Commission on tax - Local taxes must pay for local services

IT is widely expected that the report of the Commission on Taxation, which is to be finalised tomorrow will include proposals for a property tax, water charges and a carbon tax.

That these charges have seemed inevitable for some time will not make their imposition any more welcome. Family incomes will be reduced and tight margins will become even tighter. We cannot be certain that there will not be other charges because of our dire circumstances.

It is of little compensation to homeowners or businesses but local authorities will welcome the possibility, and that is all it can be, of a cash injection as many of them are facing dire financial circumstances as revenue gathered through development charges has dried up almost completely. Assuming, that is, that they get a portion of the funds collected.

Figures published yesterday reveal the precarious state of our local authorities’ finances and show that council debt has passed the €5 billion mark. This represents a 10% increase in just one year. There are 13 councils who now owe more than €100 million each to a combination of banks, building societies or State agencies. It is expected that this year’s figures will be considerably higher.

For some authorities the situation has become so dire that they are contemplating forced redundancies and putting other staff on three-day weeks. More than 1,000 council jobs have already been cut this year, mainly workers who were on contract.

The suggestion that the property tax system will be based on a number of bands is welcome too as the last attempt at such a levy left too much to the discretion of homeowners and led to inequities.

Water charges too have seemed unavoidable for a considerable period. We are almost unique in the world in not charging for domestic water and it is expected that the Commission will recommend that they be introduced over the next three years. However, we must not go down the road of privatising water services. This has been tried in very many countries and has been a social and environmental disaster in too many. Something as basic as water should never be a profit opportunity for private enterprise but rather a service provided by Government and sustained and enhanced by the fees collected.

There is a dilemma to be resolved though. Environment Minister John Gormley is preparing a white paper on local government which is expected to recommend that all local authorities become self financing.

If local authorities are to lose the opportunity of raising revenue through water or property taxes – rates by another name – how can they finance their activities? Undoubtedly Mr Gormley will have suggestions but the prospect of further local taxes on top of water and property taxes is not a runner.

If taxes that were used to finance local activities are to be imposed again they must finance local activities not sustain a central government beggared by its own blind policies and indulgences.