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The Green Party’s plans to manage

the public finances.

vote.greenparty.ie

RENEWING
IRELAND
ON FEB 25TH
VOTE GREEN
Introduction

In the last couple of years the Irish people have seen very painful budgetary
adjustments in the form of cuts in pay, social welfare and services and tax rises.

It is important to distinguish between our banking debts and our primary budgetary
deficit. The debts left at the door of the Irish people from reckless lending and an
economically, socially and environmentally disastrous housing boom, are a cause of
great concern and regret to the Green Party. Regardless of the policies developed to
deal with the consequences of this boom and banking collapse, it is clear that Ireland
and the Irish people will be paying in some form or another for a number of years to
come.

However, it is necessary to be clear with the Irish people that the primary budgetary
deficit, that is the difference between what we earn and what we spend must be
bridged. Currently, we have made a commitment to our European partners and the
IMF that we will aim to save a total of €15bn in four years. As budget 2011 will
produce savings in the order of €6bn, the next Government will have to find further
savings of €9bn in the years 2012-2014.

There can be no doubt that taking a further €9bn from the economy is no easy task
and will cause a drop in living standards. However, by sticking to some important
principles, the bulk of these adjustments can be dealt with in a way that is fair and that
will provide a sound basis for future growth, sustainable development and a more
equitable society.

The Green Party believes that the €15bn adjustment over the four year period should
be based on a 2:1 relationship should apply between adjustments of expenditure and
revenue. This, we believe, is the most fair and economically sound way of tackling
the deficit.

General Principles
The underlying principles of the four-year adjustment should be that it:
• Supports economic growth and jobs;
• Is fair;
• Broadens the tax base and ensures it is more sustainable and
• Promotes the move towards a low carbon economy.
Broad Outline of Adjustments

2012 2013 2014

€M €M €M
Current: Pay (incl. PS Numbers & 500 700 1000
Pensions)
Current: Social Welfare 250 500 800

Current: Non-Pay 600 1300 2100

Current total 1350 2500 3900

Capital 300 550 750

RTE Transmission Assets 150 150

NPRF Capital Investment (insulation & 250 500 1000

selected public transport projects)
Tax 1237 2262 3204

Total 3137 5962 9004

Investing in Jobs, Growth and a Low Carbon Economy

The Green Party believes that Government investment in sustainable capital projects
should be maintained to the greatest extent possible. Infrastructure projects are not
only directly and immediately labour-intensive but they can also provide much-
needed stimulus in the wider economy.

That is why we will readjust downward from €1.2 billion to €750 million over the
course of the 4 Year Plan. In addition, we will also draw down €1 billion from the
National Pension Reserve Fund to intensify and accelerate investment in the National
Retrofit Programme and in public transport projects. €300 million will be drawn down
and added to the existing Retrofit budget so that €200 million will be invested in the
project each year over the next three years. The remaining €700 million will be
invested in the construction of the Metro North, which will start creating construction
and immediately as well as developing a critical piece of our capital’s 21st century
transport system.

State Assets
The Green Party is strongly opposed to a fire sale approach to the sale of state assets.
In particular, we are opposed to the sale of strategic semi state companies including
Coillte, the ESB, Bord Gáis, Bord na Móna and EirGrid. However, given the current
severe pressure on the public finances, full consideration must be given to making the
best use of state assets. To that end, we propose the sale of RTE transmission assets,
which will contribute towards savings in the capital budget.
Creating a Sustainable, Stable and Fair Taxation System

An equitable and progressive income tax system

In the years before the economic crisis, successive Irish Governments eroded our tax
base. This means that as a country we were relying less on stable taxes such as
income tax and more on the proceeds of the housing boom. This was always a
dangerous policy that was guaranteed to leave Ireland in a difficult situation when the
inevitable happened and the boom collapsed. The Green Party has always advocated a
more sustainable and equitable approach to taxation.

Income Tax
Budgets 2009 to 2011 saw rises in income taxes which were aimed at bringing more
people into the tax net. By 2010, 45% of earners were not paying any income tax.
This was not sustainable and was completely out of step with the taxation systems of
our European partners and competitors. With the introduction of the Income levy and
now the Universal Social Charge, our income tax system has been brought back to a
more sustainable level. However, it is also important to remember that those on higher
incomes also saw their taxes rise. In Government, the Green Party prioritised the
abolition of the PRSI ceiling, which had previously benefited higher earners. The
highest marginal rate now stands at 55%.

The Green party believes that PRSI should be fully integrated with the USC in 2012,
taking care that no particular income group is unfairly disadvantaged. This can be
done on a revenue neutral basis.

The Green Party commits to no further increases in income tax.

Integration of the taxation and welfare systems

The Green Party believes that the taxation system and the social welfare system
should be integrated. This would allow for better targeting of social welfare payments
and diminish the need for means testing.

As first step in this, the Green Party will introduce refundable tax credits. Refundable
Tax Credits return a portion of a person’s personal tax credits if they earn too little to
use them. This will benefit those who work part-time and those on very low wages
and will assist in the move from unemployment to work. The refundable tax credits
would be introduced initially at a rate of €50 and would be increased incrementally.

Pensions
Tax relief on pensions will be standardised, thus increasing equity in taxpayer support
for private pensions.
Promoting Sustainable Development

Site Value Tax

Ireland is amongst the few developed countries in the world that does not have some
form of stable property tax/ local rates. For too long we have been dependent on
stamp duty to fund our Government spending. This has proven to be a disastrous
policy, which contributed to escalating costs for homebuyers and poor use of
development lands. There is a recognition by most experts and political parties that a
low-level and stable property charge is preferable to volatile stamp duty revenue. To
this end the Government, in Budget 2011 and in the four-year plan, indicated a shift to
site value tax and reduced stamp duty to 1%.

Site Value Tax is based on the principal value of land, i.e. without any improvements
or buildings. As it is not based on the building occupying the land, it does not penalise
homeowners for making improvements to their own homes, such as adding an
extension. Land which is better served by facilities and transport links will have a
slightly higher value. This will lead to more efficient land use in the future by
providing an incentive for the productive use of land and by discouraging land
hoarding. Site value tax will be introduced in 2012 as a low-level charge and full site
value tax will be introduced in 2013 once valuations are complete.

Carbon Levy
The carbon levy was introduced by the Green Party in Budget 2010 as a way of
discouraging the use of fossil fuels. Since then, the carbon levy has been embraced by
all political parties. The Green Party recognises that fuel poverty is a serious issue for
some households and that is why we insisted on increases in the fuel allowance in
2010. We propose to increase that carbon tax to €30 per tonne over three years. Fuel
allowance will also be increased to help poorer households and the insulation
programme will be significantly extended with €200m per annum invested in creating
warmer homes.

Waste
It has been a longstanding policy of the Green Party to use economic incentives to
reduce waste and incentivise good behaviour. In order to encourage less waste and
more recycling, the Green Party proposes to increase levies on waste to landfill and
place a tax on packaging.

A More Efficient Taxation System

As part of the Programme for Government, the Green Party ensured that a
Commission on Taxation be established to examine the efficiency and fairness of our
current taxation system. One of the areas where reform was badly needed was the
number and scope of tax breaks. Property tax breaks such as Section 23, outlived any
usefulness they may have had and contributed to Ireland’s housing boom and
subsequent collapse. While most of these were discontinued in 2006, legacy costs
continued to take revenue from the Irish state. The Green Party in Government pushed
hard to ensure that these legacy costs were tackled. Budget 2011 introduced the
facility to recoup the losses to Section 23 tax breaks over a period of four years. The
Green Party commits to commencing this action in 2011,

Financial Transaction Taxes

The failure of the banks and regulatory systems in many countries, not least in
Ireland, has prompted widespread public anger across the globe. Rightly, people have
been asking how the financial sector can be forced to contribute towards the costs of
this crisis. For many, the answer is to be found in a form of global banking activities
tax. For years campaigners have been arguing for a form of taxation on financial
transactions as a way of raising money for development and to pay for the effects of
climate change. The financial crisis has brought the issue back to the fore, with
support from political leaders in Europe adding to the chorus of NGOs and
campaigners. While the issue is still being debated internationally, Ireland can lead
the way and an initiate a low level tax on share transactions, which can be applied
more widely once international agreement is obtained on the issue.

2013 2014 2013

€M €M €M
Income Tax & USC
PRSI
Pension relief 225 450 605
Financial Transactions Tax 21 31
Site Value Tax 210 438 675
Second Home Charge 80
Stamp duty
Environmental Taxes
 Carbon Levy 220 220 300
 Tax on packaging 40 60 60
 Waste levies 15 30 50
Capital Taxes 170 215 259
DIRT
Corporation Tax
VAT 310 570
VRT
Excise Duties 142 283 389
Abolition and modification of Tax reliefs 165 295 355
Total 1267 2322 3294
Refundable Tax Credits 30 60 90
Total 1237 2262 3204
Current Spending

Under the Green Party’s proposals, savings from non-pay current expenditure will
amount to €2.1 billion over the next three years. While this will undeniably mean cuts
in public services, the adjustment is significantly less than the €3 billion set out in the
4 Year Plan. We are also determined that significant savings can be made in areas
other than frontline services, such as introducing cloud computing across all public
and Government services and reverse auctioning public procurement.

Public Sector Pay and Numbers

The Croke Park agreement provides a framework to deliver further efficiencies in a

co-ordinated and co-operative manner. The Green Party believes that the Croke Park
agreement must deliver its promised savings of over €1.2bn, as laid out in the four
year plan. If these savings and efficiencies are not found then Croke Park will have to
be re-examined.

The best way of ensuring that these savings are made and that the public service
delivers for the citizen is through co-operation and partnership with those who deliver
the services.

Social Welfare

The Green Party proposes to take just €800m from the social welfare budget over
three years. Keeping social welfare cuts to a minimum will allow us to retain rates at
their current levels. Increased efficiency, labour activation measures and the
integration of the tax and social welfare system will make up the bulk of the 800M
savings.

The Green Party will not cut social welfare rates.