The 2020 Irish Budget, written by the Minister for Finance Paschal Donohoe, is likely to have some major changes implemented within the coming years. The Department of Finance has begun drafting multiple different variations of possible changes in taxation, many of which are targeted at the Vehicle Registration Tax.
This proposed taxation would crack down on high CO2 emission vehicles and would possibly provide grants or tax breaks to owners of hybrid or fully electric vehicles. In this particular budget, there has been a substantial focus on the environment and upholding the Irish promises of maintaining and promoting environmentally friendly options.
Beyond just these changes, there has been mention of increasing property taxes in the hopes of having a more fair taxation system. The Nevin Economic Research Institute (NERI) notes that there is substantial income tax collection inequality and that an increase on home tax could be more beneficial in diversifying the collection of tax revenue. Additionally, a home value is usually more substantial than a person’s income, so applying a harsher tax on property could bring in a more proportionate amount of income from all people.
This type of shift from an income to property tax dependent method is extremely unfavorable, and through political discussions these feelings have been continuously reaffirmed. The NERI has suggested this change multiple times, due to its mission being to create a more economically fair society.
Although there is significant opposition, this organization does have substantial reasoning to back up their opinion. For one, Ireland’s taxation income is 23.3pc of GDP, which is 15.6pc less than the EU average; this income is composed of mainly excise and VAT taxes, which are not comparable to the possible value of property.
Additionally, some of the taxes that are collected now can be easily decreased or avoided all together. By taxing something that is large and registered, there is little to no chance that someone could evade their proper tax.
Although this is a very interesting proposal, there is bound to be a variety of consequences. One that has many people in opposition is the vulnerability of elders who are currently still residing in expensive homes but who are no longer employed. With a low value income but high value assets, this group could be hit unproportionately. Additionally, it is possible that some of the highest earners could live in smaller or low value homes. If this is the case, they can avoid the taxation that is somewhat targeted at them.
Overall, this is a valuable proposition but it is not likely that the Irish government will be interested in changing their current tax collection policies.