Mr. Tom McDonnell:

TASC recognises the size of the deficit and it is within that context that we propose the set of measures we do. For consistency with the Government's position we have decided rather than necessarily implicit support for stating that a budge adjustment of €3.5 billion is the appropriate amount, we have to the greatest extent possible attempted to adhere to the Government's triple lock although not fully. In proposing our composite set of proposals to an adjustment of €3.5 billion we have considered the wide body of empirical literature and radical literature as to which types of tax have which types of effects. These include long-term effects, short-term effects, sustainability, efficiency, social justice, equity and so on. We have considered all of these issues and it is in that context that we make our proposals.

I echo Dr. Healy's points on debt sustainability and the need for a deal on the banking debt, but we can come back to that. The Chairman asked me specifically about the property tax. The evidence is very clear. Recurrent, as opposed to transaction, tax on immovable property is the most efficient and sustainable tax over the long-term. If properly designed, it can be equitable. For example a recurrent tax, which is a flat tax, such as the one that is in place at the moment is of course not equitable. It is a question of how the system is designed and to what extent waivers are given and so on. We advocate having no waivers and rather having an ability-to-pay-based deferral system. This ensures the integrity of the funding or revenue source over the long term because it will eventually accrue to the Exchequer in the form of capital acquisitions tax being supplemented by a lien on the house or as part of the subsequent transactions. Therefore it is sustainable over the longer term and because it is a known resource coming in over the longer term, the bond markets and everybody else can regard that revenue as being stable, which is not true in the case of, for example, stamp duty.

We picked a tax which is market-based in the short term but have given great consideration to the concept of a land or a site valuation tax over the long-term. Ultimately the current market value of the asset is the amount a buyer will pay for it rather than some notional value which will be subjective pending rezonings and so forth. Dr. Healy spoke about the services provided and of course the market value will reflect the services in the area, whether it be a Luas line, motorways, shops and so forth. Therefore a property in Ballyvourney which is identical in every way to a property in Ballsbridge except for location will be valued at a much lower price because of the amenities available in Ballsbridge. As property prices increase and decrease, it will obviously impact on the revenue to the State, but because the value of tax increases as the price of the property increases, it acts as a dampening effect, both up and down, on the fluctuations in property prices over the medium and long-term thereby helping to prevent future crises. Nevertheless the advantages of the site valuation system are also very enticing. We have proposed that it should be a 0.35% levy which should apply to all residential properties except for those for social housing, for housing homeless people and so on.

It should be universal and there should be horizontal equity. While everyone should pay, people in defined situations such as mortgage arrears or whose combined household and child care costs exceed a particular proportion of their household income resulting in it going below a certain level would qualify for a deferral. The 0.35% rate was decided on in the larger context of identifying particular forms of taxation to provide a sustainable tax base over the long term. It is our position, based upon the evidence, that these types of taxes are the least damaging to employment, growth and sustainability over the medium and long term and should, therefore, be substantial. For example, a tax of 0.35% on a house worth €200,000 would be €700. This would be deferred in respect of a person experiencing mortgage arrears, based on his or her inability to pay.