Dr. Micheál Collins:

I will pick up on the points that Deputy Boyd Barrett made first. The bottom line in every examination of tax expenditure, and one of the first recommendations of the Commission on Taxation in that area, is to say that direct expenditure is always the better route. We should always go the direct expenditure route because it is clear and can be seen. As Deputy Boyd Barrett mentioned earlier, we look at that in a clearer way because, in a sense, we record it in a clearer way. It is always the better route.

One has to make an argument as to why one will do something via the tax system rather than via direct expenditure. The economic crisis of the past few years has come to help with that a little because, prior to the crisis, the view was that nobody notices when something is done through tax expenditure and that, to a degree, it does not count. In a sense, one is deciding not to collect tax so it was not being counted as spending. It was the equivalent of spending but it was not being counted. The economic recession and various changes across all European countries and the various fiscal rules at European level have brought all countries, including Ireland, to a point whereby we need to count everything, whether we are doing it through spending or tax expenditure. That is helpful in bringing greater clarity.

It is fair to say that not all European countries are there yet, given some of the earlier comments on what constitutes tax expenditure and so on. Ireland has come on in leaps and bounds and can continue to do that.

My colleagues in UCD would love me to state that we should take all the research and development tax money that we could possibly bring in. To be dispassionate about it, if the research and development tax credit makes sense, then we should have a report to show us that it makes sense. It has been continually tweaked since it was introduced. There are some strange structures to it whereby corporates get refunds of unused credits and so on. There is certainly potential for change within that. It is an expensive tax relief which is continuing to grow. There is what we economists refer to as deadweight within it. In other words, there are things that are happening, or it is being claimed are happening because of the research and development tax credit, which would probably happen in any event. It is interesting to begin to analyse those. The Department of Business, Enterprise and Innovation estimates deadweight as something of the order of 75% to 80% within the whole area of enterprise support. It is a very small additional gain there and the question is whether it is worthwhile or not. It would be good to see some potential for that.

For a committee such as this, it is interesting to look at that as an area which did not exist a few years ago and now costs €700 million per annum. Maybe that is money well spent, maybe it is not, but it would be useful to have a coherent answer to that.

The argument for film relief has for a long time been based around the employment it creates. I am not familiar with the precise details of the figures but if it is the case that employment is far less than expected, or far more precarious than it might be, or whatever it is, that should throw up questions. Again, it comes back to the point that we should be continuing to revisit tax expenditure measures every couple of years. That is why I felt there might be merit in the committee approaching something like this thematically every so often whereby it picks a theme and goes to it and comes back a couple of years later. That would give an opportunity to gather the information in the interim and to engage with it in that way.

It will be interesting to see where it goes with the carbon tax. The evidence is that expenditure on fuel, etc., is a much greater component of the expenditure of lower income households and therefore a carbon tax is likely to hit them harder. As Ms Sue Scott has shown for a long time, there are good mechanisms in place whereby we can address that and offset some of those costs. There are issues if we are going to take further steps in that area. We are more likely to do that through the direct expenditure route, through welfare payments or some other mechanism, but there are choices to be made by the committee members and others on that.

Deputy Éamon Ryan was right to state that, in tandem with the economic recession, the collapse of Exchequer finances and the Commission on Taxation report all happening at the same time, some very welcome changes were made. Many of the property reliefs, as we continue to see in many cases, were in place to allow people to minimise their tax bills rather than necessarily to provide assets in any serious way for the State. Those were abolished. When the commission sat, it did not directly review them because they no longer existed but it decided to look at them anyway, mainly to make the point in the commission's report that this is something we should not be doing via the tax system. Supporting the development of property in whatever way is not an appropriate thing to do. To a great degree, Ireland has written the textbook as to how not to do property supports via the tax system. It remains a concern that it is often the default answer to this day when we think about how to respond to shortages in this or that. The default answer is to do it via the taxation system and, to a great degree, we have, as a country, proven that we cannot do that.

To their credit, Alan Barrett and others at the ESRI did one of the most straightforward economic reports I have seen for a very long time over the past couple of years. In very simple terms that showed this is not a good thing to do and that using the tax system in whatever way to support property development simply does not work out. That does not stop people proposing it, but it is important to have that evidence.

The Deputy mentioned a very sensible development during that period where a high earner's restriction was introduced. That put a minimum effective tax rate the person must pay when above a particular threshold. That continues to exist. It is still relatively generous compared with what a PAYE worker would pay on the same income, but at least it stopped people moving to a point where they were able to shelter the entirety or most of their income from tax, which had been the case and grew out of the experience Deputy Broughan mentioned earlier where, over a very short period, a whole suite of tax expenditure measures came in and then they started to be managed and used in that way. That continues to exist and is very helpful.

Its structure is interesting. For example, not every tax expenditure is subject to be counted for how much people are using to write against their tax so pensions, which the Deputy mentioned, are not. It is an interesting question as to why there should not be an overall calculation of how much income a person was allowed to offset in whatever way through various tax expenditures.

On the pensions tax breaks, I am very happy to provide to the committee any of the research on that already in existence or as it continues to come out.

The Deputy is right that the Government proposed in the 2009 national rescue plan for the State-----