Dáil debates

Wednesday, 7 February 2007

3:00 pm

Photo of Dan BoyleDan Boyle (Cork South Central, Green Party)
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Question 108: To ask the Minister for Finance the existing available tax reliefs and the estimated tax foregone in the most recent annual period from which information is available. [4209/07]

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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The Deputy may wish to note that a table headed Classification of Tax Reliefs — where Tax Expenditures Go and providing classification of the income tax reliefs costing an estimated €11.6 billion for 2003, the last available year, is included on page B.15 of the Budget 2007 book. This gives a full breakdown of the reliefs in question. I will read out the details if the Deputy wishes.

Photo of Dan BoyleDan Boyle (Cork South Central, Green Party)
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The Minister should be aware that my supplementary question is a development of the point that the most recent statistics relate to 2003. A significant amount of alteration has occurred in the tax reliefs available. The Minister has chosen to extend some but he has not renewed many and some have been brought in that have not been costed since 2003. The Minister has also indicated in the last two budget speeches a new procedure for assessing the introduction of new tax reliefs. However, this does not seem to be as open as it could be.

Will the Minister consider making statistics of this type available on a regular basis? He could measure not only the anticipated tax expenditure with each of these tax reliefs but where loopholes have been identified with each of these tax reliefs — I have brought them to his attention before — the estimated amount of loss to the State as a result of each loophole. Each year the Finance Bill prevents a number of loopholes being closed. Members of this House and the public are given no assessment of the loss that has been accruing to the State as a result of the existence of those loopholes. Has the Minister any proposals in mind for making this information more widely available?

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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The two major reports on tax reliefs undertaken in the context of last year's budget were published along with the Finance Bill. They give a detailed and clear assessment of many of these reliefs. The majority of the moneys are in respect of the following categories. Basic personal credit amounts to more than €5 billion; personal reliefs such as child benefit, €327 million; mortgage interest relief worth €222 million; private health insurance, such as VHI and BUPA, €191 million; PAYE expenses, €112 million; reimbursement of health expenses, €82 million; other reliefs such as trade union subscriptions, rent reliefs and redundancy reliefs are worth €80 million, bringing a total of personal reliefs of more than €1 billion. Other discretionary or incentive reliefs on pensions amount to €2.8 million; capital allowances for companies include over €1 billion for self-employed and €560 million for farmers; for SSIAs it is €530 million; Government savings schemes, €230 million; rent and residential reliefs for section 23, €69 million; charities, €49 million; profit sharing schemes, €36 million; artists, €22 million; films, €25 million; business enterprise scheme, €17 million; maintenance of spouses, €15 million; others, such as heritage items and stock relief, €108 million. This gives a total of €11,647 billion.

The majority of the reliefs I have cited are in respect of credits and reliefs available under the tax system for the vast majority of taxpayers. When pensions are included, these reliefs account for more than €9.5 billion of the total figure, which includes entirely legitimate items such as capital allowances for business, etc.

In circumstances in which Revenue seeks to change a tax provision on the basis of how the courts subsequently interpret it or as a result of a practice that develops beyond the contemplation of the specific section, when enacted, it advises the Department and I take its advice in practically all cases. It would be open in an individual case for a Deputy to table a parliamentary question to determine whether Revenue could estimate the expenditure incurred.

Photo of Dan BoyleDan Boyle (Cork South Central, Green Party)
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I do not want circumstances to arise in which it becomes necessary to commission a further three-volume report examining the effects of particular tax reliefs. The massive Indecon report dealt only with property based tax reliefs. The information available to Deputies is out of date. We have still not been informed what type of public accountability mechanism the Minister has introduced for new reliefs, what type of modelling was carried out and what decision was made on the basis of information supplied to the Minister. We must be better informed if loopholes and wanton abuse of tax reliefs are to be avoided. The current system invites future reports of the type finance spokespersons had to wade through last year and could result in widespread overuse of tax reliefs, which would render them ineffective. I ask the Minister at least to consider making the relevant information available in a more timely manner and improving awareness of the citizenry, specifically taxpayers, as regards the way in which decisions on tax reliefs are made and the effects of such reliefs.

Photo of Brian CowenBrian Cowen (Laois-Offaly, Fianna Fail)
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The Deputy is being a little unfair in neglecting to mention the benefits delivered by tax reliefs, as outlined in the Indecon report. It emerged from the report that many of the reliefs could be phased out because the economic objectives for which they had been introduced had been broadly achieved. Considerable benefit accrued from many schemes, including in the area of urban renewal and regeneration, and there are many excellent examples of incentivised investment delivering real community benefit in addition to personal benefit to those who availed of the schemes. For this reason, I do not take as negative a view as Deputy Boyle.

The consultants also left open the possibility of introducing further tax relief schemes in future. They did not rule out new schemes but stated they should be assessed. The Department has done this and the most recent scheme, announced in the Finance Bill, includes characteristics in line with what was recommended. The consultants may regard the proposal as having limited potential because it is not in a traditional tourism area. This is precisely the reason some incentivised investment might help. The approach envisaged, under which a certification body will be brought in and a quality assurance mechanism will determine eligibility under the scheme before construction of any facilities, is sensible and one I am willing to adopt.

The Department is learning. It does not propose to give open-ended approval or take a non-time limited approach. We have taken on board some of the ideas Indecon stated should be part of any future tax relief schemes. As I indicated, it is possible that economic objectives in specific areas of activity may be more rapidly or best achieved by some degree of incentivisation. One can assess the measures subsequently. Having a certification body will assist the Department in making precise assessments of the projects which receive approval and the expenditure involved.