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New CPA President warns of dangers of unsustainable tax base

The newly elected president of the Institute of Certified Public Accountants in Ireland (CPA Ireland), Nano Brennan, has warned that failure to establish a sustainable tax base will lead the country into another fiscal crisis.

Calling on the new government to act urgently on this issue, Ms Brennan said: “We now find ourselves in the situation where health spending could be cut as a result of the suspension of water charges. If ever there was the case for broadening the tax base to ensure that resources are available to fund all of our public services all of the time, this is it.”

Welcoming the election of the new government Ms Brennan said: “The election of a Taoiseach and government by the Dáil fully ten weeks after the general election is indeed a welcome development. The caretaker administration had done an admirable job under the circumstances but that situation couldn’t have been allowed to continue indefinitely.”

Of greater concern to Ms Brennan is the nature of the negotiations which led up to the agreement on the programme for government.

“The focus seemed to be almost entirely on spending with little thought given to potential outcomes or the value for taxpayers’ money to be achieved. The implementation of the new programme for government will require a dramatic aggregate increase in public spending but little thought seems to have gone into where the money is going to come from to pay for it.”

Ms. Brennan said “At a rough estimate there are well over 100 commitments to new spending in the programme but no detailed estimates of the costs of them or how they will be paid for. If any commercial business was to prepare a business plan in a similar manner, it would quickly go out of business.”

“Relying on continuing economic growth to deliver the uplift in revenue is not sustainable” she said.

“As recent history has shown us, it is far from a sustainable model on which to base our public finances. We only have to look back to 2008 to see what happened when employment and property tax revenues went into reverse. The crisis in the public finance was unprecedented in the speed at which it took hold and the knock-on effects throughout the economy are still being felt by many citizens today.”

Ms. Brennan called on the new Government to deliver a much broader tax base than one which is over-dependent on taxes on income, spending, and profits. “Any reverse in the world economy will impact on all three of these throwing us into a perfect storm once more. The introduction of residential property tax and water charges were genuine attempts to broaden the base but unfortunately faced huge and largely unjustified opposition.”

“The real disappointment with the outcome of the government formation negotiations relates to the fact that the country still runs an annual budget deficit and any increase in spending on one area must result in a cut in another. Increased borrowing simply isn’t an option given our obligations under the Stability and Growth Pact. Health and education could therefore be hit as a result of the suspension of water charges.”

“We can only hope that now that a government has been formed some attention will be paid to this critical area”, Ms Brennan concluded. “If we don’t develop a sustainable tax base now we will surely find ourselves in another crisis before long.”

A native of Kilkenny, Ms. Brennan is a Local Government Auditor, responsible for conducting independent financial and regularity audits of several major local authorities and other local government bodies on behalf of the Minister for the Environment, Community and Local Government.

She qualified as a Certified Public Accountant in 1995, was elected to Council of the Institute in 2011 and was Chair of both the Continued Professional Development Committee at CPA Ireland and the Leinster CPA Society. Ms. Brennan represents CPA Ireland on the Consultative Committee of Accountancy Bodies – Ireland (CCAB-I).