Ceisteanna-Questions. Oral Answers. - Commission on Taxation Reports.

Pat Rabbitte


23 Mr. Rabbitte asked the Minister for Finance the progress, if any, which has been made in implementing the various reports of the Commission on Taxation; and if he will make a statement on the matter.

The Commission on Taxation, which was set up in 1980, produced five reports in the period up to and including 1985 containing a wide and detailed range of recommendations for the reform of the tax structure and the administration of the tax system. In general, the thrust of these recommendations was towards the achievement of a more equitable, simpler and more economically efficient tax system through a widening of the tax base and lower rates of tax. I think it is generally accepted that major progress has been made, especially in the last three years, in reforming the tax system along lines consistent with the thrust of the commission's reports.

In the income tax area, the number and level of rates has been reduced. As part of this the standard rate of tax has been cut from 35 per cent to 30 per cent; the top rate of tax has been cut from 58 per cent to 53 per cent; the standard and 48 per cent rate tax bands have been extended significantly. The changes have to an extent been funded by curtailment of the reliefs, as was envisaged by the Commission on Taxation.

Significant changes also have been implemented in the corporation tax code. Accelerated capital allowances have been reduced and will be phased out completely by 1992 and section 84 lending is being curtailed. As a parallel move the standard rate of corporation tax which has already been reduced to 43 per cent from 50 per cent will be reduced to 40 per cent in 1991. Most of the reduced rates of corporation tax, apart from the 10 per cent rate, have been abolished as was recommended by the commission. The principal objective of these changes is to reduce the bias in favour of capital in the tax code and to broaden the corporate tax base. The ending of the export sales relief scheme with effect from April 1990 will be a further help in this regard by providing additional revenue from 1991-92 onwards.

In the area of indirect tax reform the main impetus for change is, of course, now coming from the EC decision to complete the single market by 1992. Many of the Commission on Taxation's proposals on indirect taxes have in fact been overtaken by this development. This year's budget saw the start of the process of adapting our VAT rates and excise duties to those of our EC partners.

A number of far-reaching reforms and improvements have also been made in the tax administration system in the past few years. The measures in question either directly equate with recommendations of the commission or were designed to help achieve the commission's aim of a more effective tax administration system. The key measures are: self-assessment procedures have been introduced for the self-employed, for companies and for capital acquisitions tax; a current year basis of income tax assessment for the self-employed has been introduced; a surcharge on the late submission of returns by companies and the self-employed has been implemented; the power to attach assets of tax defaulters has been granted to the Revenue Commissioners; tax clearance certificate requirements have been introduced for public contract tenderers and applicants for grants; the 1988 tax amnesty yielded £500 million and greatly reduced tax arrears and thereby greatly improved the tax administration system; a new system of tax enforcement by sheriffs has been established and new steps have been taken to curb tax-avoidance.These changes have brought about a real improvement in the efficiency and effectiveness of the tax administration system, as well as an important broadening of the tax base.

As regards future progress, I would point out that one of the key objectives of the Programme for Government is to reduce the standard rate of personal tax to 25 per cent by 1993 and to move towards a single higher rate of tax.

Overall, as I have said, the tax reform measures adopted to date are very much in sympathy with the general approach and recommendations of the Commission on Taxation. They have resulted in reduced tax rates, they have broadened the tax base, they have reduced the incidence of tax default and they have introduced a greater degree of equity into the system. More needs to be done, of course, and the process of reform is continuing.

Despite what the Minister has said, is it not a fact that since the first report was published in 1982, only minimal improvements have been made in reforming the tax code, and that specifically since the objectives was to introduce equity, even less improvement has been made? Where do the Government now stand on the specific recommendation made in one of the reports, that a local property tax based on wealth and property ought to be introduced?

I do not know how the Deputy regards that long list of improvements I read out, mostly at achieving the objectives of many of the recommendations of the Commission on Taxation. As the report states, these proposals constitute a formidable programme of tax reform which could not be carried through easily or in a short time. I think the most important line that everybody in the House will remember is: "The advantageous among our recommendations cannot be demanded while the palatable are rejected". When we tried to make some adjustments as regards broadening the tax base, there were reactions from all the Deputies opposite. Their initial reaction seemed to be that they want the palatable but not the unpalatable, but you cannot have your loaf and eat it.

May I ask for an answer to my specific question as to whether it is intended to introduce a local property tax along the lines suggested by the commission?

You cannot just pick out one area and deal with that while forgetting about the rest. I have laid before the House our achievements in a short period of time in relation to this very complicated matter. As I have said, we are not prepared to go along with individual proposals from the far side while, at the same time, they oppose us every time we attempt to widen the tax base.

Am I to take it that it is not the intention of the Government to proceed with a local property tax, either in the form submitted to Cabinet by the Minister for the Environment or in the form advocated by the Progressive Democrats prior to their last annual conference?

My answer should be very clear to the Deputy.

With respect, that is not a reply.

It may not be the one the Deputy wants.

We must proceed to another question.

Is the Minister going to introduce the local property tax or not?

We cannot afford the luxury of repetition.

I am sure the Deputy does not want next year's budget today.

Question No. 24, please.