A la carte attitude to key tax report is off the menu
THOSE who fear that Finance Minister Brian Lenihan will be presented with a menu of tax-hiking proposals from the Commission on Taxation are mistaken.
Rather than dining in Restaurant Tax Commission, where he can pick and choose from the a la carte menu of new charges and tax rises, Mr Lenihan will find himself restricted.
Yes, the Commission on Taxation recommends a raft of new taxes on everything from property to water.
But if he abides by the central thrust of the commission's report, he will find he is stuck with the set menu.
And the set menu will leave the minister and his mandarins with far fewer options to go on a tax-rising frenzy, if they are to respect the spirit of the commission's report.
The set menu says that, indeed, you can have a starter of property tax, washed down by some water charges.
But, if you choose that, you must also order a tasty plateful of lower health levies, which comes with a side dish of lower labour taxes and a morsel of disappearing tax reliefs for the wealthy.
This is because the commission's report makes clear that it is recommending a balancing act where higher taxes and charges on things that were never taxed before are countered by lower taxes on labour.
Sources close to the commission made clear yesterday that they were not tasked with coming up with a long list of recommendations which would see the Government give household budgets a new pounding.
Instead, the commission was set up almost a year and a half ago by then finance minister, and now Taoiseach, Brian Cowen, and was given the mission to make the tax system more efficient and fair.
The commission was told to ensure Ireland remains a low-tax economy, when it comes to personal and corporate taxes.
As well as ensuring the tax system was fair to all, the system had to be changed so that it would work over a 10-year period.
A major theme in the report is the need for a stable tax base which is not subject to the existing level of fluctuation. Stamp duty, for example, depends on the level of house sales.
The terms of reference for the commission specify that there is a need to introduce measures to lower carbon emissions, but this must be done on a "revenue-neutral basis".
Nowhere in the terms of reference is there an invitation to come up with a list of levies and new taxes. Its sole aim is to boost the State's coffers.
That was back in February 2008. In the meantime, the international financial system has come close to collapse. Our own banks have, and may continue to need, state support, and the public finances are way out of whack.
Because of all this, some on the commission may have been tempted to start recommending tax hikes with no compensating reductions in other taxes and charges.
But the commission has stuck to its guns and come up with 250 recommendations in its 700-word report that should mean that households will escape swingeing tax rises.
The big imponderable is whether Mr Lenihan will be able to respect the report's philosophy that any changes to the tax system should be "revenue neutral".
This means that for every tax rise, there will be a tax cut.
The temptation to pick and choose what he wants and ditch the tax-lowering aspect of the report will be huge.
He would be most unwise to do this as those lucky enough to be still in a job are now massively burdened by the income tax system.
The last Budget, in April, saw the income levy doubled and the health levy increased to 4pc for those earning up to €75,000. Workers earning more than this are being charged at 5pc for the health levy, which is usually listed under PRSI on payslips.
Currently the levies are so high that anyone earning €75,036 pays 53pc in taxes and levies to the State.
This is made up of 41pc tax, 4pc in PRSI, a health levy of 4pc and an income levy of 4pc.
One member of the commission pointed out yesterday that Ireland was rapidly becoming a high-income-tax economy.
Contrast the effective 53pc marginal rate being paid by those earning more than €75,000 with the situation in Britain where the same salary would be taxed at 41pc, the commission source said.
Household budgets are also reeling from the loss of mortgage tax relief for those who have had a property for more than seven years.
Families with young children saw the early child supplement halved this year, with the payment due to be scrapped next year.
And all the while childcare costs are rising.
One of the few benefits of the current situation has been that mortgage rates have come down for those with variable or tracker homeloans, and prices continue to fall.
But the perilous state of the public finances means that Mr Lenihan will be tempted to pile more misery on to already financially stretched household budgets.
If he does that he will have done the Commission on Taxation a massive disservice.
- Charlie Weston
