Sinn Féin - On Your Side

Rabbitte tax proposal latest desperate attempt to gain voter support

12 February, 2007


Sinn Féin Enterprise and Employment spokesperson Arthur Morgan TD has hit out at the Labour party's proposals to cut the standard rate of tax saying that the cut would reduce the revenue available to pay for essential public services while doing nothing to tackle the real inequities at the heart of the tax system. Morgan described the proposal as a pre election gimmick and a sign of the desperate lengths that Labour was willing to go to woe potential voters.

The Louth TD said: "The announcement by Labour Party leader Pat Rabbitte that his party will cut the standard rate of tax demonstrates the desperation to get into government that now clouds every proposal emanating from Labour. This is a pre-election gimmick. A lacklustre showing in a number of opinion polls has led to Rabbitte swiftly retreating from his declaration not so long ago that the era of tax cuts was over.

"Labour is attempting to convince us that the proposed cut in the standard tax band is the best way to help those on low and middle incomes.

"Clearly it is not.

"If Labour was really concerned with helping those on low incomes, as opposed to boosting its own election hopes, it would be bringing forward proposals to tackle stealth charges and user fees.

"It would be seeking a comprehensive and thorough review of the items to which VAT is applicable to determine the scope for introducing new anti-regressive and pro-energy-efficiency measures.

"It would be seeking an increase in the minimum wage so it represented 60% of Gross Average Industrial Earnings while keeping all those on it out of the tax net.

"This proposal does nothing to tackle the real inequities at the heart of the tax system. It is soundbite politics to propose tax cuts that will benefit the wealthiest in Irish society as well as those on low incomes, instead of targeting economic measures at those on or below the average industrial wage.

What it will do is significantly reduce the revenue available to pay for public services. It is those on low and middle incomes -- those without private healthcare and who do not send their children to private schools - who most rely on public services. The less money available for these public services, the more likely were are to face increase in inequitable user fees and other stealth charges.

"Another rationale which Labour is using to explain its proposal to cut the standard rate of tax is the current buoyant tax take. This is the same argument the Government used justify to the cut in the top rate of tax. Yes, more revenue than ever is flowing into the exchequer at present. But the key question is where this revenue is being generated from.

"A substantial factor in this has been the exceptionally large revenues derived from the property sector. The Government has also become ever more dependent on consumption taxes, and in particular VAT, which hit low income families hardest. The revenue generated from these taxes is far more open to fluctuation, and indeed contraction, than revenue from other sources. The unpredictability of the amount of revenue generated from these taxes has contributed largely to the government's poor ability to project tax take. The Central Bank has warned that the government must prepare for a contraction in revenue from these sources.

"What this proposal from Labour, like the cut in the top rate of tax, would do is narrow the tax base and make the government ever more dependent on taxes related to consumption and the property sector. Sinn Féin is strongly of the view that a Government needs to be in a position to ensure that it has the revenue to provide public services, to fund social protections and to address infrastructural deficiencies especially when the present rate of consumption and construction slows down.

"The media has been surprising silent on the question of how Labour proposes to pay for many of its proposals, including its five core commitments that the party calculates at over a billion euros extra per annum, while cutting taxes which are already well below European norms."

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