Advertisement

We need your help now

Support from readers like you keeps The Journal open.

You are visiting us because we have something you value. Independent, unbiased news that tells the truth. Advertising revenue goes some way to support our mission, but this year it has not been enough.

If you've seen value in our reporting, please contribute what you can, so we can continue to produce accurate and meaningful journalism. For everyone who needs it.

Shutterstock

A major tax report has caused ructions in government, but what did it actually say?

The Commission on Taxation and Welfare said our ageing population meant we must change how we collect tax.

RARELY HAS AN independent report landed on the government’s desk and made such as splash as this week’s one from the Commission on Taxation and Welfare.

The printers were still cooling on the 547-page report when Tánaiste Leo Varadkar was already out to dismiss some of its conclusions. Taoiseach Micheál Martin came out the following day to say he didn’t agree with the Tánaiste

The report, which was commissioned by the government, came about after Fianna Fáil, Fine Gael and the Greens agreed to seek a major review of Ireland’s taxation system for the decades ahead. 

The parties promised that the commission would look at the future of taxation in the context of “ageing demographics, the move to a low-carbon economy, and the rise of digital disruption and automation”. 

The Commission was made up of variety of sources and experts from areas including tax and welfare, business, unions, and NGOs. 

After 18 months, this week they were given their answer. Simply put, major changes are required if the State is to maintain the level of services it currently provides. 

The reasons for this are many but chief among them are that; an ageing population will mean less receipts from income tax, the move from fossil fuels will mean less tax from related taxes and the bloated cash cow that is Corporation Tax cannot be relied upon. 

Perhaps more difficult still to swallow is that, as well as these sources of taxation being likely to reduce, the overall level of tax take will have to increase. 

The 14-person Commission chaired by Professor Niamh Moloney has been keen to stress that the timing of the report is not ideal, given pressures currently being faced by people, but that it’s about the challenges to be faced over the next 15 years.

What was recommended? 

Cabinet arrivals 001 Minister Paschal Donohoe outside the Department of Finance. Leah Farrell / RollingNews.ie Leah Farrell / RollingNews.ie / RollingNews.ie

While challenges were outlined in the detail in the report, the Commission also published potential solutions.

These solutions amounted to a broadening of the tax base, essentially taking taxes from a wider variety of sources and ensuring that the overall take is more balanced.

In general, the Commission says the balance needs to be shifted away from the reliance on taxation that is based on income.

It’s a move that would make the tax system more sustainable and “limit the need for increases in tax rates”.

But while th Commission argues that Income Tax should be a less of a focal point of the overall tax take, it does not argue for a long-term decrease.

In relation to Income Tax, the Commission states that there should be no “further erosion of the Income Tax or USC base”.

Essentially, that theses taxes should not be cut over the long term, adding that: “Rates of USC should be determined by income level and not by any other eligibility criteria.”

Specifically, it says that “factors such as age or personal characteristics” should not be considered.

For example, people aged over 70 and those with medical cards (with less than €60,000 a year) are currently entitled to a reduced rate of USC. This would end under the Commission’s proposals. 

If Income Tax is not decreasing, what additional taxes does the Commission want to see? 

The Commission is clear thatthe share of taxation from property and wealth is low and should increase”.  

Specifically, the report says: 

The Commission recommends that overall yield from wealth and capital taxes, including property, land, capital acquisitions and capital gains taxes should increase materially as a proportion of overall tax revenues.

It adds: 

While the Commission is not recommending a net wealth tax; the yield from Capital Gains Tax (CGT) and Capital Acquisitions Tax (CAT), as well as from taxes on land and property, should be substantially increased. Distortions within the system, such as the treatment of death for Capital Gains Tax purposes, should be removed.

Future of Media report 006 Leah Farrell / RollingNews.ie Leah Farrell / RollingNews.ie / RollingNews.ie

The call for an increase in CGT and CAT are among the recommendations that particularly irked Varadkar and led to him saying some of the Commission’s proposals were “straight out of the Sinn Féin manifesto”.

“Increasing inheritance tax, for example, increasing taxes on people’s savings. There’s no way that’s going to happen while Fine Gael are in government,” he said. 

Inheritance tax forms the bulk Capital Acquisitions Tax receipts, €481 million out of €582 million CAT receipts in 2021. 

Last year, an OECD report found that the gap in Ireland between those who are likely to inherit and those who are not is the highest of all the countries surveyed and that inheritance taxes are easier to collect than other forms of wealth taxation.

Other recommendations 

The Commission’s recommendations are extensive and it has published a separate outline of its findings in a 38-page executive summary. 

Included in the recommendations are: 

VAT

  • The Commission recommends widening the VAT base and limiting the use of zero and reduced rates of VAT. The VAT treatment of goods and services to which those rates currently apply should be reviewed to assess if it continues to be appropriate.
  • The Commission recommends that the rate of VAT on those goods and services currently attracting a second reduced rate (currently 9%) should be increased over time to the reduced rate (currently 13.5%).
  • Due to the relatively large share of goods and services attracting zero and reduced rates of VAT in Ireland, the Commission also recommends that the reduced rate of 13.5% should be increased progressively over time. 

Carbon Tax 

  • The Commission recommends that the phased increase in the Carbon Tax to €100 per tonne of carbon dioxide emitted by 2030 is implemented. 

Congestion charge

  • The Commission recommends the introduction, in the medium term, of distance, location and time-based road usage charges. Planning for such charges should include early identification of the appropriate technology to be used in calculating and applying them.
  • The Commission recommends the introduction of congestion charges in key urban areas, based on a number of key metrics linked to environmental and individual impact. These charges should be reviewed following the introduction of road usage charges. 

Property

  • A Local Property Tax surcharge should be introduced for vacant properties.
  • The Commission recommends that the Help to Buy scheme be allowed to expire as planned at the end of 2022.
  • Revenues deriving from Local Property Tax (LPT) should increase to form a substantially larger share of total revenues through the adjustment of the basic rates of taxation and potentially through an adjustment of valuation bands. The ability of local authorities to decrease the basic rate of LPT should be removed.

Among the specific measures that have caused controversy is the suggestion that tax relief for private health insurance should be phased on on the basis of the implementation of Sláintecare.  

Speaking this week on RTÉ’s Morning Ireland programme, one of the Commission members Professor Barra Roantree said overall it is about raising taxes but doing it in a way that is sustainable. 

The recommendations that we’ve set out here, particularly think in relation to land, property and capital are about raising taxes in the most efficient way, in the most equitable way. In a way that comes with the smallest economic cost.

“Again, taxes do have an economic cost but we need to look at this into the future, we need to really address these difficult decisions and what we’ve set out here is an agenda and a roadmap for reform of the years ahead.”

Readers like you are keeping these stories free for everyone...
A mix of advertising and supporting contributions helps keep paywalls away from valuable information like this article. Over 5,000 readers like you have already stepped up and support us with a monthly payment or a once-off donation.

Close
43 Comments
This is YOUR comments community. Stay civil, stay constructive, stay on topic. Please familiarise yourself with our comments policy here before taking part.
Leave a Comment
    Install the app to use these features.
    Mute Andrew Galloway
    Favourite Andrew Galloway
    Report
    Sep 17th 2022, 7:52 AM

    Some people will immediately picture families from South County Dublin who own gated houses and fly around in choppers and passing on several properties to little Oisín and Fiachra. In reality, if you look at a more normal scenario where you have a young / middle aged couple with children who are just about managing and a parent passes away and would like to leave something to their child, so that they can ease the burden on them.
    The parents have already paid tax through out their whole working life to buy a house or save money, why should it be taxed again.

    600
    Install the app to use these features.
    Mute Urban Living Dublin
    Favourite Urban Living Dublin
    Report
    Sep 17th 2022, 8:32 AM

    @Andrew Galloway: the parent is dead, so it doesn’t matter to them. It is the children who are receiving free wealth just because they’re lucky enough to have had parents who had the wealth. Not taxing inherited wealth hugely promotes inequality and is anti-meritocratic.

    82
    Install the app to use these features.
    Mute Tomo
    Favourite Tomo
    Report
    Sep 17th 2022, 9:18 AM

    @Urban Living Dublin: I completely agree people shouldn’t be able to solely rely on ‘old money’ to get by, however I think in this current economy where we have late 20 and 30 year olds living with their parents, one shouldn’t have to take out a mortgage just to inherit a house. Up to a reasonable point, they should be able to inherit it tax free. If there are multiple properties and assets, then yes tax the crap out of them, but one single house? That’s definitely a huge advantage but not one that causes major inequality. The top 10% are to blame for that.

    160
    See 7 more replies ▾
    Install the app to use these features.
    Mute thesaltyurchin
    Favourite thesaltyurchin
    Report
    Sep 17th 2022, 10:01 AM

    @Urban Living Dublin: The ‘real’ rich will have enough money to ride it out and the 3 kids inheriting the family home will be fleeced, as it should be in Ireland.

    36
    Install the app to use these features.
    Mute Rúraíocht
    Favourite Rúraíocht
    Report
    Sep 17th 2022, 10:57 AM

    @Urban Living Dublin: free wealth ! A truely sickening attitude. Families whom have worked to accumulate some wealth own that wealth and deserve it. I guess “worked” is the operative word.

    91
    Install the app to use these features.
    Mute Reg
    Favourite Reg
    Report
    Sep 17th 2022, 11:37 AM

    @Andrew Galloway: You omit to mention the vast increase in property prices in that time. Should children benefit from that increase in wealth tax free?

    9
    Install the app to use these features.
    Mute The Bolt
    Favourite The Bolt
    Report
    Sep 17th 2022, 11:40 AM

    @Urban Living Dublin: What a pile of scutter. My parents worked hard to own their own house. I’ve worked hard to own my own house. I would hope my children’s own hard work will avail of them owning their own house. It’s the job of a parent to make the journey of the next generation easier. Luck has nothing to do with it. Hard work has everything to do with it. Its not free wealth. Parents have to make huge sacrifices to obtain their own home. I’ve paid enough taxes on my earnings, and property, that an additional tax shouldn’t be passed on to those inheriting them.

    115
    Install the app to use these features.
    Mute Massimiliano Gallo
    Favourite Massimiliano Gallo
    Report
    Sep 17th 2022, 1:45 PM

    @The Bolt: yes and it’s also down to personal life style choices. I prefer leaving something for my children and do not care of buying much for myself. An inheritance tax on a house that someone keeps living in from the family should not be taxed, tax it only if sold and makes a profit over some threshold or if not occupied.

    36
    Install the app to use these features.
    Mute Gerard Smith
    Favourite Gerard Smith
    Report
    Sep 17th 2022, 3:28 PM

    @Urban Living Dublin: completely agree with this.

    1
    Install the app to use these features.
    Mute Stealth
    Favourite Stealth
    Report
    Sep 17th 2022, 10:00 PM

    @Tomo: from revenue website

    You will be exempt from Capital Acquisitions Tax (CAT) on the inheritance of a dwelling house if, at the date of the inheritance:

    the house was the only or main home of the person who died (this condition does not apply if you are a dependent relative)
    you lived in the house as your only or main home for the three years immediately before the date of the inheritance
    you do not own, or have an interest in, any other house
    you do not acquire an interest in any other house from the same disponer between the date of the inheritance and the valuation date
    the house continues to be your only or main home for six years after the date of the inheritance.

    4
    Install the app to use these features.
    Mute kevin mc cormack
    Favourite kevin mc cormack
    Report
    Sep 17th 2022, 8:15 AM

    Maybe they would also commission a report on how taxes could be better spent , for example if it’s to be believed, healthcare is extremely well funded and people yet are on ten year waiting lists, it seems like the government is burning the peoples money without consequence

    362
    Install the app to use these features.
    Mute David cotter
    Favourite David cotter
    Report
    Sep 17th 2022, 8:26 AM

    @kevin mc cormack: good point kev….how many ministers wanted o tackle this and didn’t make a dent…the medical system of administration and professionals have it built to suit themselves it’s unreformable……

    126
    Install the app to use these features.
    Mute thesaltyurchin
    Favourite thesaltyurchin
    Report
    Sep 17th 2022, 10:08 AM

    @kevin mc cormack: People wouldn’t mind paying more if they could see and be proud of how it’s spent, high-speed train or two, decent healthcare, well-executed housing infrastructure, etc. while our elected officials have historically and systemically no vision for the future it stems from Ireland being the land of begrudgery. This report ultimately is good as it does for better or worse ‘plan for the future’ which feels like a first.

    41
    See 1 more reply ▾
    Install the app to use these features.
    Mute Gerard Smith
    Favourite Gerard Smith
    Report
    Sep 17th 2022, 3:35 PM

    @kevin mc cormack: very valid point. We need root and branch reform in public service delivery

    8
    Install the app to use these features.
    Mute Sean Harmon
    Favourite Sean Harmon
    Report
    Sep 17th 2022, 8:01 AM

    The most disappointing line in the article is that all these measures are to maintain the current public services.
    Start messing more with peoples wealth will disincentivise people to push themselves academically/professionally in the long term and those that are ambitious will leave in the short term.
    This is where the populist rhetoric falls over, when you actually bring the ideas to their logical conclusion. People with work ethic and a good education are wanted by other countries and we risk loosing these people to pay the taxes in other countries like the UK, US and Oz. Irelands climate and current public services coupled with these types of taxes will more than likely cause a brain drain.

    184
    Install the app to use these features.
    Mute Jonny Parkinson
    Favourite Jonny Parkinson
    Report
    Sep 17th 2022, 8:52 AM

    @Sean Harmon: isn’t that the problem in this country tho we are way to self serving and don’t think of the wider community. We value personal wealth over collective wealth.

    36
    Install the app to use these features.
    Mute Sean Harmon
    Favourite Sean Harmon
    Report
    Sep 17th 2022, 10:17 AM

    @Jonny Parkinson: I think the bigger problem in this country at the moment is people lying to the public and fooling them into thinking that the €104 billion spent last year didn’t come out of every tax payers payslip at some point in the past.
    And if these skilled workers are squeezed too much, they can and will leave.
    Not sure what collective wealth means or looks like in reality but if it’s a system where people working pay to support those that can’t work then, according to the OECD, we have the most progressive version of it in the world.

    33
    See 5 more replies ▾
    Install the app to use these features.
    Mute Colette Byrne
    Favourite Colette Byrne
    Report
    Sep 17th 2022, 10:51 AM

    @Sean Harmon: don’t believe everything you read.

    3
    Install the app to use these features.
    Mute Jonny Parkinson
    Favourite Jonny Parkinson
    Report
    Sep 17th 2022, 11:12 AM

    @Sean Harmon: we are in full employment we aren’t paying for those that aren’t working unfortunately we need to support ppl who are working but can’t afford to live because our cost are spiralling out of control.

    Collective wealth is our services and infrastructure. Ireland is exploding at the moment our population has grown by 400,000 people in 6 year (according to census figures and refugee intake) there is almost too much work in the country and we have serious amount of foreign investment but at the same time we aren’t investing in our services and infrastructure quickly enough to stay at pace with our growth and everyone is demanding better pay and conditions whilst at the same time complaining about having to pay tax but then wonder why our public services are not up to scratch.

    12
    Install the app to use these features.
    Mute Sean Harmon
    Favourite Sean Harmon
    Report
    Sep 17th 2022, 11:31 AM

    @Colette Byrne: I only believe that which is backed up by valid and verifiable data or what I witness/experience in person.

    4
    Install the app to use these features.
    Mute Sean Harmon
    Favourite Sean Harmon
    Report
    Sep 17th 2022, 11:56 AM

    @Jonny Parkinson: Full employment in real numbers is 73.5% and collective wealth sounds a lot like public expenditure.
    We spent €30 billion on social protection last year, not a normal year but we usually spend about €20 billion, so we are supporting those in our country that need help.
    Our population growth is a positive thing in my eyes as we need to fill the jobs or they will go elsewhere. The taxes being mooted in this article are probably a direct result of the average family shrinking in Ireland so without immigration we are in an even worse situation.
    Inflation is a major issue for the country and the onus is on government to support businesses and people through times such as these.
    Circling back to my original point, the people that pay the taxes, pay for the infrastructure and supports. Populist politics is built on lies and false promises. Much like events in other countries over the last few years, the people that stand to get burnt the worst by these types of political changes are those that vote them in.

    8
    Install the app to use these features.
    Mute Jonny Parkinson
    Favourite Jonny Parkinson
    Report
    Sep 17th 2022, 5:45 PM

    @Sean Harmon: The country needs a decade of Stability, where our population remains where it is and we keep our economic growth at a stable pace.

    People want to blame the government for a lack of housing and to a certain part they are responsible for not building enough social housing but then what government can cope with 400k people in 6 years coming into the country, if we said the average family was 4 ppl sure that is 100k houses needed to cope with the increase in population over 6 years sure that is a colossal amount and that’s not taking into consideration the infrastructure need to with it all.

    With the way the climate is going in African and southern eu countries we are going to see continued migration into the country and we are going to struggle to manage it all.

    4
    Install the app to use these features.
    Mute Míleata Watch Co
    Favourite Míleata Watch Co
    Report
    Sep 17th 2022, 9:37 AM

    We pay an enormous amount of tax in this country, the problem isn’t really the amount, its the value for money!! Seeing our money wasted year on year is disheartening and a kick in the stomach of the hard working people of this country. That report should be more focused on how the money they have is spent, not about taking more tax to keep the current level of service. And if you really care about the cost of living crisis, abolish the USC. That tax was a specific tax brought in to pay off our bail out, but they also used it for other things and got used to it and now won’t give it up.

    131
    Install the app to use these features.
    Mute David cotter
    Favourite David cotter
    Report
    Sep 17th 2022, 7:04 AM

    Wow…according to this inheriting wealth is what I keeps the disparity between rich and poor in his country and surprise suprise Leo is straight out to call it sinn fein socialism.….So cue a group of FFG cronies and lackeys to take to the airwaves this weekend to fight this, what seems a progressive report.
    Yes FFG and friends loves to keep its dynasty wealth just as much as their outrageous pension entitlements ….this one will go on the shelf….

    126
    Install the app to use these features.
    Mute Andrew Galloway
    Favourite Andrew Galloway
    Report
    Sep 17th 2022, 7:38 AM

    @David cotter: all to pay for the bloated civil service pension bill, e.g Garda pension bill is several times the garda wage bill, put that accross all the organs of the state, that is unsustainable.

    154
    Install the app to use these features.
    Mute Urban Living Dublin
    Favourite Urban Living Dublin
    Report
    Sep 17th 2022, 8:34 AM

    @Andrew Galloway: compared to most European countries we live in a relatively low-tax state. Particularly when it comes down to taxing wealth, like an inheritance

    26
    See 4 more replies ▾
    Install the app to use these features.
    Mute Brendan Greene
    Favourite Brendan Greene
    Report
    Sep 17th 2022, 8:42 AM

    @Andrew Galloway: have you a link for that because as faras I know Public Sector pensions are generally a fraction of the pay bill. There werectwo different actuarial reports that said as much so Ic we old be interested in your new source.

    15
    Install the app to use these features.
    Mute conriel
    Favourite conriel
    Report
    Sep 17th 2022, 9:58 AM

    @Andrew Galloway: It was recently reported that the public pension costs are 3.5 billon the largest number in receipt are HSE staff.

    13
    Install the app to use these features.
    Mute thesaltyurchin
    Favourite thesaltyurchin
    Report
    Sep 17th 2022, 10:10 AM

    @conriel: Lol! we should cut that straight away!

    5
    Install the app to use these features.
    Mute Colette Byrne
    Favourite Colette Byrne
    Report
    Sep 17th 2022, 10:52 AM

    @David cotter: Of Leo is against it, it can’t be a good thing.

    3
    Install the app to use these features.
    Mute Dónal McCarthy
    Favourite Dónal McCarthy
    Report
    Sep 17th 2022, 9:31 AM

    They want people over 70 to pay USC on money they already paid USC on (pension contributions arent USC exempt). I know this country loves double/triple taxation, but they have to be careful not to put people off investing in their pension.

    89
    Install the app to use these features.
    Mute iohanx
    Favourite iohanx
    Report
    Sep 17th 2022, 6:29 PM

    @Dónal McCarthy:

    Public Servants should save for their own pensions like everyone else. Solved.

    15
    Install the app to use these features.
    Mute cathalsurfs
    Favourite cathalsurfs
    Report
    Sep 17th 2022, 8:15 AM

    You can comment on this article. But you can’t comment on this one…

    https://www.thejournal.ie/how-many-tds-are-landlords-property-rent-5866433-Sep2022/

    Sorry to hijack. But it says it all.

    83
    Install the app to use these features.
    Mute Dave Byrne
    Favourite Dave Byrne
    Report
    Sep 17th 2022, 7:24 AM

    ERSI said the government take in 5 billion in tax from petroleum products PA, This will have to be replaced with another form of tax due to everyone in the future driving EV.
    So they wanna charge a congestion charge plus a distance charge does that mean Motor tax and tolls will cease to exist?
    The same person also mentioned what DCC are doing at present in making it more awkward for people using their cars to get into the city.

    56
    Install the app to use these features.
    Mute Ronan Lawler
    Favourite Ronan Lawler
    Report
    Sep 17th 2022, 8:11 AM

    Time to get out of Dodge .

    59
    Install the app to use these features.
    Mute Rúraíocht
    Favourite Rúraíocht
    Report
    Sep 17th 2022, 11:05 AM

    My parents owned a shop and sold it. The company paid capital gains when it sold the property. My parents paid capital gains when it liquidated the company. Whats left is small. It will be further subjected to inheritencr tax.

    Tax reforms are needed, but also public spendihg and social welfare. The productive in this country are taxed the most. Tax should incentivise entrerprise and not fund layabouts and welfare defrauders.

    53
    Install the app to use these features.
    Mute Lydia McLoughlin
    Favourite Lydia McLoughlin
    Report
    Sep 17th 2022, 9:08 AM

    Maintain current level of services … what, the rubbish level? Its their over inflated salaries and pensions for the fat cats that are draining us!

    89
    Install the app to use these features.
    Mute Lydia McLoughlin
    Favourite Lydia McLoughlin
    Report
    Sep 17th 2022, 9:11 AM

    If people got more bang for their buck they’d want to work and then they’d both mentally and physically be happier! More tax take, less health issues, less strain on our system … why does our Government not look at other, better, more draconian ways to turn things around than taxing us into oblivion?

    45
    Install the app to use these features.
    Mute Sequoia
    Favourite Sequoia
    Report
    Sep 17th 2022, 11:32 AM

    They should consider a passport tax.

    If you hold a valid and current Irish passport, you should pay a nominal tax to the state wherever you live in the world.

    The likes of multi millionaires who live abroad for tax reasons would be then forced to provide some income to the state in order to take advantage of the benefits the passport provides.

    10
    Install the app to use these features.
    Mute Fiona Fitzgerald
    Favourite Fiona Fitzgerald
    Report
    Sep 17th 2022, 5:47 PM

    The final paragraph is confusing. Scrap the Help to Buy scheme, and raise property taxes? Sure people can barely afford rent. Where can they live?

    10
    Install the app to use these features.
    Mute Keth Warsaw
    Favourite Keth Warsaw
    Report
    Sep 17th 2022, 12:24 PM

    I understand the diversion of taxes, even a slight increase in CGT, CAT and Inheritance tax etc. But dear oh dear with all of these keyboard socialists and paper thin communists ready to march through the town on tbe hunt for tbe monster, driven by frustration and anger due to a NO from the bank. To generalise people who come into a bit of fortune through luck, calculation or grief as all the same is a tad neanderthal.

    14
    Install the app to use these features.
    Mute Watchful Axe
    Favourite Watchful Axe
    Report
    Sep 17th 2022, 7:28 PM

    Christ, you don’t need a 550 page report on how to collect taxes. They’re very good at figuring that out on the fly.

    6
    Install the app to use these features.
    Mute Dermot Purcell
    Favourite Dermot Purcell
    Report
    Sep 21st 2022, 8:49 AM

    Our freemason government hires another bunch of freemasons to see how they can screw the working poor out of everything and then roll out the media to see how they can spin it to make themselves look better

    1
Submit a report
Please help us understand how this comment violates our community guidelines.
Thank you for the feedback
Your feedback has been sent to our team for review.

Leave a commentcancel

 
JournalTv
News in 60 seconds