Patrick O'Donovan (Limerick, Fine Gael)
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To ask the Minister for Finance if he will provide details agreed between the Troika and the previous Government in respect of the creation of a property tax including the amount that was forecast to be collected by the previous administration in the first year of a property tax planned by them; the total number of houses that they had expected to levy; and the average amount that they planned to levy as a result. [16276/13]

Michael Noonan (Limerick City, Fine Gael)
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The EU-IMF Programme of Financial Support is subject to policy conditionality which is set out in programme documents - the Memorandum of Understanding on Specific Economic Policy Conditionality, the Memorandum of Economic and Financial Policies and the Technical Memorandum of Understanding. The conditionality in these documents is subject to continuing assessment by the Irish Authorities and the EU, IMF, ECB (the Troika) to ensure the board programme objectives are met. Such assessment is undertaken at the quarterly reviews. These review missions include discussions where programme commitments are updated and agreed after every mission. The introduction of a property tax has been a condition of the Programme since it was first negotiated in November 2010 and has remained a condition following subsequent reviews. All of the programme documents are available on my Department’s website. The original Memorandum of Understanding contained certain provisions regarding the safeguarding of the public finances. However, it did not make specific reference to the amount to be collected by way of property tax or to the number of houses expected to be covered. The Safeguarding Public Finances section of the document, which is available at www.finance.gov.ie/documents/publications/reports/2011/euimfrevised.pdf, stated:

21. To continue with the programme of fiscal consolidation, a comprehensive National Recovery Plan 2011-14 was approved by the Government and published on 24 November 2010. This Plan forms the basis for the 2011 budget consistent with fiscal consolidation measures amounting to €15 billion, a 9 percent of GDP budgetary correction over the period 2011–14. Having stabilised the deficit, albeit at a high level, the steps announced in the Plan will place the budget deficit-to-GDP ratio on a firm downward path. While the debt-to-GDP ratio will remain at high levels for the next few years, it is projected to decline thereafter, underpinning debt sustainability. We also propose to keep under review progress towards meeting the Stability and Growth Pact targets.


22. Budget 2011 which will include adjustment measures of €6 billion, will be submitted to Dáil Éireann for passage on 7 December (prior action). As set out in the National Recovery Plan, most of this adjustment will come from the expenditure side. The capital budget will be reduced, partly through greater value for money in our infrastructure procurements. On current expenditures, we are pursuing public service numbers reductions through natural attrition and voluntary schemes, adjustments in public service pensions, and further savings on social transfers (from reductions in working age payments, reductions in universal child benefit payments and other reforms). Protecting the socially vulnerable at a time of difficult economic adjustment remains a central policy goal. Current savings will also be realised from streamlining government programmes and through administrative efficiencies. Should these savings or the expected numbers reductions not materialise, we reserve the option to take further measures.


23. An income tax-led revenue package—sized at over €2 billion in a full year—will supplement the above expenditure measures in 2011. Over the past decade, the proportion of citizens exempt from income tax has risen to 45 percent and tax credits have doubled, resulting in a comparatively low burden of tax on ordinary incomes. This is no longer sustainable. Accordingly, we are widening the tax base, by lowering income tax bands and credits by 10 percent, and by reducing various pension-related tax reliefs. We are also taking action on other tax expenditures, and distortions arising from the existence of multiple levies.


24. To secure our fiscal targets, a number of fiscal measures have been identified for 2012–14. We will continue to rely on expenditure savings (€6.1 billion), led by current spending (€4.9 billion), as outlined in the National Recovery Plan. We are targeting further reductions in public sector numbers, social benefits and programme spending, and have anchored the prospective savings by publishing multi-year expenditure ceilings by Vote Group through 2014. We are also planning to move towards full cost-recovery in the provision of water services and ensuring a greater student contribution towards tertiary education, while ensuring that lower-income groups remain supported. In addition, we will accelerate the process of placing the pension systems on a path consistent with long-term sustainability of public finances. On the tax side, we will build on the base-broadening measures outlined above and establish a sound basis for sub-national finances through a new residential-property based site value tax. The Finance Bill 2012 will contain necessary provisions to bring into effect the already signalled VAT increases in 2013 and 2014.


25. We are preparing institutional reform of the budget system taking into account anticipated reforms of economic governance at the EU level. A reformed Budget Formation Process will be put in place. Furthermore, we will introduce a Fiscal Responsibility Law which will include provision for a medium-term expenditure framework with binding multiannual ceilings on expenditure in each area by end-July 2011 (structural benchmark). A Budget Advisory Council, to provide an independent assessment of the Government’s budgetary position and forecasts will also be introduced by end-June 2011 (structural benchmark). These important reforms will enhance fiscal credibility and anchor long-term debt sustainability.