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Post COVID-19: Reforming Ireland's Taxation System - some policy options

As we navigate through the global crisis caused by COVID-19, the need for a broad, stable tax base that can collect the revenue required to support our social, economic and environmental goals has never been more apparent.  Social Justice Ireland examines some of the policy options availbe to the new Government in our policy briefing 'Ireland's Taxation System Post COVID-19: Policy Options'.

It is clear that tax policy will play a vital role both in the immediate Government response to support people and businesses, and in rebuilding our society and economy once the worst of the health impacts are contained.  The new Government has an opportunity to reform and broaden our tax base and lay the foundations to increase our total tax take now to ensure we are well prepared to meet any future shocks.  We have a once in a generation opportunity to build a new society, a new economy and a new country that reflects the lessons we have learned in recent weeks. 

Our policy briefing explores some options and policies available to the new Government that would increase our overall tax take as a proportion of national income,  broaden our tax base, and deliver a tax policy that would support our social and economic recovery and a new Social Contract.

The new Government can begin the process of broadening our tax base by implementing policy proposals such as:

  • Set a new tax take target to raise an additional €2.5bn to €3bn per annum and a pathway to achieve it
  • Introduce a Minimum Effective Corporate Tax Rate of 6 per cent
  • Provide an Annual Review of Tax Expenditures
  • Introduce Refundable Tax Credit for Low Paid Individuals
  • Re-introduce a Windfall Gains Tax
  • Replace the Local Property Tax with a Site Value Tax
  • Remove environmentally harmful subsidies

The proposals outlined in the policy briefing will have the combined impact of reforming the tax system by making it fairer, simpler, and broadening the tax base.  This will contribute to raising the overall tax take in a modest, realistic and progressive manner.  These proposals would also deliver a taxation system that would support our social and economic recovery and a new Social Contract.

Estimating the impact of COVID-19 on GDP and taxation remains highly speculative, but early estimates suggest that the impact on tax revenues is likely to be significant. What we know from recent experience of the financial crash in 2008 is that it can take a number of years for tax revenues to return to where they were pre-crisis.  We now have an opportunity to learn from past mistakes and take steps to broaden our tax base so that we are better prepared for the task of rebuilding our society and economy and in making the changes needed to build a stronger, more inclusive Ireland.   

Regardless of how it is measured, Ireland is a low-tax economy. Social Justice Ireland is of the view that a broadening of Ireland’s tax-base will be required, together with an increase in the total tax-take towards the European average.

 In addition to the health, social and economic impacts of the COVID-19 pandemic, we also face challenges posed by demographic changes, social inequality – in housing and healthcare in particular – and climate change.  These challenges and deficits existed before the current pandemic, and it should not need stating that such deficits cannot be closed without gradually increasing Ireland’s tax-take towards the European average.    

Tax policy will contribute to covering the costs of the crisis and policy responses to it. As we look to the future and rebuilding our social and economic infrastructure our taxation system will have a key role to play both in terms of our overall tax take, and how it is structured.  A Just Taxation system needs to be a key part of an overall policy package for a new Social Contract, a package which includes a vibrant economy, decent services and infrastructure, sustainability and good governance.

‘Irelands Taxation System Post COVID-19: Policy Options’ is available to download here.