Commission on Taxation produces mixed set of proposals

Posted on Monday, 7 September 2009

The Report of the Commission on Taxation, published on September 7, 2009, has produced a wide range of proposals. Some of these are very positive others are not acceptable. 

Social Justice Ireland believes that the biggest achievement of the Commission is contained in part 8 of the Report which looks at tax 'breaks' or tax 'expenditures' as they are referred to officially. For years we have sought to have a full list of these tax breaks and their actual cost published. However, despite our best endeavours, it is now clear that both the Department of Finance and the Revenue Commissioners were being 'economical with the truth' in the past. The Report of the Commission on Taxation identifies 111 tax breaks. Information on many of these was not available previously. The Report also shows that Government has no idea what many of these tax breaks are costing the Exchequer. Given the scale of public expenditure involved, this is a bizarre and totally unacceptable situation.
The Commission analyses each of the 111 tax breaks and makes a recommendation on each of them. We support most of these recommendations. However, we disagree with its proposal to tax child benefit. Social Justice Ireland believes that Government should move immediately to implement the recommendations of the Commission on tax breaks (with the exception of taxing child benefit). This would make the tax system fairer. It would also provide substantial additional resources which would go quite some distance towards achieving the adjustment Government has proposed for the next Budget. 
The Commission's most unacceptable conclusion is its insistence that Ireland's total tax-take should not increase. Eurostat, the European Union's statistical body, states that a country is a low-tax economy if its total tax-take is below 35% of GDP. Ireland's total tax-take is likely to be less than 29% of GDP in 2009. This is far below the Eurostat benchmark for a low-tax economy and is also far below the percentage of GDP that Ireland has taken in tax for many years. 
There is no justification for the Commission's conclusion that the total tax-take should not rise. Social Justice Ireland believes that Ireland should remain a low-tax economy but should set a target of 34.9% of GDP for total tax-take. This can be done without increasing income tax rates. A first step in the right direction would be to eliminate the tax breaks that litter Ireland's tax system.
Social Justice Ireland will be providing a detailed set of proposals on taxation when it publishes its Pre-Budget Policy Briefing in a matter of weeks.