Vol. 453 No. 4
48 Mr. Sargent asked the Minister for Finance the plans, if any, he has to be more ecologically motivated in over-hauling the tax system in view of the fact that Denmark has had an energy tax since 1992 which, if given effect in Ireland, would cost industry far less, £80 million, than the corresponding payback with reduced PRSI and income tax, £120 million, according to one source in the ESRI. [9436/95]
In relation to the overall economic and fiscal impact of the type of tax-switching envisaged, I would refer the Deputy to the replies to his previous parliamentary questions on related topics, on 1 December 1993, columns 1164-1165 and 25 January 1995, columns 148-150 of the Official Report. As pointed out on that occasion, 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 European Union 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.
