EU Commission recommends Ireland broaden its tax bases

The European Commission is recommending that Ireland takes all necessary measures to effectively address the Covid-19 pandemic, sustain the economy and support the recovery that follows.

It also says the tax base here should be broadened over this year and next.

“The challenges facing Ireland in regard to poverty and employment quality and support, including for people with disabilities, remain and they are likely to be exacerbated by the pandemic,” the Commission says.

The recommendations are contained in the Commission’s response to the Government’s submission of its National Reform Programme and Stability Programme Update last month.

It says that when economic conditions allow, fiscal policies aimed at achieving prudent medium-term fiscal positions and ensuring debt sustainability should be pursued, while at the same time enhancing investment.

The Commission says Ireland should front-load mature public investment projects and promote private investment to foster the economic recovery.

It claims investment needs to be focused on the green and digital transition, in particular on clean and efficient production and use of energy, sustainable public transport, water supply and treatment, research and innovation and digital infrastructure.

“The restart of the economy requires that Ireland advances on its ambitious environmental, climate, energy and infrastructure investments,” it says.

“Ireland has lagged behind so far in tackling decarbonisation. Greenhouse gas emissions in transport and buildings are high and have remained on a rising trend. Ireland will fall short of the 2020 energy efficiency and renewable energy targets.”

Support to companies, particularly small and medium-sized ones, is encouraged, especially through measures that boost their liquidity, while assistance is also needed for households impacted by the Covid-19 crisis.

“The Irish authorities and banks have introduced a number of measures to alleviate the financial difficulties faced by businesses and households,” it states.

“It is important that these measures provide the necessary liquidity and foster sustainable restructuring solutions for borrowers whose financial difficulties are strictly linked to the outbreak, and who are therefore expected to return to viability following a transition period.”

It also says that action needs to be stepped up to address features of the tax system that facilitate aggressive tax planning.

“Ireland has taken steps to address aggressive tax planning practices by implementing international and European agreed initiatives and taking some additional measures at national level,” it said.

“However, the high level of royalty and dividend payments as a percentage of GDP suggests that Ireland’s tax rules are used by companies that engage in aggressive tax planning, and the effectiveness of the national measures will have to be assessed.”

Improved accessibility and a strengthening of the health system’s resilience is also called for, including responding to the health workforce’s needs and ensuring universal coverage to primary care.

“Timely emergency measures have been put in place to increase hospital capacity and provide temporary universal healthcare services,” it says.

“However in the medium term, Ireland still needs to address the structural limited efficiency, flexibility, resilience and accessibility of its healthcare system.”

The Commission’s report also says employment needs to be supported through the development of skills, while the risk of digital divide, including in the education sector, need to be addressed.

“With the contract having been signed for a major public investment under the National Broadband Plan to address infrastructure gaps, it is therefore important to closely monitor and ensure the timely implementation of the rollout of the publicly supported ultra fast broadband network, especially in rural areas,” it says.

The provision of social and affordable housing is also recommended.

“Further efforts are needed to cover the needs of remaining households on the current waiting list and of potential new applicants,” the Commission says.

“Of the around 10,000 homeless people registered in Ireland, 3,500 are children. This raises concerns about the potential risks of deepening inequalities, entrenched poverty and social exclusion.”

The update also says close coordination between economies in the economic and monetary union is key to achieve a swift recovery from the economic impact of Covid-19.

“Ireland should, as a Member State whose currency is the euro – and taking into account political guidance by the Eurogroup – ensure its policies remain consistent with the euro area recommendations and coordinated with those of the other euro area Member States,” it states.

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