Submitted to the Irish Social Partners and Taxation Commission
18th March 2009
Executive Summary
This submission does not generally address existing fiscal mechanisms; others have contributed exhaustively to those issues. It focuses instead on new actions that address the current crisis but which would also strengthen our position in the face of an immanent energy crisis coupled with advancing climate change.
Despite the constraints of EMU membership, innovation is still possible – in fiscal mechanisms, in financing development and in complementary money systems. We ask the Irish government to employ these innovations so as to lighten the burden on taxpayers, foster solidarity between the public and private sector and increase productivity and competitiveness. These measures are outlined briefly in the following action points.
Banking & Debt Reform in Ireland
1 Nationalise AIB and Bank of Ireland as, together with Anglo Irish, these banks carry the biggest portfolio of impaired property development loans now guaranteed by the Irish government; an action now unavoidable to restore credibility.
2 Separate out the impaired property development loans into a series of capital or equity partnerships, preferably LLPs (Limited Liability Partnerships). This will remove substantial debt from the banks balance sheets.
3 Require that the banks and lending agencies offer the option of swapping existing mortgage obligations for shares in an equity partnership created for property owners in repayment difficulties and with negative equity.
4 Tighten regulatory oversight on bank lending and reserves to become similar to Canada’s that protected their financial sector from the worse effects of the crisis. Require that the financial sector executive remuneration and non-executive board members fees do not exceed more than 8 times the average full time wage paid by the bank and that bonuses are similarly bounded and are based on long term sustainable profitability of the institution.
5 Launch a set of special savings products offers (termed accounts, general savings accounts, SSIA-type accounts and/or bonds) in order to generate investment to provide the capital for essential, economically viable infrastructure projects.
6 After these reforms are carried out the previously nationalised banks should be privatized again.
7 The process of nationalization, reform and re-privatisation would not be necessary were Bank Ireland and Allied Irish Bank willing to undertake the reforms above on an agreed basis.
8 Extend the DIRT tax to cover the bond holders in all banks covered by the Irish government guarantee.
This reform can raise considerable immediate funds for the government as well as providing a relatively stable flow of funds in the future, reducing the risk of volatility in Exchequer receipts.
Climate and Energy Measures
9 Create an independent Carbon Trust with the power to impose an upstream cap on carbon emissions from fossil fuels with permits necessary to import or mine fossil fuels (industrial peat extraction) under the excise duty controls as per Feasta proposal.
10 Distribute at least 66% of the permit income to citizens as their rightful share or dividend of an essential commons resources. A significant portion (33%) should be retained as a ‘children’s’ fund’ to provide investment for national infrastructure needed for their future in low carbon economy.
Land Value Taxation
11 Announce the phased introduction of an annual land value tax (LVT) that will replace existing transaction taxes such as Stamp duty and development levies.
12 Require that all sale and rental property transactions are recorded accurately in a central database and published to inform the valuation office and the general public.
13 Replace rates on commercial and industrial premises by an annual land value tax (LVT) including on empty and derelict sites, public buildings and charity owned land with commercial zoning. This reform is achievable in 2010
14 Extend to zoned development land while abolishing development levies and Part V contributions. Achievable in 2011.
15 Replace stamp duty on all property transactions and extend LVT to all residential dwellings when valuation records and estimates are completed. This is achievable for 2012.
16 Extend the LVT to all land in the state including farmland based on rentals yields and abolish all income tax on farming activities. Achievable in 2012.
17 When economic recovery begins, all increase in land values should be captured by an increase in LVT so that a property boom never has a chance to develop again, and rising LVT revenues allow for the reduction of taxes on income and businesses.
Address Contraction in the Domestic Money Supply
18 Initiate a top level group to consider the design and implementation of an emergency complementary currency to fill the shortfall of euro in circulation because of the overhang of debt and continued contraction of liquidity in the euro system.
19 Develop a system of parallel VAT taxation reflective of the quid-denominated transactions. Permit the payment of LVT at least in part in quid to establish the value of the new complementary currency.
20 Support the development of other mutual credit cooperatives, barter systems or peer to peer transactions backed by a mutual insurance pool.
Pensions Policy
21 Pensions-provision relief should be gradually reduced to reflect the new investment environment of higher systemic risks and lower economic growth in the medium and long-run future
22 Extend pension and other tax reliefs to a wider selection of local investments such as renewable energy, municipal bonds for infrastructure which involve reducing Ireland’s dependence on fossil energy.
23 All pension taxation relief’s should be at the lower rate of income tax so that the well off do not benefit to a greater degree than the lower income groups.
24 As a partial recompense for the pension tax relief moratorium, the Exchequer should use future injections of capital into Irish banking system as the means for repairing the balance sheets of the Irish households.
25 Reclaim the commons for its owners – the people – to establish the capital base for a dividend that will provide economic security for everyone, especially in old age.
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Feasta; foundation for the Economics of Sustainability
14 St Stephen’s Green
Dublin 2
Tel: 01-661 9572 / 086 8267555
Contact: Emer O’Siochru : emerosiochru@gmail.com
Project Manager Smart Taxes Network
