How the parties stack up on their approach to tax
Sheila Killen breaks down each party's policy on tax ahead of Election 2007
Fianna Fáil set out its tax and economic policies on 16 April. The party plans to index tax bands and credits in line with wages each year, to double the home carer credit to €1,540 and to reform employee's PRSI in favour of the lower-paid by halving the rate and removing the ceiling. They announced no stamp-duty changes, and plan to reduce income-tax rates only if economic resources allow. Corporation tax will remain at 12.5 per cent, tax harmonisation across Europe will be opposed, and the existing business expansion scheme (BES) and Seed Capital relief will be continued.
Pros The PRSI reform is progressive, benefiting those earning below €44,180 at the expense of those earning more. Caution on stamp duty is appropriate in a slowing market.
Cons BES and Seed Capital relief are limited in scope, and unlikely to foster entrepreneurship. The sustainability of continuing to rely on tax rate competition to attract multinational investment is questionable.
Fine Gael and Labour
In February, Labour announced plans to cut the standard rate of tax. In March, Fine Gael promised to reform stamp duty, moving from a system of thresholds, whereby once a set limit is passed, duty is levied on the whole purchase price of the property, to one of bands, where only the excess over that limit is liable to tax. On 19 April, the parties published a joint policy document incorporating both measures, as well as rowing back on individualisation in the income-tax system to favour single-income couples. They follow Fianna Fáil in indexing tax bands and credits, and doubling the home carer's tax credit. They also plan to reduce the tax-compliance burden for small firms, and widen access to venture capital for start-ups. They do not specify when the stamp duty changes will be introduced.
Pros The use of bands rather than thresholds in stamp duty is sound in principal. The reduction of individualisation favours single-income families. Reduced compliance costs for small business would be welcome.
Cons To detail new stamp duty measures without saying when they will be introduced brings uncertainly into the market. The proposals lack some ideological coherence, favouring first-time buyers of expensive property as well as single-income families. This makes it difficult to interpret more general promises. For example, simplification of employment law could have several opposing interpretations in the context of the policy document.
The PDs launched their economic policy on 20 April, promising to cut both rates of income tax, to increase child payments, and to maintain corporation tax and capital-gains tax rates. They promised to abolish stamp duty for first-time buyers immediately upon re-election, and to introduce banding instead of thresholds for owner-occupiers. Their manifesto also outlines an SSIA-type scheme to encourage private pension saving for low-income taxpayers, though this is excluded from the main policy document.
Pros The SSIA pension plan is innovative, and targeted to those on low income. The stamp-duty reform is limited to first-time buyers and the family home.
Cons If the principal of banding stamp duty is accepted, it should be extended to all property. There is nothing new for small business, and an apparent continued dependence on tax competition to drive the economy.
The Socialist Party
The Socialist Party does not plan to be in government after the election, as they feel it will be dominated by the capitalist interests. However, they favour a more progressive system with no stamp duty or service charges, and a 100 per cent tax on land speculation transactions.
Pros Like the Greens and Sinn Féin, the Socialists' proposals are underpinned by a clear ideology favouring the poor and marginalised.
Cons Most proposals are not costed, some are not detailed, and others, such as the 100 per cent land tax, are not realistic.
The Green Party
The Green Party plans to overhaul residence rules to eliminate tax exiles, index tax bands and credits, and make the credits refundable. They also plan to reduce VAT on essential items, and propose an annual tax on unproductive land, a carbon levy and other measures on pollution, with a corresponding reduction in tax on labour. They aim to increase capital-gains tax, and to initiate a detailed cost-benefit analysis of all current tax incentives.
Pros Any discussion on VAT reform is welcome. A small increase in capital-gains tax to above the level of income tax seems fair, and is unlikely to impact on the market. Refundable tax credits would benefit those on low incomes. There is a clear ideological consistency in the proposals, which aim to promote social justice and protect the environment.
Cons There is no attempt to cost the measures, and little detail on business tax. Some proposals, such as the land tax, are unlikely to be supported by any coalition partners.
Sinn Féin's public-finance policy had yet to be finalised at the time of going to press. However, on 22 March the party's national director of policy wrote in An Phoblacht that they propose to introduce a new income tax rate of 50 per cent on individuals' income over €100,000, to eliminate service charges, and in the long term, to tackle VAT reform. They also aim to harmonise taxes across the island, increasing corporation tax here to 17.5 per cent.
Pros Like the Greens, their income-tax proposals are progressive, and the overall package is ideologically consistent. They are the only party critical of Ireland's remarkably low rate of corporation tax.
Cons The measures are not costed, and their policies will not be formally ratified until the party's next ard fheis, so the proposals lack detail.