A flat-rate property charge on households is one of the options being considered by the government in the run-up to the next budget, which is shaping up as even more challenging than last year's.
Savings of €3bn are required in December, but as it will be politically impossible to achieve that solely from cutbacks, it is believed that €500m to €700m will have to come from a broadening of the tax base.
The success of the €200 property tax on second homes – which has brought in around €70m since its introduction – has focused attention on the potential for introducing a similar modest charge on property and domestic services.
There are almost 1.5 million households in the country and, while any scheme would inevitably exclude local authority housing and those dependent on social welfare, even a relatively modest charge offers scope to raise €200m to €300m.
The government has committed itself in the programme for government to introducing a site valuation tax (a form of property tax) and water charges.
However, first it has to value all sites in the state and introduce water meters in every home, which could take years.
Because of this it had been assumed that a property tax was off the agenda for this year's budget. However, with the budgetary situation so challenging, the option of an interim measure to raise money will have to be considered, senior political sources told the Sunday Tribune.
The government is likely to look to widen the tax net to include some of the 50% of workers who are now exempt from paying tax – a figure that is unparallelled among OECD countries.
In his budget speech last year, finance minister Brian Lenihan flagged his plans for a new universal social contribution. This would replace PRSI, the health levy and the income levy and would be paid by everyone at a low rate "as a collective contribution to public services", he said. This is seen as the most likely way of bringing more workers into the tax net.
Both an interim domestic property charge and a widening of the tax net to include lower-paid workers are likely to be strongly resisted by government deputies in both parties. One Fianna Fáil TD said a flat-rate property tax "wouldn't wash" and "would be very inequitable", adding: "I cannot see Minister Lenihan going for it."
The government is still some months from making any final decisions. However, the budget options facing it are stark.
With €1bn in capital cuts already pencilled in, it has to find €2bn in savings on current spending. But there can be no repeat of last year's cut in both public sector pay and social welfare rates, so it will be extremely difficult to come up with the required cutbacks.
"You won't get all of the €2bn on the expenditure side. As it is, health is going to get an awful wallop. There will have to be new taxes," one senior government TD said.
In a clear sign of the challenge facing the cabinet, government departments have been given a deadline of tomorrow to deliver their spending plans for next year – kick-starting the traditional estimates process months ahead of normal.