Taoiseach: Budget to redesign tax system

TOMORROW’S budget will signal a major redesign of the country’s entire tax system, needed after the collapse in tax receipts from sectors such as development and the huge increase in unemployment, Taoiseach Brian Cowen has indicated.

The budget will include measures not just for this year but also for the next three or four years in terms of changes to the tax system, both income tax and other taxes, he said.

“We have to basically redesign our tax system to meet the new requirements of our day,” he said, adding that there were parts of the tax system that would not yield the same as in the past, such as on property and ways would have to be found to compensate for that.

“Clearly we have to find other sources of revenue, some of them in the medium term, that will be on the income side, but obviously we have to broaden the tax base as well in the future,” he said, adding this will also be based on the Commission on Taxation’s reports.

He criticised suggestions by Fine Gael that Tuesday’s budget need not include increasing the tax take.

“We have to take action on the revenue side, and any suggestions to the contrary at home are simply trying to cod people,” he said.

“This is uncharted territory. We have a very serious challenge ahead of us and there is no painless or easy solution available,” he said.

He warned that the shortfall in revenue will not be resolved in a year or two, but will take a much longer period of time and added that they had agreed a five-year strategy with the European Commission. The Government will return to the commission with a revised budget deficit figures after the budget, as it will go beyond the 9.5% in the current guidelines, he said.

In a clear indication that spending on the National Development Plan will be cut, he said that the programme was devised on the basis of 4% annual growth, but now the country is facing a contraction of 7% this year, he said.

The only ray of hope was that there would be no further emergency budgets this year, the Taoiseach said.

“It is not our intention to continue to return to this issue during the course of this financial year. The economy can take only so much this year. We are talking about a contraction of 7% before the budget so we have to do our job and look strategically for the years ahead,” he said.

Mr Cowen was in Prague at the EU-US summit where the world economy was a major topic of conversation between the leaders.

The Taoiseach said the sterling exchange rate was putting a lot of pressure on industries that depend on the British market. But this recession was global and coordination with the EU and international organisations was imperative.

Mr Cowen was one of a handful of leaders asked to address US President Barack Obama during the EU-US summit in Prague.

He stressed the need to involve Syria as an important regional player in the bid to get a comprehensive peace agreement between Israel and its Arab neighbours.

“Encouraging them to use their influence on Hamas to move in an exclusively political direction would be one obvious way of testing their good intentions. It may also be that Syria can assist in the opening up of relations with Iran along the lines of your recent most welcome and important address to the Iranian government and people,” he said.