Difficult choices on taxation
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Faced with the task of bringing the public finances under control, the Government will have to consider the reintroduction of some sort of universal property tax.
The possibility is no longer in the realms of rumour. The Central Bank pointedly reminded us yesterday that this country is "unusual" in not applying an annual residential property tax. In most countries, domestic property taxes are used to pay for local services, such as roads, refuse, lights, water and schools.
Winding up the Dail debate on the economy yesterday, the Minister for Finance spoke of the need to broaden the country's tax base. If savings of €4bn are to be achieved next year, he said, some of it will have to come from taxation. He reiterated the Government's commitment to 12.5pc Corporation Tax, one of the few remaining attractions for foreign firms considering investing here, as high costs continue to erode our competitiveness.
The Central Bank also stressed the need to broaden the tax base, pointing out that just 6pc of earners pay 50pc of total income tax. One third pay no tax at all, making no contribution to public services.
Mr Lenihan's reminder that substantial revenues will have to be raised next year, even after €2bn reductions in public spending this year, was a reminder that the Government has asked the Commission on Taxation to identify "appropriate options to raise tax revenues" and to report back by September.
It is impossible to forecast what measures may be in place by next Wednesday, never mind next September, but it would be surprising if the Commission chose not to examine the pros and cons of a property tax, perhaps similar to domestic rates, which were scrapped 31 years ago. It has been estimated that a property tax levied on all homeowners would raise about €3bn a year.
A new property tax would carry its own political risks, but the Fianna Fail-led Government must realise by now that the difficult choices it faces are bound to make life difficult.
No matter how hard the sectional groups fight their respective corners, no-one is in any doubt about the scale of our economic problems. And, if Brian Cowen and his Government can guide us through, they will deserve the gratitude of us all.
