Budget Perspectives 2014 Conference

The annual ESRI "Budget Perspectives" Conference has become an established part of public debate about budgetary issues in Ireland. The 16th Conference will examine issues of interest from both macroeconomic and microeconomic standpoints. This year’s "Budget Perspectives" conference includes a panel on current issues in macroeconomic policy (Peter Breuer (IMF), Philip Lane (TCD) and Alan Ahearne (NUIG)). John FitzGerald will examine fiscal sustainability for the medium term. Stuart Adam (Institute for Fiscal Studies, London) will examine issues related to housing taxes and housing benefits, drawing on the recent Mirrlees Review and on UK experience in this area, while Tim Callan, Claire Keane, Michael Savage and John Walsh will look at Ireland’s income taxes in a comparative perspective.

PROGRAMME 08.30 Registration and coffee 09.00 Welcome: Frances Ruane, Director, ESRI SESSION 1 Chair: Frances Ruane, ESRI 09.05 "A Medium-term Perspective on Fiscal Sustainability" John FitzGerald (ESRI) 09.40 Panel: Current Issues in Macroeconomic Policy Alan Ahearne (NUIG), Peter Breuer (IMF), Philip Lane (TCD) 10.10 Discussion 10.30 Tea/Coffee SESSION 2 Chair: Derek Moran, Department of Finance 11.00 "Housing Taxation and Support for Housing Costs" Stuart Adam (Institute for Fiscal Studies) 11.40 "Taxes on Income: Ireland in Comparative Perspective" Tim Callan, Claire Keane, Michael Savage and John R. Walsh (ESRI) 12.20 Discussion 12.45 Close Please find below short summaries of two of the presentations to be given at the Conference. Conference presentation slides will be available to download from our website on the day of the event. Members of the Media are invited to attend the Conference.   "Taxes on Income: Ireland in Comparative Perspective" Tim Callan, Claire Keane, Michael Savage and John R. Walsh (ESRI) Ireland takes a smaller share of national income in tax than most EU-15 countries, according to new ESRI research. This is true even when taking account of recent Irish tax increases and of how precisely multinational profits affect the Irish tax base. The share of tax in national income in Ireland remains well below that in countries such as Germany, Austria and the Scandinavian countries. Much of the gap arises because these Northern European countries have higher taxes on income – whether in the form of income tax, employee social insurance contributions, or employer contributions. This is not because of higher tax rates on the top slice of income. The extra tax revenue in these countries comes from applying higher income tax rates lower down the income range, so that they are paid by low, middle and high income earners alike. Speaking at the conference, Professor Tim Callan said “There is much debate about the balance between taxes and expenditure in the run-up to annual budgets. Evidence on choices other countries have made as to long-run levels of expenditure and tax helps to inform this debate and bring a longer-term perspective to bear on the issues involved”.

"Housing Taxation and Support for Housing Costs" Stuart Adam (Institute for Fiscal Studies) The UK’s system of housing taxes and benefits falls well short of a coherent design. Drawing on a major study of the UK tax system (the Mirrlees Review*), Stuart Adam argues: “housing is a consumption good, an asset and an essential for life, and its treatment in the tax and benefit system needs to reflect all of those aspects.” Some key reforms would help to improve the system:

• Housing consumption should be taxed like other consumption: subject to VAT when new or to an equivalent tax levied on the stream of services it provides. Britain’s council tax, which is currently based on 1991 values in England and Scotland, should be reformed to relate it more closely to actual property values: levied as a uniform proportion of up-to-date rental values with no cap and no discount for unoccupied or single-occupancy properties.
• Taxation of rented housing should be reformed by offering landlords an allowance against a ‘normal’ return to their investment (and by aligning capital gains tax rates with income tax rates).
• The UK’s stamp duty on housing should be abolished and the revenue replaced by part of the reformed council tax.
• There is a case for allowing home-owners who lack the liquidity to pay the tax to defer payment (with interest) until sale of the property or death.
• Those who lack both current income and assets should be entitled to financial help towards their housing tax, and indeed towards their housing costs more generally. Preferably this would form part of a larger integrated benefit rather than requiring a separate means test and procedures.

Speaking at the conference, Stuart Adam said: “There is a set of principles for housing taxation that should be applied in any modern economy. Large changes need to be phased in carefully, but this is an area where current UK practice is a long way from an economically rational and efficient system.”

*Tax By Design: The Mirrlees Review.  

Note to Editors:

1. This half-day ESRI Conference, "Budget Perspectives 2014", will take place on Tuesday 25 June 2013 at the ESRI. Members of the Media are invited to attend the Conference.
2. The Conference presentation slides will be available to download from the ESRI website on the day of the event, 25/06/2013.
3. Two of the papers ("Housing Taxation and Support for Housing Costs" by Stuart Adam (IFS), and "Taxes on Income: Ireland in Comparative Perspective", by Tim Callan, Claire Keane, Michael Savage and John R. Walsh (ESRI)) will be published in a book titled "Budget Perspectives 2014". The book will be available at the Conference and on the ESRI website at 00:01 am Tuesday 25 June 2013.