Taxing the nation

MIDDLE income families should brace themselves for hefty charges on water, property and universal welfare payments, according to the Government-ordered template for stabilising the tax system.

For an average working family, this included ballpark suggestions that could translate into a €1,000 property tax, a €300 water charge and more than €1,700 less in child benefit payments.

However, the Commission on Taxation urged the Government not to hit people unless it was prepared to reduce income tax by a comparable amount.

Its chairman, Frank Daly, said the root-and-branch reform agenda should not leave people worse off.

He said almost €3 billion could be wiped off the combined income tax bill of workers if the Government acted on four key suggestions – introducing a property tax (to raise €1bn), water charges (€500 million), and a carbon tax (€450m), and removing and/or restricting of tax reliefs (€800m).

And the commission said it saw no reason why the controversial water and property measures could not be fully in place to boost local government funding by June 2014.

So far the Government has indicated its intention to act on carbon tax and child benefit in its December budget and defer other controversial moves.

Speaking in Wexford, Taoiseach Brian Cowen said his Government would not rush into making wholesale changes.

“What government has to do is, over the coming years, see what way those recommendations can be interwoven into our present system, to bring a more equitable and fair system and one that will be as efficient as possible and promote enterprise and promote securing jobs,” he said.

Finance Minister Brian Lenihan said it would take “several years” to implement.

But Mr Daly, whose commission was asked to devise a system to last 10-15 years, said the measures were designed to be implemented as one programme of reform.

“[We drew it up] as a coherent package and we would like to see it implemented as a coherent package,” he said.

The tax commission spent 19 months analysing the country’s tax code and plotting a more stable system. It said it arrived at radical measures the country had avoided acting on for decades.

This included adopting a three-tier income tax rate.

It called on the Department of Social and Family affairs to tax all welfare payments and take these deductions before making payments.

The controversial health and income levies should be scrapped and absorbed into a single tax bill.

Reaction to the report was swift.

On the proposals to abolish stamp duty and bring in a new self-assessed property tax, the Irish Auctioneers and Valuers Institute said it risked paralysing an already ailing housing market.

Simon Ensor of its property panel said Mr Lenihan need to clarify when he would act on this recommendation or nobody would buy a house in the hope of avoiding stamp duty next year.

Economic advisor to the Irish Congress of Trade Unions, Paul Sweeney, said it appeared working people will be hit with higher costs at a time when they were already struggling.

The call to tax child benefit was an early lightening rod of opposition.

The National Women’s Council of Ireland, which hosts a protest meeting in Dublin tonight, said the proposal failed to recognise the realities mothers faced.

The business lobby embraced the commission’s 561 page production.

Employers’ group IBEC said it was an overdue effort to modernise the tax system.

Chambers Ireland said the Government needed to act decisively, particularly in the area of local government financing.

The Opposition said it contained some welcome measures but lacked fairness for families already struggling.

Fine Gael’s finance spokesman Richard Bruton said before asking families to pay more, Mr Lenihan should find ways to cut costs and improve efficiency.

His counterpart in the Labour Party, Joan Burton, said not enough had been done to remove the tax cushions high-earners used to soften their bill.

Green Party chairman Dan Boyle said it was a chance to rectify the mistakes made by the Government it is a part of.

“To date, the Government has got the balance wrong and hopefully this report will allow a fairer system to be brought about,” he said.


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