Tax take €3bn down on January estimates
Taoiseach Brian Cowen hinted that significant changes to the tax system are on the way on April 7.
“Our tax system needs to change. We need a better tax system to meet out newer circumstances,” he told a group of finance experts and business leaders at a conference yesterday morning.
Later he said: “It is clear that we will see a new tax system for the future to meet the requirements of today and tomorrow.”
He said the current taxation system is more suitable for growth periods and is not viable during a downturn.
“Obviously the budgetary situation that faces the country today in terms of the loss of tax revenues, the substantial loss of tax revenues we have seen in the last two financial years... will mean that we have to design a tax system for the future that is sustainable, provides for sustainable revenues for the country,” he said.
“Anyone who has a cursory understanding of the sources of revenue will know that we have to replace those revenues by other means,” he said.
Finance Minister Brian Lenihan told the Dáil he expects the tax take for 2009 will be e34bn — e3bn short of January estimates and a 16% decline on 2008 receipts.
Mr Lenihan said the tax take from a VAT increase in the October budget will not be as high as expected.
He said the increase from 21% to 21.5% will only yield e164m rather than the e208m expected, and indicated the rate will not be brought back down, despite concerns over cross-border shopping.
“Given the current Exchequer deficit position, the budget policy decision of increasing the VAT rate continues to be necessary in order to support the public finances,” he said.
Mr Cowen had earlier made his remarks on taxation at the launch of a report by FTI consultants: A Path to Recovery and Renewal for the Irish Economy. The report said Ireland’s recovery is dependent on the stabilisation and reform of the banking sector.
“While other economic threats — including the budget deficit, deflationary trends and waning global competitiveness — are adding significant pressure on government decision making and policy formation, we believe these threats can in part be alleviated by repairing the banking system and restoring confidence with a view towards restarting growth,” it concluded.
It also said Ireland enjoys “massive cultural awareness and positive sentiment around the world” which is not being exploited enough.
“Ireland’s built-in sales force of expatriates can have significant impact on global perceptions and willingness to help. Studies have shown diaspora can bring benefits in a variety of forms, including remittances, knowledge and innovation transfer, direct investment, donations and word of mouth support. This goodwill too often goes untapped, and now is the time for Ireland to engage this community in a meaningful way,” it said.
