Oireachtas Joint and Select Committees
Tuesday, 5 February 2019
Committee on Budgetary Oversight
Scrutiny of Tax Expenditures (Resumed): Dr. Micheál Collins
I agree with Deputy Broughan that we need to look at every measure. On the tax and dividend on carbon tax, we asked the Department of Finance to look for an initial analysis of the effect. The latest evidence on that is showing clear progressiveness in that lower income people benefit. That is very clear and is backed up by decades of research by Sue Scott and others showing the same. In all the research I have seen, it seems it is transferring from the wealthy to the poorer in our society.
I remember Dr. Collins time on the tax commission and the really good work it did. As I recall, in the depths of the crash, 2009 to 2011, one of the changes put in was a significant scaling back on all the tax expenditures that were available, particularly the property ones.
It particularly applied to tax expenditure breaks availed of by the wealthiest and, if I recall correctly, there was the introduction of income limits and so on that cut out the flagrant abuse of tax expenditures to favour the very wealthy in our society. Is that a fair assessment of what happened in that difficult period with tax expenditures?
There was a recommendation or a proposal at the time that was agreed by Government to standard rate the pension tax expenditure break. That is probably still one of the biggest of these discretionary tax breaks, along with that for mortgages. I understand that never happened. Has Dr. Collins any history as to why that was the case? I recall that being agreed by Government but I could be incorrect.
I am interested in Dr. Collins' work and concentration on the area of pensions contributions. His report, which he cited in his opening statement, suggested that the median beneficiary or user of a pension tax break is in the ninth decile. It is heavily skewed towards those on higher incomes. I would be very interested to get a copy of the analysis Dr. Collins did on gender because I am sure that will show a similar skewing. It would be timely for this committee to get a copy of that report when it comes in.
We have a large volume of tax expenditure on pensions and, last March, the Government agreed a new system for planning and managing the State pension system. In the context of strand 4 of the research work, it was stated that the Government would look at how to incentivise and support defined benefit contributions and so on. I do not recall, in the context of that announcement or at that time, any commitment to reviewing the tax expenditures for pension contributions. Was Dr. Collins approached or engaged in respect of that matter? Has he looked at that process? Measures will be introduced in the next two or three whereby one would have to opt out of a defined benefit pension. Surely that provides a moment for us to consider reform, review, removal, or certainly adjustment of the tax breaks we give on pension contributions given that, from the analysis that Dr. Collins cites, this is not progressive and may be gender biased. Are there any developments in that regard? If the committee is looking for a recommendation in the upcoming budget, does Dr. Collins think we could use that analysis to make a suggestion to the Minister for Finance that he does something to change that pension contribution tax break?