The OECD were in town this week to share their assessment of the Irish economy. This process happens all OECD member states every eighteen months or so. When it came to our turn, the OECD had some particular points in relation to the tax system. In fairness to all concerned, their points are not new to the current national debate.
The main observations of this OECD study on tax are:
- Tax revenues became too dependent on construction and housing transaction-related receipts
- The revenue-raising capacity of the income tax system was weakened by rate cuts and a narrowing of the tax base
- There is an extensive and inefficient system of tax reliefs, thus allowing many people to pay little or no income tax at all
- A comprehensive review of tax expenditures has recently been undertaken by the Commission on Taxation. Many should be eliminated or deductibility limited to the standard rate and capped.
- While direct tax rates have been increased now through various levies, these should be integrated with income taxes when the tax base has been repaired.
- Personal allowances should be reduced with the objective of widening the tax base.
- There is little scope to raise indirect taxes in general.