Increases in taxes on income, consumption and property may be needed to fund future public spending, according to new research published by the ESRI. The ESRI report suggests that tax revenue could be raised by restricting or abolishing tax reliefs such as Principle Private Residence Relief and Entrepreneur relief, which the ESRI says has questionable economic rationale.

The ESRI’s report, Options for Raising Tax Revenue in Ireland, notes that future spending pressures combined with potential declines in corporation and motor tax receipts mean that significant future tax increases are likely to be needed in the years ahead. While these should be avoided until the economy has recovered from the pandemic, the ESRI’s research indicated that increases to income tax, VAT or the local property tax could raise significant sums of revenue. The report includes the following suggestions as potential sources of tax revenue:

• Increase the rate of PRSI paid by the self-employed to match PRSI paid on behalf of PAYE workers.
• Levy both employee and employer PRSI on employer pension contributions to employee pension scheme.
• Restrict the €200,000 tax-free lump sum on a pension pot on retirement.
• Reduce the lifetime or annual limits on what may be contributed to a pension tax-free.
• Remove Principal Private Residence Relief as part of a wider and radical reform of housing taxation.
• Entrepreneur relief creates an array of economic distortions with no clear justification for applying lower tax rates to people who own their own business than to the rest of the population.

Other reliefs with questionable economic rationales according to the report include the CGT exemption on assets transferred at death, Retirement Relief and the seven-year CGT exemption for property purchased between 7 December 2011 and 31 December 2014, CAT Agricultural Relief and Business Relief, the Help-To-Buy scheme and tax reliefs on fossil-fuel.