Fine Gael's plan to offer tax write-offs to hundreds of thousands of Eircom shareholders has been rejected as unworkable by the Taoiseach, Mr Ahern, and greeted unenthusiastically by the Labour Party.
Under the proposal, over 400,000 taxpayers would recoup 20 per cent of their Eircom losses by offsetting them against their annual tax bill, at a maximum cost of €90 million.
The unprecedented move was justified because the Government set the price of Telecom Éireann stock too high and failed to reveal that the company's board preferred a lower price, said the Fine Gael leader, Mr Michael Noonan. Insisting the proposal was "fair and equitable", he said the public had been "conned" by the €90 million advertising campaign orchestrated by the Government.
But the Taoiseach, Mr Ahern, said Fianna Fáil had examined the idea late last year, but decided that it could not work because it would create a number of tax anomalies. "Any proposal deserves an examination of it, but I don't see how you could actually do that without including everyone and everything in it as well," he told The Irish Times.
The Labour Party refused to comment publicly on the Fine Gael proposal, but a number of sources doubted if it could or should be made to work: "It isn't a runner, I believe," said one TD involved in drafting Labour's own manifesto. Asked if Labour would negotiate on the issue in coalition talks, a party source, speaking on condition of anonymity, said: "We are not going to respond to everything that they do between now and the election."
Rejecting the claim that Fine Gael was trying to "buy votes", the party's finance spokesperson, Mr Jim Mitchell, said: "We are making no apologies for it, and we hope that Labour will see the sense of it. This is one of the fundamental proposals that we want included in a programme for government. And we will be fighting to ensure that it is included."
Over 480,000 private investors bought Telecom Éireann shares at €3.90 each and 420,000 of them still held the stock when the Eircell division was sold to the UK-based telecommunications giant, Vodafone.
Most of these still held the stock when the Sir Anthony O'Reilly-controlled Valentia bought out the company in August 2001. Under Stock Exchange rules, they were forced to give up their shares.
The write-off proposal was agreed at a meeting of the Fine Gael front-bench last week, which is currently preparing the party's manifesto for the coming general election.
Many old age pensioners and others outside the tax net could write their losses off against DIRT, said Mr Mitchell, adding that Fine Gael would consider direct compensation for those who could not benefit in this way.
Facing questions, Mr Mitchell said he had bought £10,000 worth of Telecom stock, while Mr Noonan bought £1,000.
"I was forced to sell them only last week. I wanted to hold them because I was prepared to take the long-term risk, but I was not allowed to do so," he said.
The Department of Finance costed the proposal for Fine Gael, under a long-standing arrangement that allows Opposition parties to avail themselves confidentially of Finance officials' advice.
The Eircom proposal, which Fine Gael clearly hopes will deliver a much-needed boost to the party's fortunes, marks a significant escalation in the election campaign.
"Between now and April, we will be revealing a number of ideas rather than letting everything wait until the formal opening of the campaign," a senior party figure told The Irish Times last night.
Fianna Fáil said it rejected the idea as "completely unworkable" because it would blur the line between capital and income taxes, and threaten future State sell-offs.
Equally cool, the Greens, another of Fine Gael's potential coalition allies, said financial institutions, rather than all taxpayers, should compensate private investors.
