerned about the impact this issue might have on the forthcoming referendum on the EU fiscal compact.
Despite the obvious lack of planning and the general mess the Government has collectively made out of the household charge, it is absolutely essential it now sticks to its guns and ensures the household charge is paid by everybody who is liable for it, and that the groundwork is laid for a residential property tax.
Working people should recognise if this household charge fails and if a residential property tax is not introduced, public services will suffer dramatically or the income tax burden will have to increase significantly. It is time people copped on to the realities.
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