PROPOSALS TO raise €3 billion through a more equitable tax system would end spending cuts and have a huge psychological and financial benefit, an economics expert said yesterday.
Speaking at the launch of the Progressive Tax Reform Campaign in Dublin, Tom O’Connor, lecturer in economics and public policy at Cork Institute of Technology, said the proposals would halt the downward spiral in the economy by creating confidence and increasing spending.
Community Platform, an umbrella organisation for community groups, yesterday began its tax reform campaign by introducing a four-point plan to raise €3 billion in taxation.
It proposed reducing mortgage interest relief for landlords to the EU average over three years, saving €1.5 billion a year. It advocated a wealth tax for high earners with €1 million in assets; that people should be taxed on the basis of citizenship not residence and that PRSI and income levies should be charged on all income.
Mr O’Connor said the cutbacks introduced by the Government last year did not work. “Every time there is a cut in capital, every time there is a cut in public services the economy shrinks and jobs are lost,” he said.
The money saved by the cuts is then absorbed through increased unemployment payments and lower tax takes. “If we keep doing it we spiral downwards,” he said.
Taxing “a relatively thin sector of society” would mean the Government would not have to cut capital spending and jobs would be created. It would also inject a “feel good factor” and people would spend more of their savings, in turn creating more employment.
Anne Costello, spokeswoman for the Community Platform, said the myth that low taxation created the Celtic Tiger was untrue and it was also untrue that high earners paid disproportionately high tax.
To raise taxes without affecting low and middle earners, the Government could introduce PRSI and income levies on income from capital, investments and rents.
She also said there were 6,000 tax exiles in Ireland in 2007 who limited their tax liability by limiting the numbers of days they are resident here. A taxation system based on citizenship rather than on residence, such as the US model, would ensure gains for the exchequer.
Only those earning in excess of €250,000 would be targeted.
