Tax Changes an Issue

A new tax regime will be among the issues EU Economics Commissioner Olli Rehn and Finance Minister Brian Lenihan will discuss when they meet this evening in Dublin.

The Minister is expected to brief Mr Rehn on the four year budget plan which will set out exactly how the government plans to find the €15 billion it needs to cut from the deficit by 2014.

Brussels has been perturbed by the government’s delay in issuing details of the budget which it expected last week, and believes this is helping fuel market speculation against the country.  

A spokesperson for the department of finance said it could be the last week of the month before the unique four year budget is ready as it will have to be approved by government and take account of ministers discussions.

This evening’s 90 minute long meeting in the Department of Finance is expected to be particularly intense as Mr Rehn goes over with the Minister the kind of steps and the amount of detail that needs to be in the plan demanded by Brussels some time ago.

Before he left for Dublin the Commissioner’s spokesperson said, “Mr Rehn wants to discuss in detail all the elements in and around the four year plan”.

He is particularly anxious that cutting back public spending be supported by structural reform, such as widening the tax base.

Mr Rehn is already on record as saying that given the circumstances he expects Ireland will not continue to be a low tax country.

The Finn, who helped guide his own country through a near complete economic collapse in the 1990s,  will encourage the government to adopt labour market reforms and make investments in a bid to cutting the 13.7% unemployment rate.

He will also insist that whatever the figures the government gives for cutting €6 billion off the deficit next year and similar sums for the following years will be backed by concrete measures.

The Commission believes that only by producing an entirely credible plan will the markets be persuaded that the country will be able to meet its debt commitments. So far they are not convinced as shown on Friday when the difference between the cost of German and Irish debt was similar to that between German and Greek debt when the Greeks were forced to ask for a bail-out.

Mr Rehn is also hoping that his visit will help reduce tensions among opposition politicians and civil society to the measures needed since political instability adds to market nervousness.

He will meet Central Bank governor Patrick Honohan, members of the opposition parties and IBEC and ICTU, but, his spokesperson said, his role was not to convince them to support the government’s strategy.

“We want to listen to their perceptions of the situation and the measures to be taken and he will be making the point that this is a serious situation”, said his spokesperson.

He would not comment on whether Mr Rehn would discuss with Minister Lenihan the possibility of Ireland tapping the EU-IMF rescue fund.