Dáil Éireann Debate, Thursday - 4 October 2012
1. Deputy Michael McGrath asked the Minister for Finance if he has raised with the Troika the possibility of substituting a range of alternative taxation measures for the property tax in Budget 2013; and if he will make a statement on the matter. [42464/12]
View answerThe Government has decided, as part of its obligation under the EU-IMF programme of financial support to Ireland, to introduce an annual recurring property tax. In the latest memorandum of understanding between the Government and the troika, a commitment is given to introducing the tax in the forthcoming budget. The introduction of a property tax has been a condition of the programme since it was first negotiated in November 2010, under the previous Government, and has remained a condition of the programme following subsequent reviews, which are agreed by all programme partners. As stated in the terms of reference of the interdepartmental group on property tax chaired by Dr. Don Thornhill, the property tax is to meet the immediate financial requirements of the EU-IMF programme. The fiscal consolidation conditions in the programme are set with a view to meeting the adjustment path agreed at the ECOFIN Council in December 2010 for the general government deficit, in order to bring it below 3% of GDP by 2015. For 2013, this adjustment path sets a deficit ceiling of 7.5% of GDP.
The memorandum of understanding for budget 2013 provides for overall fiscal consolidation of €3.5 billion, to be made up of €1.25 billion in tax measures and €2.25 billion in expenditure reductions. The memorandum of understanding does provide for substitution of measures in certain circumstances. It states that "without prejudice to the minimum consolidation amount referred to in the previous paragraph and to the requirements to achieve the agreed fiscal targets, the Government may, in consultation with the staff of the European Commission, the IMF, and the ECB, substitute one or more of the above measures with others of equally good quality based on the options identified in the Comprehensive Review of Expenditure (CRE)". Therefore any proposal to alter the proposed composition of tax or expenditure measures would need to be substituted with measures of equal value.
Furthermore, the memorandum of understanding states that the Irish authorities will "Consult ex-ante with the European Commission, the ECB and the IMF on the adoption of policies that are not included in this Memorandum but that could have a material impact on the achievement of programme objectives".
The property tax forms part of a long-term policy to broaden the tax base, to provide a stable funding base for local government and to assist the strengthening of democracy at local level. A Bill to introduce the tax will be published with the forthcoming budget. No final decision has been made as to the rate or basis of assessment of the tax.
I thank the Minister for his response. I acknowledge that the original memorandum of understanding in December 2010 provided for the introduction of a property tax in 2012. The Government introduced that in the form of a household charge. The memorandum further provided for an increase in the property tax in 2013. Having said that, it would be deeply unwise to proceed with a property tax at this time given the conditions that prevail in the economy. The Minister knows all the facts - 435,000 people on the live register; one in five owner-occupier mortgages in trouble; half of mortgages in negative equity; and 160,000 people having paid stamp duty of €10,000 or more in the past ten years. These are not all different people and some people fall into a number of these categories. However, a great many families simply do not have a spare €300 or €400 to pay a property tax. My question, which the Minister did not answer, was whether he has raised with the troika the idea of replacing the property tax in the budget for 2013 with alternative taxation measures of an equal value.
What alternatives does the Deputy have in mind?
I have a number of alternatives in mind.
Could we hear them?
I will help the Minister to come up with a taxation package of approximately €1 billion. The Minister needs €1 billion in new taxation measures in December's budget. I accept that all sides of the House have responsibility to come forward with measures. If the Minister agrees to abort his proposal for a property tax in the budget, I will sit down with him and come up with measures, amounting to €1 billion.
First, we have no intention of raising €1 billion by way of a property tax.
I know that.
Second, the implication of the Deputy's question is that he has some alternative tax proposals to raise the amount of money we intend to raise by way of property tax.
We have.
For the purposes of helping the debate, I ask the Deputy to state now what his alternatives are.
As is the tradition, as an Opposition party, we are preparing our budget submission, which will be published in November - well in advance of the budget. It will set out a taxation package to meet our overall requirements. I have asked the Minister a simple question, which he has refused to answer so far. Has he raised with the troika the possibility of substituting other taxation measures for the property tax in December's budget?
This is all very interesting, but it was the Fianna Fáil-led Government in 2010 that committed to a property tax as outlined in the memorandum of understanding.
Correct.
The Deputy knows very well that the only way to move that out of the memorandum of understanding is if tax increases of equal value are substituted.
Correct.
That is the thrust of the Deputy's question.
It is reasonable for me to request more information. What are his alternatives?
It is reasonable of me to ask the Minister to answer the question.
Otherwise I am simply buying a pig in a poke. If he is serious about this, he should make his alternative suggestions for me to consider. If they appear better than a property tax, we can look at them. At present the Government has decided to introduce a property tax, the details of which will be announced in the budget. It will not raise €1 billion. The Revenue will be responsible for its collection and the probable date for its introduction will be 1 July 2013.
May I clarify-----
Very briefly as we are out of time.
---- that the Minister is open-minded to revisit the decision to introduce a property tax if he is satisfied that there is an alternative of equally acceptable taxation measures that meet the fiscal requirements? Is he open to that possibility? It is clear from his response that he has not raised the issue with the troika because he does not see any alternative. If there is an alternative that meets with his acceptance, is he prepared to revisit the decision to introduce a property tax in December? That is a very straightforward question.
The Government has made decisions as I outlined. In the latest adjustment to the memorandum of understanding with the troika, we have stated that a property tax will be announced in December's budget. That is the firm Government commitment and we are not moving from that. If the Deputy believes he has a convincing way of influencing me to move from that by putting up "gentle" tax increases-----
They will not be gentle.
-----to substitute for property tax increases, I would like to hear them.
They will hurt people - they will not be gentle.
I believe he is simply involved in an exercise of bluff.
The Deputy's party in government brought in the commitment to introduce a property tax and he is now pretending he has some other way that people would not notice or feel to raise €1 billion.
They will notice.
We must continue now.
If he has, he should let us know. We would love to hear it.
