Oireachtas Joint and Select Committees
Tuesday, 24 March 2026
Committee on Budgetary Oversight
Tax Expenditures: Discussion
2:00 am
Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I ask everyone to turn off all mobile phones and devices or put them on silent. Before we begin, I wish to explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses may make to other persons in their evidence. Witnesses are protected by absolute privilege in respect of the presentations they make to the committee. This means that they have an absolute defence against any defamation action for anything they say during the meeting. However, they are expected not to abuse this privilege. It is my duty as Chair to ensure that it is not abused. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.
I wish to advise members of the constitutional requirements that members must be physically present within the confines of the Leinster House complex in order to participate in public meetings. In this regard, I ask any member partaking via MS Teams to confirm, prior to making their contribution to the meeting, that they are on the grounds of the Leinster House campus. Members are reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative that they comply with any such direction.
The purpose of this engagement is to discuss tax expenditures with the Department of Finance and the Revenue Commissioners. From the Department of Finance, I welcome Mr. Kevin Daly, principal officer, Ms Linda Walsh, principal officer, Ms Deirdre Donaghy, principal officer, and Ms Caitriona Kirwan, assistant principal. From the Revenue Commissioners, I welcome Ms Jean Acheson, head of statistics, economics and reporting. The committee welcomes the opportunity to engage with the witnesses and thanks them for being here today. I invite Ms Walsh to make the opening statement on behalf of the Department of Finance.
Ms Linda Walsh:
I would like to thank the committee for the invitation to discuss tax expenditures and to provide an update on our work in this area. My name is Linda Walsh. I work in the domestic and indirect tax policy division of the Department of Finance and I have responsibility for general policy relating to tax expenditures. I am joined by colleagues from the Department’s tax and economics areas, Cathal Sheridan, Deirdre Donaghy and Kevin Daly, who is joining remotely, as well as Jean Acheson, head of statistics and economic research at Revenue. Other colleagues from our respective teams are also in attendance. I would like to flag to the committee that our colleague, Caitriona Kirwan, from the indirect taxes team, had intended to be here today but, due to other events of which the committee is aware and which are transpiring simultaneously, she is unable to join us. We do not have a representative from indirect taxes area, but we will do our best to answer any questions members have and will follow up in that regard if necessary.
To begin with some context, total tax revenues in 2025 amounted to €107.4 billion. The big four tax heads, namely income tax, corporation tax, VAT and excise, accounted for over 90% of all receipts. The Irish tax base is highly concentrated. Corporation tax is dominated by a small number of large multinational firms. In 2024, ten companies accounted for 57% of corporation tax revenues. A similar pattern of concentration is seen in income tax, which reflects its progressive nature.
Turning to tax expenditures, these are policy tools used to support specific economic or social objectives, functioning as alternatives to direct public spending. They may take the form of tax exemptions, allowances, credits, deferrals or preferential rates. To identify a measure as a tax expenditure, it is necessary to assess it against a defined baseline or benchmark, which represents the normal structure of the tax system. Irish law, specifically SI 508/2013, defines tax expenditures as transfers of public resources achieved either by reducing tax obligations relative to a benchmark tax or by provisions that reduce or defer revenue for a comparatively narrow population of taxpayers. This aligns with the OECD definition. For example, the rent tax credit is considered a tax expenditure, as it was introduced with regard to a specific market failure, is targeted at a defined group and has a sunset or expiration clause. In contrast, standard personal tax credits form part of the benchmark system and are not considered tax expenditures. International best practice supports the principle that tax expenditures should be used sparingly, and only where there is clear evidence of market failure or where a tax-based intervention is more efficient or effective than direct spending. When appropriately designed, tax expenditures can influence behaviour, encourage economic activity and address specific policy challenges.
Under SI 508/2013, the Minister for Finance is required to publish an annual report on tax expenditures - the first report was published in 2014 - and has introduced guidelines for the evaluation of tax expenditures, covering ex ante appraisal and ex post review. These guidelines were most recently updated in October 2024, incorporating recommendations from this committee and from the Commission on Taxation and Welfare and form the basis for our current evaluation framework. In 2025, 11 tax expenditures were reviewed. These reviews are published in tax strategy group papers or as stand alone reports on the Department’s website.
Our approach prioritises expenditures with upcoming sunset clauses. Reviews are generally carried out in house by Department of Finance officials, working closely with Revenue and, where relevant, other Departments. A key recognised challenge in evaluation is data availability. There is a natural tension between the desire for more detailed data to support analysis and the need to avoid imposing unnecessary administrative burdens on taxpayers.
While Revenue data is essential for transparent policy evaluation, the primary purpose of the data collected by Revenue is to facilitate the assessment of tax, in line with the tax legislation in place.
Recent years have seen significant progress. In 2025, the Department published a tax strategy group paper setting out enhancements to the monitoring and reporting of tax expenditures. In the same year, we also introduced the first set of tax expenditure passports, which were one-page summaries for each measure on the master list of tax expenditures. These will be updated annually to reflect the latest data. Importantly, the Department and Revenue have identified a shared master list of tax expenditures which have been published in the annual report and on the Revenue website since 2023. Other credits and allowances not defined by the Department as a tax expenditure continue to be published on the Revenue website also, to support understanding of the tax system more broadly. Looking ahead, we plan to publish the 2026 annual report in July. We are undertaking nine tax expenditure reviews scheduled for publication this year, and we will update the passports in advance of budget 2027. We welcome the committee's questions and will carefully consider any recommendations that may arise out of the session.
Edward Timmins (Wicklow, Fine Gael)
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I thank Ms Walsh very much. I will now open the floor to members who wish to ask questions. As we have witnesses attending online, I ask members to address their questions directly to the appropriate witness in order to ensure that we make the most of our time.
Mairéad Farrell (Galway West, Sinn Fein)
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I will leave it open to whoever wants to come in on this, if that is okay, because it might be easier. I will start with section 110 firms. There is a lot of talk about instability in private credit markets. What concern is there about section 110 firms that currently house some of the largest collateralised loan obligations? Are there are concerns that if there is a crisis, Ireland will be exporting significant risk to other countries and that knock-on reputational damage could occur?
Mairéad Farrell (Galway West, Sinn Fein)
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That is okay. What I might do is ask all the questions I have on this matter, because I am concerned. I am aware that section 110 is niche, but it is niche until it is not. I will pose my questions and then move on to something else if that is okay. Most of my questions are about section 110 though, so it means I have fewer questions to ask. I have a concern about this, and a risk analysis should be done. What risk analysis has been done of the risk these section 110 vehicles pose to other jurisdictions? A problem in this regard would have a reputational impact on Ireland. Are the officials satisfied with the regulation? I believe that regulation here is light touch in nature, and I worry that it is going to leave us in a state of financial fragility similar to that which obtained in 2007. I would appreciate it if the officials could come back to me on this matter. I am happy to leave my questions with them.
The next issue is rent tax credits. I am interested in how the officials measure the effectiveness of tax expenditures once they are introduced. I imagine that the aim of the renter's tax credit was to support renters in a total crisis, but it is not having the desired effect because renting is still totally unaffordable. Given that it was not introduced alongside a policy of rent freezes - I am not asking the officials to comment on the thing itself - it allowed landlords to hike up rents and effectively pocket the tax credit. Has there been an analysis done on the inflationary impact of the renter's tax credit?
Mr. Kevin Daly:
I am from the economics division. I have a small team of economists who do a couple of reviews of tax expenditure evaluations each year. We did a tax expenditure evaluation on the rent tax credit that we published around budget time last year. That review did not look into the matter the Deputy inquired about in the context of the impact of the credit on overall rent levels in the market, so we cannot really answer her question.
Mairéad Farrell (Galway West, Sinn Fein)
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Why not? Who set the parameters for the review? Mr. Daly may say that it was a political decision, etc. I would have imagined that would have been key to evaluating the benefits of the tax credit.
Mr. Kevin Daly:
I was not in the role when the parameters of the study were set. They would normally be set by the tax division responsible, and then we carry out the work. The results are online. The review focuses mostly on an analysis of the distributional impacts of the tax credit. It uses a model called SWITCH, which is done by the ESRI. It divides society into ten cohorts on the basis of income levels. You can then run scenarios to see who is benefiting from the rent tax credit and which deciles would benefit from changes to or increases in it. The main findings were that if we increased the amount of the credit, all the benefits would go to the top six deciles. In other words, the top half richest people in the country who are renting. It was a useful finding, but there is obviously a limit to how much we can put in scope because we are a small team. The more you put into scope, the more difficult it is to complete the work on time. I hope that helps the Deputy. We are happy to engage on the report afterwards if she is interested.
Mairéad Farrell (Galway West, Sinn Fein)
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Is this something the officials will commit to looking at, because surely that is critical information that would be of use to the general public and also to policymakers?
Mairéad Farrell (Galway West, Sinn Fein)
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Do we have them here?
Ms Deirdre Donaghy:
Maybe it is worth thinking about how you would go about trying to establish what level of inflation is derived specifically from the rent tax credit. That would be the difficulty, because you have a lot of factors driving inflation of rents like demand for rent, scarcity of supply, the ability to pay being impacted by wages and disposable income being impacted by other inflation. There would be great difficulty in trying to isolate one fact amid all that, which, I think, would feed into part of the problem.
Mairéad Farrell (Galway West, Sinn Fein)
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I take Ms Donaghy's point, but surely there would be a way of trying to isolate it to a certain extent. Perhaps it would be difficult. I take Mr. Daly's point that his team is quite small. Maybe the bigger issue is that his team does not have enough people to do this work. It would be quite interesting to see how it has changed over the period in question.
I really wanted to use this opportunity to discuss section 110 firms. I will provide the details to the officials, and maybe we can get that back as soon as possible.
Joe Neville (Kildare North, Fine Gael)
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There are a few matters I want to jump between. Can we discuss capital gains tax here?
Joe Neville (Kildare North, Fine Gael)
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How can the Department calculate the tax potentially lost to the State by keeping it so high and not reducing it? When was it increased to its current rate?
Joe Neville (Kildare North, Fine Gael)
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About 14 years.
Joe Neville (Kildare North, Fine Gael)
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It was increased by Michael Noonan, as Minister for Finance, in extreme circumstances.
Joe Neville (Kildare North, Fine Gael)
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How do we know if there is a cost if we do not reduce it?
Joe Neville (Kildare North, Fine Gael)
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They are not taken into account.
Joe Neville (Kildare North, Fine Gael)
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That is what I want to check. If capital gains tax were reduced, there could be an increase activity as a result of increasing the intake. However, the Department does not model it out like that.
Joe Neville (Kildare North, Fine Gael)
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Will Mr. Sheridan say that again?
Joe Neville (Kildare North, Fine Gael)
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Okay.
Joe Neville (Kildare North, Fine Gael)
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That seems like a very static way of doing it. I would never calculate something like that in business. I was an accountant for years. I would never say that if we did something, there would be a linear increase or decrease. No business would ever model anything on that basis.
Joe Neville (Kildare North, Fine Gael)
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No way.
Joe Neville (Kildare North, Fine Gael)
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I am shocked by that-----
Joe Neville (Kildare North, Fine Gael)
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-----because if you want to stimulate investment, reinvestment, support keeping ownership and so on, there can be all these ramifications, but the Department does not model them. It is a linear 1%, and it is €87 million.
Joe Neville (Kildare North, Fine Gael)
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It almost sounds comical. It is strange. That was the nub of the question.
Joe Neville (Kildare North, Fine Gael)
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The way the Department looks at it, if it reduces it to a more normal-----
Joe Neville (Kildare North, Fine Gael)
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If it was never modelled, we would never know.
Mr. Kevin Daly:
The Deputy's point is very good. It is a feature, not only in Ireland but in most countries, that behavioural impacts are not measured. There are some quite valid reasons for this. Obviously, it would be better if we could, but mainly it comes down to reasons of data availability and of methodology around the question of how do you accurately measure them. Pretty much every country has struggled with this. The OECD and the IMF recognise that this is less than ideal in their publication,s but it is the situation in which most countries find themselves. That is not a satisfactory answer, but this is one that pretty much all countries have struggled with.
Joe Neville (Kildare North, Fine Gael)
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All right. I will not dwell on this. I am happy Mr. Sheridan cleared that up. I did not know that it was even as simple as that, and €87 million is a figure that I can easily lean into.
I will change tack. Can we discuss personal investment in exchange-traded funds, ETFs? It is pertinent. I know this is not necessarily related to tax; it is deemed disposal. The rate is at 38%, which is a reduction from 40%. Rather, it was 41%. What was the logic of reducing this by 3%? What would the tax take have been from ETFs before? Do the officials know what the tax take was from ETFs last year, for example?
Ms Deirdre Donaghy:
I cannot tell the Deputy offhand because that would not be a tax expenditure. On the change and the reason for it, that goes back to the funds review published by the Department of Finance which looked at various issues in relation to the funds sector including taxation of investment funds. It was a recommendation to look at the treatment of ETFs. The first stage was taken in last year’s budget. Further work is going on this year in the Department on the area of taxation of investments.
Joe Neville (Kildare North, Fine Gael)
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Between the deemed disposal and the high tax rate, it almost seems as if the Department does not want people to operate in that space. If you are going to be taxed at 41% and you have to do a deemed disposal after eight years, it seems the Department does not really want someone to do it.
Joe Neville (Kildare North, Fine Gael)
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The Department is basically telling people that there is nothing to be gained. It is not an investment route that it wants people to go down.
Ms Deirdre Donaghy:
I would not say that. The reason the eight-year deemed disposal was brought in was because, in the absence of a provision of that nature, you could have investments that went in, were rolling up and basically indefinitely deferring taxation on it. The policy decision at the time when the eight-year deemed disposal was introduced was that what was involved was not in the best interests of the State and that there could be gains building up that our taxation was indefinitely deferred upon outside of a pension fund which is specifically set up to operate in that manner. When it comes to the gains-----
Joe Neville (Kildare North, Fine Gael)
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Yes, but you would not do that with houses – with a second or third house – businesses or anything else. It was just specifically ETFs.
Joe Neville (Kildare North, Fine Gael)
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It was specifically in that area.
Joe Neville (Kildare North, Fine Gael)
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Ms Donaghy can see how bizarre it would be. Maybe "bizarre" is not the right word, but she can see how it makes people not want to invest that way because otherwise it would be a sensible way of personal investing. Instead, the Department is just pushing people away from it by doing the deemed disposal. Imagine someone bought a house in 2006, 2008 or whenever this rule was brought in. You would want them to do that after eight years. Obviously, we know what happened to the economy afterwards, but who knew that was going to happen at the time? At the same time, however, you would not want them to do that with a second house or some other type of investment.
Joe Neville (Kildare North, Fine Gael)
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On the capital gain after eight years, however, you would never do a deemed disposal. You could have a house for 40 years. Some people bought houses in 1980, and they still have them as second houses. If they had invested in ETFs, then under the current rules, they would have had to do deemed disposals in 1988.
Joe Neville (Kildare North, Fine Gael)
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Yes. I know.
Joe Neville (Kildare North, Fine Gael)
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I am just saying that the policy is pushing people down a certain path; it is pushing people away with 41% as well.
Joe Neville (Kildare North, Fine Gael)
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They kind of are because they are the kinds of investments that a person might wish to make if they have extra money. We have a system in Ireland where the guts of €170 billion is sitting in personal bank accounts. People will either invest in houses or in stocks and shares. Historically, it has been in a second or third home when people had extra money. That is probably less the case now, so we have to have other suggestions. All I mean is that when someone has to make a deemed disposal, we have such high tax rates. People do not seem to have options. Hence, we are seeing this huge growth in personal savings.
Joe Neville (Kildare North, Fine Gael)
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I know. These would have been in place for years. That is all I am saying.
Joe Neville (Kildare North, Fine Gael)
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All right. That is it from me.
Johnny Guirke (Meath West, Sinn Fein)
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I thank everyone for coming in. A high-net-worth individual is someone worth €20 million or more. Ireland has 1,600 such individuals according to the latest data - it dates back to 2024 - available from Revenue. Of this group, 250 are non-resident for tax purposes. The most recent Oxfam report shows that number of members of the Irish billionaire club rose from nine to 11 last year. Their combined wealth increased by more than one third to just over €50 billion. To visualise what over €50 billion looks like, Oxfam said it could carpet the whole of the Phoenix Park in €50 notes almost one and a half times over. Jim Clarken, CEO of Oxfam Ireland stated:
It’s time for governments to stop protecting billionaires and to prioritise investing in people. A fairer, more equal world is essential for a liveable planet, global democracy and the eradication of poverty.
It might be a question for Ms Acheson. What is the feeling about this in Revenue, as we see people at the pin of their collar in energy poverty and all kinds of poverty? Some 20% of single mothers are in consistent poverty, while billionaires pay little if any tax in the country.
Johnny Guirke (Meath West, Sinn Fein)
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Yes.
Mr. Cathal Sheridan:
There is generally a discussion around this on Committee Stage of the finance Bill. The general view is that we do have forms of wealth tax at the moment. We have capital gains tax, capital acquisitions tax and taxes on various properties. We have stamp duty on the transfer of shares. That generates a significant amount of revenue in a particular year.
A review was done in 2016 by the Central Bank on the general wealth tax area using CSO cost-of-living income. The then Minister, Mr. Donohoe, committed during the finance Bill process last year that we would do an update on that particular work from 2016, using 2023 data from the CSO. The ESRI and the Department are doing further work on that as we speak. A report is due to be delivered towards the end of the year on this matter. That will look at that particular issue.
My understanding is that Spain has a wealth tax. Within the EU, it is probably the only country that has one. There are challenges in implementing and applying it because there are a lot of people there who are asset rich but do not necessarily have liquidity. Trying to get the balance right in developing such a tax is quite difficult. It is something that is there in the background. We need to see this particular report, the update from 2016. From an official perspective, that is really all I can say. Ultimately, the decision about a wealth tax is a matter for the Minister and the Government. That is just an initial perspective on it.
Johnny Guirke (Meath West, Sinn Fein)
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Would it be something the Department would support?
Johnny Guirke (Meath West, Sinn Fein)
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When high earners and high-net worth individuals do not pay their fair share, the burden falls harder on low- and middle-income earners. A little more tax would not crucify people who are making that kind of money. It is something that comes up all the time and I was just wondering how the witnesses felt about it.
Why does the 2025 tax expenditure still have no costs or even estimates? Examples are the capital gains tax relief for entrepreneurs, the tax relief on pension lump sums and the mortgage interest tax relief.
Mr. Cathal Sheridan:
All I can say on the pension lump sums is that there are data issues. My understanding, which is subject to correction from Revenue, is that there is a mix of lump sum and redundancy payments together and that separating the two is problematic. Revenue may have a view on that. Does Jean have anything to say?
Ms Jean Acheson:
Yes. A portion of the data collected by Revenue is to assist with assessing tax, as provided for in the legislation. In some instances, which Mr. Sheridan cited, Revenue does not collect the data, but that is a reflection of the legislative provisions underpinning specific tax reliefs.
Mr. Sheridan called out one there, which I think was mentioned at a previous session of this committee, namely, the entrepreneur relief. To clarify, that was very quickly overtaken by something called the revised entrepreneur relief. It is that relief that we collect data on and use to produce the annual estimate of cost.
I can provide other examples of why we do not collect the data, if the Deputy wishes. I think he mentioned CGT. In essence, if we do not collect the data, the primary reason for it is to do with the legislative provisions underpinning the tax. First and foremost, the tax returns are designed to assist taxpayers to comply with their obligations under the legislation.
Ms Linda Walsh:
If I could come in on the data, the revised guidelines do recognise that data availability and collection should always be considered as part of evaluations of both proposed tax expenditures and ones that are in place and are being reviewed. As Jean said, in many cases Revenue does not collect the data because it is not necessary for the administration of tax. It is not always possible to impose that additional data onto tax returns as that would put an additional administrative burden onto taxpayers. The administrative burden and the cost of compliance is something that frequently comes up with stakeholders. For example, at the tax administration liaison committee, which Revenue runs, and at the cost of business advisory forum, the cost of business and the compliance burden regularly come up. While it is recognised that the greater availability of data would assist with evaluations, there is that tension between collecting the data that is necessary for tax administration, trying to keep the simplification agenda going and trying to minimise the administrative burden on taxpayers, but also having the correct data for policy analysis. It is a challenge that will always be in place with analysing and assessing tax expenditures. It is certainly something that we recognise. Whether enough data is available to undertake a substantial review of the tax expenditure is built into the guidelines for reviews.
Johnny Guirke (Meath West, Sinn Fein)
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I thank the witnesses. A lot of people I deal with tell me how hard it is to contact Revenue, in particular elderly people who cannot use the online service. We can never underestimate the value of face-to-face meetings. Do the Revenue Commissioners see any improvements being made to the accessibility of the service and information provided to people, especially older people?
Johnny Guirke (Meath West, Sinn Fein)
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I am sorry about that. That is fine. I thank Ms Acheson.
Aindrias Moynihan (Cork North-West, Fianna Fail)
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I had a couple of questions lined up, but the last question is certainly a topic that has been raised with me again and again by constituents. I refer to the inaccessibility of Revenue and the reduced phone service. Revenue is out of arm's reach. These are people who want to make sure their business is in order. They are the people we want to keep onside. They find it a real struggle to deal with Revenue. The reduced access is so difficult. There must be some effort from Revenue's point of view to make it more accessible to people who ring up and do not want to spend a huge amount of time on the phone trying to deal with it. The fact is that they are only available for limited hours. It is not good enough that Revenue is hiding away and inaccessible in the way that it is. There should be some questioning of it. It should be accessible to people who want to get their tax affairs in order and who very often want to make minor enough changes, but it is such a struggle to deal with Revenue on that inaccessible phone line.
Ms Jean Acheson:
I cannot speak to this as I do not represent that part of Revenue. Nevertheless, I am struck by the fact that today we issued a press release on local property tax, LPT. There is an example of an LPT phone line, which speaks to the Deputy's point about that particular taxpayer cohort. They are an older cohort who maybe do not engage that frequently with the Revenue so that is a reason we have a phone line in place for them. I can take away the Deputy's concerns from this meeting.
Aindrias Moynihan (Cork North-West, Fianna Fail)
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It is a serious concern of so many constituents from my area. Revenue really needs to wake up and serve people who are interested in dealing with it and getting their business affairs in order.
There are three areas on which I want to focus: rent tax credit, mortgage interest relief and inheritance tax.
There is a budget set aside for mortgage interest relief based on a certain number of mortgage holders or householders availing of it. I am trying to get a handle on it. It is a restrictive enough allowance that people have been able to draw down. Is everybody who has the opportunity drawing it down, or is money left and going back because people are not claiming that allowance?
Aindrias Moynihan (Cork North-West, Fianna Fail)
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What number of people were they expecting to claim it compared with the 52,000? Are there people who have not claimed?
Aindrias Moynihan (Cork North-West, Fianna Fail)
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Will Ms Walsh please do that? They have based their budget on an estimated number of mortgage holders. One would have an expectation that people might be doing it over the space of a number of years. We are trying to get a handle on how many people are missing out or what the gap is. Will she provide that?
Aindrias Moynihan (Cork North-West, Fianna Fail)
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I turn to the rent tax credit. Has there been any review of that and the opportunity to increase it further?
Ms Linda Walsh:
A detailed review was undertaken of the rent tax credit last year, which was published on budget day. That was carried out between the tax division and economics division. My colleague Mr. Daly, who is online, did a lot of work on it. The decision made last year was to extend it in its current form. There is a Government commitment to keep it under review. Mr. Daly can speak to the specifics of the review last year if that would be helpful.
Mr. Kevin Daly:
We reviewed the rent tax credit last year and published late in the year. The main findings of the review, which I am happy to share afterwards, are that most of any increase in the rate would only benefit the richest half of renters. There is a bit more detail in there but that was the main take away. The level was not increased. I do not know if that was related to the review, but that was the main finding of the review.
Aindrias Moynihan (Cork North-West, Fianna Fail)
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I turn to inheritance tax. Is any review being conducted on that, particularly with regard to the class A available to immediate family? In some cases, and possibly in an increasing number of situations, you have people who do not have immediate family that would fall in under the class A tax band, for example couples who have no children. They may want to pass on the family home to a niece or nephew or the closest family to them. Has any examination been done on changes in the inheritance tax that would take into account a changing demographic?
Mr. Cathal Sheridan:
First, this is very much a policy decision for the Minister. However, last year's tax strategy paper reviewed capital acquisitions tax in a broad way but looked at specific issues within that. We looked at that issue of moving people falling into CAT threshold B, like nieces and nephews or brothers and sisters, into threshold A to qualify for the higher €400,000 threshold.
Aindrias Moynihan (Cork North-West, Fianna Fail)
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That is all the time working within the existing model.
Aindrias Moynihan (Cork North-West, Fianna Fail)
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Are they looking at a new or different model, whether that is a UK-type thing or otherwise?
Mr. Cathal Sheridan:
The UK-type model is an estate tax, which we used to have. I do not know the details of it that well, but my understanding is that ours is considered a fairer system. The model we are looking at, and which we examined within the context of the tax strategy group, TSG, was if we could move people currently subject to the €40,000 threshold into the higher €400,000 threshold. We looked at this for a number of reasons. We are looking at this from a policy-neutral, objective perspective. The first question we asked ourselves was why there was a distinction between these. Historically, the reason is that from the outset of the State our legislative framework has prioritised the family and immediate close relationships over more distant relationships. That is still the case with Article 41 of the Constitution. That explains the legal position. I acknowledge the Deputy's point, which would be that things are changing but that is then a policy decision for any Minister to take account of. We also saw that we are not on our own in making these distinctions between immediate family and brothers and sisters or nephews and nieces. The UK does it and France does it. A lot of other countries do it, so we are not unique there. The third aspect we looked at was the costing of it. From a data perspective it is difficult to cost this properly. However, for the purposes of budgetary arithmetic, the costs we would have to use for this would probably be over €300 million. That would be the cost of moving these people into threshold A. We outline that in the TSG and provide the advice to the Minister. The Minister then makes his decision. It is one of many competing priorities he has to take on board, so he makes the call on that. We looked at it last year and we will probably examine it to some degree again and maybe update the figures and some things this year. That is the position.
Aindrias Moynihan (Cork North-West, Fianna Fail)
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The Department is generating the data and passing it on to the Minister.
Edward Timmins (Wicklow, Fine Gael)
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I have a couple of questions. Some of them have been alluded to. I am concerned about the vast number of tax expenditures that do not have costs against them. There is a list of approximately 25, if not more. Ms Walsh referred earlier to data collection and so on in the minutes. This is also relevant to the Revenue Commissioners. Does she see any improvement in the data collection? When it comes to things like mortgage interest tax relief or rent tax credit, I would have thought the Revenue would be able to calculate the cost of that to the Exchequer. Those are just two examples. My general question is if there are plans to cost every tax expenditure.
Ms Linda Walsh:
I refer to what I said earlier. It is certainly recognised as a challenge that there are some tax expenditures we have no data available for. In those situations, it is primarily because it is not data that Revenue collects or needs for the purpose of tax administration. As proposed tax expenditures are being considered and as tax subventions in place are being reviewed, a criterion assessed as per our updated guidelines is if the data is sufficient for policy analysis. Are there opportunities to gather more data? That obviously has to be balanced against administrative burden and what Revenue actually needs to administer tax.
Edward Timmins (Wicklow, Fine Gael)
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Do the witnesses think the Revenue has the wherewithal to gather the data, for example on rent tax credit? Does it have the ability to do it?
Ms Jean Acheson:
We collect what is required under the tax legislation. Speaking specifically to that, because it is an income tax credit like the mortgage interest tax credit, each year Revenue produces a comprehensive set of statistical tables on income tax. That allows us, or anyone, to analyse something like the rent tax credit according to things like who is claiming across the income distribution and according to certain equality characteristics like gender or age.
We pull in-----
Edward Timmins (Wicklow, Fine Gael)
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Does Ms Acheson know the number of people who claim the tax credit?
Edward Timmins (Wicklow, Fine Gael)
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Multiply that by the credit and one would get the total cost.
Edward Timmins (Wicklow, Fine Gael)
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That information is available then.
Edward Timmins (Wicklow, Fine Gael)
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Okay, good. Is mortgage interest relief a little bit more complicated?
Edward Timmins (Wicklow, Fine Gael)
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Does the Department have a strategy to evaluate the costing on this type of expenditure?
Ms Linda Walsh:
The guideline sets out a prioritisation of tax expenditure. We prioritise tax expenditures that are sunsetting and due to expire that year. They are subject to review. There are criteria set out in the guidelines as to how categories and tax expenditures should be reviewed based on cost. On data more generally, where there are opportunities to collect more data and where the Revenue has an underpinning legislative basis by which to collect that data and provide it for policy analysis purposes, then that is always utilised. For example, an area where the data collection - or certainly reporting - has been enhanced recently concerns one of the tax expenditures, namely, the small benefits exemption. This is in relation to employers providing small benefits to staff. Prior to the introduction of enhanced reporting requirements in 2024, the cost of the small benefits exemption was estimated by the Department of Finance. With the benefit now of the data that is provided through enhanced reporting requirements, we are now able to correctly identify what the cost of that is. The Department of Finance estimate was €8 million. The actual cost in 2024, which is in our 2025 report, was €110 million. We certainly see the value and benefit of gathering more data where there is a legitimate legislative basis.
Edward Timmins (Wicklow, Fine Gael)
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There is a quite significant order of magnitude in the difference between the estimate and the actual figure.
Edward Timmins (Wicklow, Fine Gael)
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I kindly suggest that the more data the Department gathers the better and we would get a more accurate picture of what the real cost of tax expenditure is. That is a good example that Ms Walsh provided. She mentioned in her opening statement that 11 reviews were done. Are there any kind of standout conclusions that the witnesses can share with us on the reviews? I know that is a very broad-based question, but is there anything that stood out like the example that Ms Walsh just gave?
Edward Timmins (Wicklow, Fine Gael)
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When the Department does a review like the research and development tax credit, does it look at the benefits? It does not really measure or estimate what the benefits of that is.
Ms Deirdre Donaghy:
We attempt to but it is difficult to do that because if we have something that is easy to follow from a data trail that is very useful. However, often we are trying to examine something that has benefits that are more qualitative than quantitative. We are trying to estimate positive spillover benefits. For example, with the research and development tax credit, we can count how much of the credit is the claimed in respect of and what activity specifically takes place on research and development. We also know there are a lot of spillover benefits in terms of interactions with third level institutions and bringing second level people through on STEM projects and increasing knowledge that way. Those are things that we cannot quantify. We try to put some reflection in the review on that but it is one that is very hard to put a number on.
Edward Timmins (Wicklow, Fine Gael)
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One of things that is classified as stealth tax is the pension tax relief on income. The Department does not take account that those pension contributions cost the Exchequer income tax in short term, but in the longer and medium term that income is paid back to the taxpayer, and they pay income tax at that point. I see this summary as a little bit out to one side. It does not take account of the other side. Am I right in saying that the Department does not build back in what is estimated in this regard? It is a very difficult thing to measure.
Mr. Cathal Sheridan:
In relation to pensions, our tax system works on what is known as an exempt taxation basis. The contributions that are paid in are subject to tax relief. The contributions are then paid into funds, which are invested, so if there is income generated, they are gains generated. They are subject to tax relief. No tax is paid. When the pension is realised, there is a lump sum paid. No tax is paid up to €200,000. The income is then paid as a pension. We have costings for the cost of the relief for the first part of the contributions, which is the employer and employee contributions. We do not have costings for the investment side of things - the money in the fund - because it would be very difficult to do that.
Edward Timmins (Wicklow, Fine Gael)
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I was making the general point that it is not all a downside from the point of revenue collection.
Edward Timmins (Wicklow, Fine Gael)
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There is an upside.
Another example is health expenses with a tax rebate remaining at 20%. They were higher. That is classified as a tax expenditure. It is cheaper than if medical expenses were free to the taxpayer. That is another way of looking at it. Savings to the Exchequer are being made by virtue of the fact that people are paying for their health expenses, be it the doctor visit or whatever. There is a 20% rebate that one can get from a doctor visit on his or her income tax, but one is still paying 80%. Does the Department look at all of that? I am looking at the corollaries or the other side of the tax expenditure. Does the Department look at stealth tax? The capital gains tax, CGT, was mentioned earlier. Capital gains tax indexation was got rid of over 20 years. It is something that should probably be brought back. That is clearly is a stealth tax that works the opposite to a tax expenditure. The value of one's assets or whatever could remain the same if adjusted for inflation and then one goes to sell and pays capital gains right even though one has not realised a gain. Does the Department look at that? Similarly, the capital acquisitions tax, CAT, has barely been indexed compared with what it was 20 years ago. Does the Department examine stealth taxes?
Mr. Cathal Sheridan:
In relation to CGT, there was that indexation. It still applies for assets held before that date. We have not examined reinstating that indexation in recent times. In relation to CAT, the thresholds have been increased significantly over the past number of years. They were as high as €500,000 back around 2010 or 2011. They fell significantly. They have been increased several times since. That is the aspect we have looked at, rather than the indexation of the assets.
Edward Timmins (Wicklow, Fine Gael)
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Will the Department consider publishing a multi-year forecast for every tax expenditure? For example, for five years ahead.
Mr. Kevin Daly:
I saw it in the previous papers I read and have been thinking about it. At a technical level, it would be extremely difficult. The Department would have to forecast each of the 120 separately. There are 20 or 25 that have no data. Even within those, on what basis would the Department forecast them? It could do a simple linear forecast, which is fine, but I am not sure if it would add a whole lot of value because the policy changes, the amounts change and the legislation as to who can get advantage of these various things changes all the time. The Department could do it for the ones that it has data on, but the only way is probably a linear basis. I am not sure the value of that. It might give a false level of confidence around something like that that is very likely to be incorrect.
Hopefully, that helps.
Ms Jean Acheson:
It is probably worth noting some of the tax expenditures are designed to change behaviour as well and that is quite difficult to forecast.
As a reminder, the Department forecasts the level of the Exchequer tax heads. That is about ten tax heads in total. That job is challenging enough to prepare estimates on.
Edward Timmins (Wicklow, Fine Gael)
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Does the Department plan to do an evaluation on all tax expenditures? The Department has done a lot. It did 11 or whatever recently.
Ms Linda Walsh:
There are a series. They are prioritised for the committee as set out in the guidelines. We prioritise ones that are due to expire in that year. That is down to prioritisation, competing demands and making sure that we have reviews carried out in advance of any budget decisions needing to be made that year. They are prioritised.
Last year, there were two ex-ante reviews carried out which were programme for Government commitments. They were carried out in relation to proposed tax expenditures that were subject to review. Then there was an additional nine carried out that were measures that were due to expire that year.
There has to be prioritisation given to them because have competing demands for resources and we do not have unlimited time, between ourselves and Mr. Daly's team. We work together on them but it would be extremely challenging to review them all given the number of them.
Edward Timmins (Wicklow, Fine Gael)
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When the Department is planning on doing a tax expenditure, does it publicise that? The reason I ask is that if the Department was going to publicise it, does it experience lobbying by people who are affected by that tax expenditure? Does the Department flag it in advance before it is going to do the review or is it done privately within the Department and then the Department publishes the review?
Edward Timmins (Wicklow, Fine Gael)
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But the Department does not flag when it is going to do what reviews. For example, do we know what are the Department's planned reviews for this year?
Edward Timmins (Wicklow, Fine Gael)
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The Department could be doing reviews this year that we do not know it will do. I do not have a problem with that, by the way. I am merely trying to understand how the Department does it.
Ms Linda Walsh:
There are some reviews under way at the moment and there are some proposed. I suppose the challenge is that we have a work programme for the year and as we have seen from the last couple of weeks, international events can overtake. Resources can have to be diverted into different areas which detracts from the capacity to undertake as many reviews as we would like but I suppose it is fair to say that where there are measures that are due to expire this year and where a recommendation will need to be made to the Minister in relation to them, they are being prioritised for review this year. There is not a list published at present.
Ms Deirdre Donaghy:
It would also be the case that when we are reviewing certain expenditures, particularly the larger ones, we would often do public consultation. That would involve putting a consultation paper up on the Department's website and inviting submissions. In general, we would publish those responses that we get in as well on the website afterwards.
Edward Timmins (Wicklow, Fine Gael)
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When the Department does the reviews, are they all made public?
Edward Timmins (Wicklow, Fine Gael)
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I think that is it. We might follow up any questions that were raised earlier, particularly by Deputy Farrell. We might raise that through the secretariat.
That concludes this session. I thank the officials for attending the meeting today. The meeting now stands adjourned until Tuesday, 14 April.