MINISTER FOR Finance Brian Lenihan has said that while all options are being considered for December’s budget, there are problems with capital taxation because of the huge reduction in the value of property.
There was renewed speculation last week that a property tax could be imminent following the publication of an International Monetary Fund (IMF) report showing the Department of Finance told visiting IMF officials in May that a flat-rate property tax was under consideration.
Speaking yesterday, however, Mr Lenihan said: “The problem with a property tax is that people still have to pay it out of income. Of course there is scope for tax reforms, of course the income tax and income levy system should incentivise work and be kept to the minimum possible and of course, equally, capital has to play its part.
"But one of the problems with capital taxation at present, whether it is property, inheritance, [or] capital gains, is that we have seen this huge reduction in the value of property, so that the capacity of the capital taxes to raise money has reduced accordingly. It is very difficult if you are talking about capital taxes in the present climate to talk about property taxes, because that is just another capital tax," Mr Lenihan told the Sam Smyth On Sundayshow on Today FM.
Mr Lenihan said that while the Programme for Government indicated that “we will do some preliminary work on laying down the basis over a number of years of how you might connect a property tax”, the Government had not yet discussed such a tax and Mr Lenihan had not “examined it in any detail”.
Mr Lenihan stressed the importance of containing Government expenditure. “That’s what we did in the last budget – we put all the emphasis on expenditure measures because if you keep endlessly increasing taxation, you will destroy confidence in the economy.”
He singled out the issue of VAT. “You can’t raise your consumption taxes to levels that are unsustainable or you will get a lot of leakage out of the domestic economy here.”
Asked about Fianna Fáil’s prospects in the next general election, Mr Lenihan argued that much hinged on the “credibility of the Opposition parties in advancing policies that will address the serious problems” faced by the country. I never made any secret of the fact that I expected Fianna Fáil to lose the last general election, and I was surprised when we were returned to office. In my view, at the time, there was an abject failure by the Fine Gael party to offer any viable alternative.
“It seemed to me incredible that . . . Fine Gael and Labour could not put together a coherent [alternative].”
Mr Lenihan accused Opposition parties of being “on the moon” in relation to the economic crisis. “In the last two years . . . what I have seen from the Opposition benches is a great deal of contradictory posturing and populist rhetoric, and a refusal to stake out definite political positions, especially on the part of the Labour party,” he said.
There was an onus, Mr Lenihan said, on all parties to come up with credible solutions to problems at a time of national crisis.
Asked about whether he nurtured ambitions to lead Fianna Fáil, Mr Lenihan replied: “We have a leader, he has worked very hard . . . He is our elected leader, and it has been made very clear at the parliamentary party meeting before the Dáil rose that he has the full confidence of the parliamentary party . . . We intend to be led by Brian Cowen into the next election.”
Mr Lenihan also discussed his cancer treatment, saying he remained in “good, robust health”. He said he was very grateful for the goodwill shown to him since his diagnosis. “The public have shown a tremendous support across all party boundaries for my own personal circumstances,” he said. “The presence I seem to have in the thoughts and prayers of many – that has been a huge personal support for me during what has been a difficult time and I very much appreciate it.”