The introduction of a valuation-based property tax on most residential properties in the country has been recommended by the National Competitive Council.
In a report entitled ‘Getting Fit Again: The Short Term Priorities to Restore Competitiveness’ published today, the NCC said without "immediate and continuing action" to restore Ireland’s international competitiveness, the Irish economy runs the risk of entering “a prolonged period of depressed economic activity.”
Speaking at the launch of the report, NCC chairman Dr Don Thornill said targeting export led growth was the key to securing Ireland’s long-term prosperity.
He said that Irish exports were holding up relatively well in 2009 despite the steep drop in economic activity in Ireland and the sensitivity of small open economies to changes in the world economy. He said that Ireland “cannot return to a model where the construction industry drives growth” but must focus on restoring competitiveness so that the country can compete internationally.
One of the key issues facing the country, he said, is the sustainability of the public finances. The report recommended that additional revenue should be raised by broadening the tax base through measures such as a property tax, rather than through further increases in taxes on income.
Mr Thornhill said one positive feature of a property tax was that, unlike additional income tax, “it does not affect people’s incentive to work”. The Council’s proposal is that a property tax, based on the value of residential properties, would replace stamp duty.
On the subject of reform of the public sector, the report said that the country must deliver "better public services with fewer resources". Mr Thornhill said that this may include a reduction in the public sector work-force, or a reduction in public servant salaries.
Yesterday’s report also recommended that the new National Asset Management Agency (Nama) should release the assets of failed developers onto the market sooner rather than later. Mr Thornhill said that there was a temptation to "release assets slowly onto the market to gain maximum return for the exchequer".
However, selling the assets sooner will provide opportunities for ‘strong and new businesses to purchase assets cheaply’, in the process helping economic recovery.
The report said that the ongoing efforts to resolve the banking crisis should ensure that the interests of the taxpayer are protected by minimising the exposure of the State to bank risk. “It is critical that, as far as possible, responsibility and risk is delegated to the banks to resolve the problems they have caused.”
The National Competitive Council, which was established in 1997, is a body which reports to and advises the Taoiseach on competitiveness issues facing the Irish economy. The NCC said it will report later in the year on the longer term issues facing the Irish economy.
