Vol. 448 No. 1
47 Mr. Sargent asked the Minister for Finance if he will make a statement on the Government's position on the merits or otherwise of shifting the balance of taxation from labour to non-renewable resources in view of the endorsement of the ESRI and the European Commission of the asertion that an energy tax would lead to 9,000 extra jobs in Ireland as well as help stabilise CO2 emissions. [1593/95]
The policy agreement, A Government of Renewal, states that, in the context of protecting the environment, the Government will contribute to the preparation of a pan-European taxation policy on carbon and fossil fuel inputs. While the benefits of shifting taxation from labour can be endorsed in principle, we would need to be assured about the full implications of additional taxation on energy products. While the former would reduce the direct cost of employment, additional tax on non-renewable resources would inevitably cause an increase in inflation. If, in turn, this were to lead to demands for higher wages in compensation, the benefits of reduced labour taxes could be quickly offset. In addition, unilateral action by either Ireland or the EU as a whole in this area could very likely result in some industries moving to locations which would not be as concerned about the environment, leading to loss of employment here. This potential effect would need to be borne in mind in examining the overall effect on employment. With regard to the estimates of increased employment by the ESRI, I would refer the Deputy to the reply given by my predecessor to his question of 1 December 1993 on this issue.
The ESRI's estimate, in a study published in 1992, emerged from an illustrative exercise which envisaged unilateral adoption by Ireland of a carbon/energy tax applied at the rate of $10 per barrel of oil equivalent for a period of ten years up to the year 2000. It assumed that all the proceeds of the tax would be applied to reducing PRSI contributions. Because of the nature of the study it could not address sector specific effects such as closure or relocation of plants in certain industries— effects which would diminish the positive employment impact found by the ESRI.
