Oireachtas Joint and Select Committees

Wednesday, 3 November 2021

Committee on Budgetary Oversight

Remit, Terms of Reference and Priorities: Commission on Taxation and Welfare

Professor Niamh Moloney:

I thank Deputy Canney. It is very helpful for me to have this interaction with the Deputy and all his colleagues. I appreciate it, particularly because I am aware that the committee has a very busy schedule this evening.

I thank the Deputy for raising a very distinct part of the job of the 2021 Commission on Taxation and Welfare. A distinctive feature that has not been a feature of other commissions so far is the focus on the interaction between the tax system, incentives that make it worthwhile to work, the welfare system and all the various incentives along that chain.

Our terms of reference bring us right back to supporting economic activity, and prosperity and employment, while also being very cognisant of those who are most vulnerable in society and taking a fair and equitable approach. This is something that is novel and we embrace it. As the Deputy said, it is in that interaction that we are at the crux of the issues of prosperity, economic incentives and supporting people in the best possible way. It is something we are looking at and taking very seriously.

There are many different facets to this, including the points of interaction between when it is worthwhile to work, given the return from work, the different forms of tax charge and the point at which they activate. These are technical issues but they are very important. For someone who is going to work and moving from one threshold or rate to another, it is very important we have the mandate to look at that, the impact it has, how those different rates, bands and thresholds all fit together and how they feed back into our terms of reference of supporting our prosperity and the economy. I very much welcome that part of our terms of reference. The comments the Deputy made in that regard are very valuable and I thank him for them.

Regarding the issues of business premises and rates, one of the themes undercutting our terms of reference, alongside the interaction between tax and welfare, is the interaction between much of the tax code and smaller businesses and SMEs because we run the gamut on that. On tax administration, for example, it is very important for small businesses that the tax system is navigable and not overly complex and that the administration of it works effectively. Equally, and some of the statistics are very stark for small businesses, 91% of all businesses employ fewer than ten people. That is the absolute beating heart of our economy so it is very important the tax system is cognisant of that and reflects those sorts of challenges in allowing small businesses to grow in scale and to start.

A whole ecosystem sits around that, from corporation tax through to income tax, different reliefs and the commercial rates system and how it works. Again, it is this sense that, for a small business and the system within which it sits, whether it is the tax wedge that applies as it pays its employees, how the commercial rates system works or the administration of the tax system as it engages with it, these are all very important matters for us to look at holistically. We need to stand back and ensure, especially for smaller businesses and entrepreneurs, that all this is working effectively. I thank the Deputy for his comments. They are well noted and will be very helpful for us as we go forward.