Facing a tough, thankless task
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IF new taxes and charges proposed by the Commission on Taxation are to be neutralised by reductions in other areas, how is the Government going to raise extra revenue to help plug the €20bn hole in the public finances?
The answer to that rather obvious question is that the commission was not set up to identify revenue-raising measures.
It was appointed by the Government in response to a demand by the Green Party for a review of the balance and equity of our fiscal system. In particular, its terms of reference insisted that it should assess how a carbon tax might apply.
In other words, the commission's aim was reform rather than the raising of revenue, but with carbon tax, beloved of the Greens, at central stage.
The resulting massive tome examines many existing taxes, charges and benefits and suggests how increases in one area might be balanced by decreases in another, hopefully minimising the impact on already hard-hit households.
Will the Government see any great benefit in such an exercise when its other big blueprint, the Bord Snip report, has suggested so many ways in which a huge €5.3bn could be saved? Bord Snip's principal architect, Colm McCarthy, has said that follow-up reports will recommend further cuts.
Until the Government shows its hand in the December Budget, we will not know which particular combination of reform, equity and revenue-raising the Government will settle on.
However, the Finance Minister has recognised that the State has reached the point of diminishing returns when it comes to increasing taxes further. More increases would surely further inhibit economic activity and gains would be less than projected. This would suggest that recommendations of the Commission on Taxation may be utilised where they are seen to introduce more equitability to the system.
Nevertheless, the commission's report contains the seeds of confrontation on many fronts. Changes to child benefit, however they may be implemented, will be controversial. Carbon tax, property tax and water charges will be resented and resisted, even if they are staggered over several years.
The Government faces a tough and thankless task; it must make difficult and unpopular choices. But the very life of the country depends on those choices being hard enough to be effective.
