NCC says property tax necessary

UNLESS the tax base is broadened to repair the public finances income taxes will have to be raised, the National Competitiveness Council (NCC) has warned.

To address that issue the report says Government should move on the introduction of a property tax without delay.

Such a step could raise €1.4 billion a year if a charge of €1,000 per home was introduced, said NCC chairman Dr Don Thornhill. He warned the competitiveness issue has to be addressed across a number of issues.

In particular, the NCC said a freeze, or a reduction in local authority commercial rates, was vital to ease the competitiveness burden on struggling Irish businesses.

Recent falls in energy costs have been a help in taking some pressure off business, but were insufficient. And it also called for a phasing out of price supports for renewable energy as its use increases.

Mr Thornhill said while Ireland’s competitiveness had improved last year, this was due more to the severity of the recession rather than any structural changes.

Funding for education and training should be targeted at areas with particular needs – such as specialist compliance skills in the chemical, pharmaceutical and financial services sectors. Financial support should be maintained for training those in work in vulnerable sectors with low skills, said the NCC.

It said that limited competition in the professions in Ireland has serious implications for the cost of doing business here.

The council, which advises the Taoiseach, says that a need also exists to promote competition in the professions and in the locally traded sector of the economy to reduce costs in an economy that has slipped dramatically in terms of its competitive rankings in recent years.

The NCC says the price of land, office and factory space and housing in Ireland needs to adjust to the levels justified by their underlying potential for adding value or earning rent.

In that context the NCC said it was important that the actions taken by the banking sector and the National Asset Management Agency should result in an appropriate adjustment within the property market.

“While Ireland’s competitiveness has improved during 2009, this to a great extent reflects the sharpness of the recession rather than competitive advantages arising from structural change,” the NCC said.

Joanne Richardson, chief executive of the American Chamber, said in response to the NCC report that: “Ireland’s competitiveness is fundamental to the country’s economic recovery andfuture success”.