State's credibility rests on passage of Finance Bill
Published 24/01/2011 | 05:00
THE country will face significant legal problems and international cred-ibility issues if the crucial Finance Bill does not pass.
The bill, published late last week, contains a series of legal changes which allow the Government to increase taxes, alter the corporation tax rules, bring in a new social charge and potentially tax bank bonuses.
If the bill does not get passed these measures either won't happen or their implementation could be challenged in the courts.
While some measures in the bill could be jettisoned for now, the vast bulk of the bill forms part of the Government's budgetary strategy and needs to go through.
The bill amends significant amounts of existing legislation and changes the country's tax rules in radical ways.
While the Government can announce these things in the Budget, the Finance Bill gives legal effect to the changes and without this the measures could be challenged legally.
Chartered Accountants (Ireland) last night warned that rushing through the Finance Bill would result in "bad tax legislation''.
"The proposed timeframe for the passage of the Finance Bill will result in the normal process being truncated, possibly down to one eighth of the time usually allotted,'' it said in a statement.
The body pointed out that tax reliefs are altered by the measures in the bill and pension changes are also included. But it also stressed the importance that many of the changes form part of the IMF/EU package.
The Government agreed in December to pass a Budget and part of this commitment was the legal underpinning of the Budget through the Finance Bill 2011.
There is also a credibility issue. Bond investors and even shareholders in Ireland's banks are starting to grow restless at the scale of the political disruption in Ireland. The BBC yesterday accused Ireland of offering nothing to investors but "folly''.
The cost of insuring Irish debt has risen over recent days, partly in response to the political instability.
Complicating the picture is that the public has not even been told exactly what will be in the final version of the Finance Bill.
For example, the issue of bank bonuses remains unresolved. And while Finance Minister Brian Lenihan is committed to taxing these bonuses at 90pc, that proposal is not actually in the bill and is due to be added at a "later stage'', he said last week.