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Irish Accountants Call For Focused Debate On Tax Policy

by Jason Gorringe,, London

05 November 2009

Chartered Accountants Ireland has called for a refocused debate on the issues facing the Irish economy in the light of the Exchequer figures, published by the Irish government on November 3, 2009, which show further deterioration in tax receipts, particularly from Value-Added Tax (VAT).

“There is now almost no prospect of total tax revenue reaching EUR32bn this year. Most worrying is the decline in VAT receipts, which now run more than half a billion euros behind targeted projections. It is now essential to plan for some domestic stimulus for the economy, through targeted VAT reductions,” argued Chartered Accountants Ireland Tax Director Brian Keegan.

He continued: “We need to revisit our 21.5% VAT rate and reassess how effective it is in taxing domestically traded services. Consumers are not spending, yet EUR83bn is in deposit accounts held by private households in the State. Businesses such as restaurants and bars, along with other commercially provided services provide much needed jobs. They now need a boost.”

“In addition, it is now totally clear that there is nothing to be gained by increasing income tax rates. The increases in the Income Levy should have yielded an additional EUR2bn in income taxes, yet the income tax take between 2008 and 2009 will fall by more than EUR2bn. This fall cannot be explained by the dreadful increases in unemployment alone. Moreover, it signals that the increases have been counterproductive. The recent proposal from the Irish Congress of Trade Union’s for a 54% rate would increase the top tax rate to a prohibitive 69%.”

“High marginal rates of tax reduce the incentive people have to increase their earnings, most of which are taken by the government for no discernible improvement in services. They increase the incentive people have to leave the country and take their skills with them, thus impoverishing the nation as a whole. It also serves as a disincentive for higher earners from abroad from locating in Ireland, and importing the skills we need to weather this recession,” Mr Keegan concluded.

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