There are two main reasons why I feel that the Commission on Taxation report fails to identify change that will help alleviate our current economic woes.

The first is the focus of the report on efficiency, stability and simplicity in collecting tax revenue.

This might be a secondary objective of our tax system but it should not be the main focus at this time. The emergency Budget last year showed how nobody in control saw the warnings that lead to the failure of the system.

Secondly, the members of the Commission appear to be best placed to analyse and comment on how our tax system works, which may not be the attributes to identify and introduce meaningful reform.

It is difficult to identify who in the Commission represents the interests of small and medium business.

Brendan Hayes from Siptu was unable to sign the report as it focused on a low tax system and was deficient in areas of equality and fairness such as social infrastructure. Mr Hayes alone has recognised that the tax system must address social justice.

Last week, Barack Obama highlighted again the deficiencies in the American system of health care that must be addressed in the USA, highlighting the need for social awareness.

The Commission has succeeded in preparing a report that analyses how our tax system works at present. It should be used in our colleges to make our third level students more aware of the financial system.

In the 18th century, Adam Smith published The Wealth Of Nations, which outlined fundamental principles on which the tax system should be based.

We have moved on since then, but the fundamental principles are still the same.

1. The subjects of the State should contribute to Government support in proportion to their abilities and interests in the State.

2. There should be no ambiguity in the calculation of tax.

3. It should be levied at the time or in the manner that it is most convenient for the contributor to pay it.

4. It should be possible to collect tax efficiently (ie, it should be possible to collect it at minimum cost and with the least disruption or annoyance to the wheels of industry, the labour force, or the consumer).

We need to focus on these principles today.

The Commission was rushed, in the end, and required to publish its report early. A great deal of emphasis has been placed on keeping the tax on labour low and the need for a property tax to replace stamp duty.

If the proposed new taxes are used to reduce the top rate of income tax to 30 per cent for a certain level of income, this might be tax neutral and might be used as an incentive to encourage industry and productivity.

Widening the tax base by the inclusion of more lower income groups may be inevitable in the current economic cycle, but it will never be widely accepted while the very wealthy can be totally excluded from paying tax. Adam Smith said it is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.

Of course we don't have the mobility restrictions that applied back then. The concept of "mobile non-resident" presents difficulties for the Revenue and opportunities for the rich. The global economic meltdown last year focused on this issue as one needing urgent attention and international cooperation.

The proposed property tax is very restrictive. It focuses essentially on family homes. With few exceptions, the family home should be exempt from stamp duty and capital gains tax. Loan interest relief has all but been abolished for procuring a home. That justifies abolishing stamp duty.

In the case of investment and commercial property there are strong arguments to reduce, if not abolish, stamp duty. The yield has disappeared as it is impeding the purchase and sale of properties. There should be no ambiguity in the calculation of the tax and it should be possible to collect it efficiently.

Collection of the proposed property tax is dependent on an accurate valuation system. This is illusory at best.

It will give rise to additional costs for the taxpayer and, taking account of the possibility of prosecution, interest charges and penalties in the event that adjustments are needed, it will be a cause of great frustration and concern for most taxpayers.

It is difficult to see how what is proposed will justify the ultimate benefit to the State. Property tax, if introduced, may increase certainty of collection of tax as it is not dependent on income or profit. However, it takes no account of ability to pay.

Most of those involved will pay the tax from income, as they have no savings. In the circumstances it would be fairer and more transparent to tax their income. Property tax is a mechanism to avoid addressing the need for a wealth tax. It is easier to collect €1,000 from 1,000,000 people than it is to collect €1,000,000 from 1,000 taxpayers. The Commission's role appears to have been more of an administrative one than anything seeking meaningful reform from an economic perspective.

While the rich may need to contribute more, the labour force must recognise the need for improvements in productivity and efficiency to help our international competitiveness.

The Commission's report is an excellent technical review of our tax system. It has great academic merit and should be studied and analysed to gain understanding of a broad cross section of the tax system.

While it makes many good recommendations in relation to tax anomalies that have been with us for years, it is unlikely that they alone will be able to restore stability or quell social unrest. It's a pity it didn't focus primarily on equality and fairness.

Our objective should be to identify reforms that reduce the deficit while being socially acceptable on a broader basis that gets the majority of taxpayers to accept the change.

If the system is seen to be fair it is more likely to be acceptable, whatever about being welcomed.

Most of us accept that we have a part to play in restoring stability, but when our contribution is not proportionate to our means or ability to pay, and in addition we are asked to pay for the failure of others, the proposals must be revised.

Last year the emergency Budget introduced tax exemption for certain new businesses. The principle makes sense, as it should address the growing unemployment that continues today.

However, it must be questioned at a time when the Government is trying to make up a shortfall of tens of billions. It takes no account of ability to pay. If these businesses can pay tax perhaps they should. Existing businesses that have paid tax for many years might help retain jobs if they were given some incentive.

In my opinion, it would be better to provide incentives in the form of flexibility, provided that proper procedures and controls are put in place to facilitate growth and development in an organised fashion. Tax exemptions or deferrals might be considered as part of the package. However, it doesn't tie in with broadening the tax base.

The pension reforms may be considered as reasonable. Indeed, it is difficult to argue with many of the comments made in the Commission's report. Perhaps it comes a little late. Taking account of longevity and increasing dependency ratios, any tampering that discourages funding of private pensions will lead to problems soon rather than later. If the €200,000 limit is introduced on tax free lump sums, the legislation should provide for discretion based on social equality. After all. the self employed may be entitled to receive €750,000 tax free retirement relief on the sale of a business in addition to the €200,000 under a pension scheme. That is not unreasonable, but it may create class disparities.

One of the great burdens for small business is the requirement to maintain very detailed financial records, which are used in conjunction with sophisticated tax adjustments to determine taxable business profits.

The proposal to consider basing taxable profits on business accounts would help simplify procedures and is a welcome recommendation.

However, an enormous burden is placed on small business to maintain very detailed employer and VAT records in particular, often purely for statistical purposes which is of no benefit to the business. The huge resources applied to this in the past did little to help predict the economic events of last year.

Provided that everything is captured for tax calculation and payment, data compilation should be cut and all annual returns should be combined with the minimum of information in the annual return of income and gains. This should apply for all small and certain medium businesses to improve compliance and avoid unnecessary interference with industry.

We have a sophisticated and relatively efficient tax system, at least from an operational point of view. It works well for the vast majority of the larger taxpayers. However, it was never designed with the needs of small business in mind and this is an area that warrants attention.

Virtually all business tax is paid under the self-assessment system. The main control used by the Revenue is use of prosecution, interest charges and penalties and public humiliation generally.

There is merit in the Revenue having a more proactive part in improving tax compliance through incentives rather than the threat of punishment. While nobody will ever be happy to pay tax, they can be encouraged by a fairer system. We need to see a more equitable system to improve public revenue.

We are a small well educated nation who can move more quickly that our larger neighbours to adopt change that will restore our financial position. That will happen when we stop analysing the past and take decisions for the future.

James Fitzsimons is a chartered cccountant specialising in tax and financial advice for business and individuals