The Labour Party have released an analysis of the draft NAMA legislation. Link here.
Month: September 2009
Michael Hennigan provides an analysis here.
In the context of current discussions about the government spending on R&D and more broadly on science, technology and innovation the key question should be how to use the public resources in the most efficient way. While the fact that markets do not provide sufficient incentives for individuals and firms to engage in socially optimal R&D and innovation is well established in theory and documented by existing empirical evidence (due to positive externalities private returns to R&D investment are lower than social returns), in some cases government action may not provide effectively appropriate incentives at sufficiently low administrative and compliance cost, and without creating further distortions (crowding out).
Given scarce public funds, assessing the efficiency and effectiveness of public spending on R&D and their determinants should be given a high attention in Ireland.
When I studied public finance in the late 1980s, stamp duties were presented as historical oddities: Simple to collect but so distortionary that they had long been abolished in the civilised world.
The Commission on Taxation recommends that stamp duties be abolished and replaced by a property tax. Impeccable.
In fact, the CoT recommends that the stamp duty on non-owner-occupied residential property be maintained. This creates unnecessary friction between the rental market and own homes.
The CoT also recommends that rezoned land be subject to capital gains tax. This is smart, treating land like any other capital, thus improving capital allocation. It would further depress the land market, though.
Returning to the property tax, the CoT recommends that house values be self-assessed. This creates a problem with asymmetry of information. In fact, the CoT immediately adds that the Revenue Commissioners would not have a clue about the value of houses. This part of the proposal would create the new national sport of property tax dodging.
It seems, though, that the political leadership is not too keen on the property tax. I would suggest that it’d be introduced in 2011 and that 2010 is used to build up a database for “objective” valuation of residential property. In other countries, the “taxable” value of a house is typically far below the market value (so that no one can challenge the tax person) while the tax rate is fairly high (so that revenue is not affected). Building up the data can be done in a year, and would actually employ a few recent graduates.
The Commission on Taxation recommends that water charges be introduced. High time. Giving away a valuable resource has never been smart.
There are two additional recommendations by the CoT.
Water charges should come in two types: Flat rates for those without meters, and volume-based rates for those with meters. If the flat rate would be set at approximately the average volume-based rate, then a substantial fraction of the population would have a reason to install a meter. If the flat rate is then adjusted to the average volume-based rate OF THOSE WITHOUT METERS, meters will soon be installed everywhere. If not, there will be a subsidy flow from those who save water to those who do not.
It’s a pity that water data are so poor that we do not even know the average drinking water use per household with some degree of confidence.
The CoT also recommends that local authorities be local monopolies in supply, and that the price be regulated, presumably by a new Commission on Water Regulation. Old habits die hard.