‘Weak case’ for tax cuts, says economic report
The Nevin Economic Research Institute (NERI) said that cutting taxes now “will limit our resilience to future economic shocks” in its quarterly economic report.
NERI senior economist Tom McDonnell said: “In light of our ongoing revenue deficits, and given limited fiscal space and significant under-spends in crucial areas of spending like education, childcare, housing and infrastructure, the case for cutting taxes is extremely weak.”
NERI said that it had compared government revenue in Ireland to that of similar high-income EU countries across a range of areas, and that on a per person basis, it found that combined taxes and social contributions in Ireland were significantly lower than in similar high-income EU countries.
“With the exception of taxes on consumption we find no evidence that the Irish taxation system is onerous in comparison to other high-income European states. In fact, the evidence is clear that Ireland is a low revenue state,” the report said.
It claimed the most substantial revenue deficit was in the area of labour taxation — specifically employer social contributions. There is also a deficit in relation to taxes on capital stocks, for example, property taxes and inheritance taxes, NERI said.
Director Tom Healy said: “Tax cuts will limit our ability to pursue social objectives and will reduce our resilience to future economic shocks. We must learn from the mistakes of the past.”
In contrast, both AA Ireland and the Irish Petroleum Industry Association (IPIA) called for a reduction in petrol taxes, in the face of plans being considered by the Department of Finance to increase diesel taxes to equalise it with petrol costs.
A spokesman for AA Ireland said: “If you want to equalise costs between petrol and diesel, the logical thing is to bring petrol duty down. Increasing diesel duty is totally unfair on motorists who were encouraged to buy diesel cars a decade ago. Emergency taxes on fuel were imposed at the time of the economic recession, and now is the time to rescind some of that extra costs to motorists.”
The IAPA echoed the call, saying it was “misguided” for the department to increase diesel duty.
It said: “Any consideration of equalisation should be equalisation downwards —that is a reduction in the excise on petrol.”
The IAPA said business and rural motorists would be hit hardest if diesel duty was increased.
“Common sense tells us that increasing excise on diesel would not bring the shift away from diesel now sought by Government.
“Consumers can give up tobacco or alcohol overnight but a business cannot change its commercial fleet with such ease. Neither can those many rural dwellers, who have recently invested in diesel transport, abandon their vehicles,” the group said.
Criminal activity would increase if there was an increase in diesel duty, the IAPA claimed.
“Increasing the excise on diesel would give further incentive to the criminal laundering of diesel,” it said.
US oil prices once again fell below $50 a barrel yesterday after a rally last week pushed crude to its highest in almost two months.
