Ryan moots water, property taxes

THE Government may introduce taxes on real estate and water usage to help narrow the widest budget deficit in the euro region, Energy Minister Eamon Ryan said.

“You are not going to hit labour or corporation profits – that would threaten your economic model,” Mr Ryan said in an interview yesterday. Levies on real estate and water “don’t undermine the model and allow us to meet some of our deficit targets”.

Grappling with the worst recession in the state’s history, Ireland has cut state workers’ pay by an average 13%, raised sales taxes and introduced income levies.

Greece’s fiscal crisis, which sparked a rout in European bonds last month, may help build support for further fiscal measures, “because the public realise some of the realities of the situation”, Mr Ryan said.

The Fianna Fáil/Green coalition, plans to cut the budget shortfall to 3% of gross domestic product by 2013 from 14.3% in 2009.

Hitting the target is “doable,” said Mr Ryan. “Subject to the world not going completely mad, we’re fairly well placed. We’ll come out reasonably strong.”

The economy is showing signs of stabilising after shrinking about 10% in the last two years as the property boom imploded. Unemployment surged to a 16-year high, the budget deficit surged and the financial system came close to collapse.

Still, the fiscal position is being further squeezed as billions of euro are pumped into banks to increase their buffers against mounting bad loans. The Government may spend €25 billion bailing out Anglo Irish Bank and Irish Nationwide Building Society, Central Bank Governor Patrick Honohan said last month. The state has also said it will provide support to Allied Irish Banks Plc if it can’t raise the €7.4 billion it needs to meet new capital levels set by the financial regulator.

Mr Ryan, whose parents and grandfathers worked for the lender, said he “wasn’t proud” of the bank after bad debts surged in the wake of a 50% decline in real-estate prices.

“They lost the run of themselves, at a board level in particular,” he said. “If it has to be public capital, that’s absolutely fine. If you are going to invest in AIB, AIB is going to turn around and give you a payback.”