Dr. Tom McDonnell:

We have a lot of tax expenditures related to housing, for example, which obviously would have no impact on enterprise. We would see some of the recent schemes that have been brought in that increase demand for housing, such as help to buy and so on, as obvious ones for the chopping block. We would see shared equity schemes and those type of policies as having very minimal actual benefits and offering very poor bang for buck. That is what we need to think about: the employment and distributional impacts. Are they distorting a market or are they actually helping? Those would be fairly obvious ones to me. I would also note a lot of the environmental fuel subsidies, perhaps, would be seen to be counterproductive in terms of greenhouse gas goals. Overall, the Commission on Taxation and Welfare pointed to a menu of measures amounting to about €14.5 billion, although obviously no one would want to do all of them. There were calls for reform of the VAT system as well. We could bring down the overall rate if we increased some of the reduced rates to remove distortions there.

One obvious one would be in the realm of inheritance tax and the agriculture and business reliefs there. We could say the business relief might perhaps affect enterprise, although I will come back to that in a second. There is potentially hundreds of millions that can be gleaned there that really goes to the very top of the income distribution. We know from the wealth statistics that those type of assets are really only held by the top 10% of the distribution. We also note from the literature that actually second and third generation firms tend to underperform and it might actually be better to induce a transfer to a different entrepreneur who might use the business better. Those type of measures might actually make the economy weaker in the long run. On the VAT issue, it is topical at the moment but essentially it is a massive tax expenditure already because it is already reduced by slightly less than ten percentage points. That works out at billions already. It is not clear why a low value added sector would get it when other sectors of the economy would not. Normalising would seem to be the logical choice there.