Michael D Higgins (Galway West, Labour)
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Question 51: To ask the Tánaiste and Minister for Finance if he has proposals to cap the benefit that a person can derive from cumulative tax breaks on investments outside their principal occupation; and the number of persons with an income in excess of €500,000 and bands of €50,000 above that who pay tax at the standard 20% rate or less, including those paying 5% and below, for the most recent year for which figures are available. [29597/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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In budget 2006 I announced the introduction of a limit with effect from 1 January 2007 on the use of tax reliefs, including certain exemptions by some high-income individuals. This measure was designed to address the issue of a small number of individuals with high incomes who, mainly by means of the cumulative use of various tax incentive reliefs, have been able to reduce their income tax liability to a very low level or to zero. Such individuals are no longer able to do so. This provision ensures that such individuals who use tax incentive schemes will have an effective rate of income tax for each year of not less than approximately 20% on the income sheltered by such schemes.

The method used to increase the rates at which these high income individuals pay tax effectively addresses the equity concerns raised over the past number of years while at the same time ensuring the intended incentive effects of tax schemes will continue to be delivered.

I am informed by the Revenue Commissioners that the most recent basic data on incomes available from which information of the type requested by the Deputy could be derived are in respect of the income tax year 2004. The data are set out in detail in the table. The figures show that in 2004, of the 2,544 people with incomes in excess of €500,000, 21% had an effective rate of tax of 20% or less. Within this category, 7% had an effective rate of 5% or less. The data also show that 79% had an effective rate in excess of 20%. It should be noted these figures are historical and predate the changes I have outlined in regard to the restriction of reliefs.

Joan Burton (Dublin West, Labour)
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Does the Tánaiste accept that the taxation system should be fair and equitable? Essentially, the Revenue survey shows that over 10% of earners in the top 400 have a tax rate of 5% or lower. Much of that 5% exists because the Tánaiste changed the statistics to include the payment of DIRT in order to create some notion of these people paying tax.

Does he intend to extend the use of such tax breaks or will he curtail them? The recommendation from Indecon, the consultants he appointed last year, was that from the perspective of economic efficiency none of these tax breaks should last longer than three years and they should not be undertaken unless they are clearly evaluated and subjected to a cost-benefit analysis. These tax breaks are basically State subsidies for the very wealthy. Does the Tánaiste propose to continue and expand them in the forthcoming budget?

Brian Cowen (Laois-Offaly, Fianna Fail)
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I do not comment on specific tax issues but I will answer Deputy Burton's questions to the extent that I can. The issue raised by the Deputy pertains to the roles tax relief schemes play in promoting economic and social development. She referred to a review which I asked to be conducted and which recommends that in the future, consideration should be given to tax incentive schemes on the basis of their being time limited and specific. I certainly see merit in that recommendation.

I do not intend stating what I propose to do in the forthcoming budget. The review took place during my tenure and I have sought to introduce measures to deal with the situation, while recognising that it is not a matter of being opposed to tax incentive schemes per se but of ensuring we target the incentivisation in our tax policies towards new priorities or areas that are now regarded as required in the present economic circumstances.

Joan Burton (Dublin West, Labour)
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The Tánaiste indicated the existence of new priorities. Would he like to tell the House what these new priorities might be in respect of tax breaks?

Has he a clear idea of the cost of the proposals for co-locating private hospitals on the grounds of public hospitals? For every €1 million invested in a private hospital bed on a co-located site, the tax expenditure will be a minimum of €410,000. An additional PRSI element will also accrue.

He seemed to indicate that he is thinking in terms of the budget. What are the parameters of the additional tax breaks and will he follow his consultant's recommendations on a three-year duration and the publication of full cost-benefit analyses prior to the introduction of proposals?

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Deputy clearly made a specific interpretation of what I said. I was speaking about matters of general principle rather than specifically addressing any impending issues. The criteria set out in the tax review report, which I instigated, have a lot of merit.

Joan Burton (Dublin West, Labour)
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The reason I asked is that the Minister accepted the recommendations.

Brian Cowen (Laois-Offaly, Fianna Fail)
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I have accepted the recommendations on the one or two occasions I introduced specific schemes. The Deputy's question was not related to the question she tabled. Rather than surmise and be misinterpreted again, I ask the Deputy to table a question and I will give an accurate answer.

Richard Bruton (Dublin North Central, Fine Gael)
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Does the Minister agree that many people will find it unfair that in 2004 500 people earning more than €500,000 per annum paid less than the standard rate of tax? Does he propose to introduce any new reliefs? He stated reliefs should be time limited and specific. Will he also act on the third recommendation of the report, namely, that a cost benefit analysis be carried out to justify any new relief before its introduction? Will he act on this recommendation before any new reliefs are introduced?

Arthur Morgan (Louth, Sinn Fein)
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Does the Minister believe that increased restrictions on the use of specified tax reliefs by high income individuals would lead to a fairer taxation system? For example, will he consider introducing a ceiling restricting the proportion of income high income earners could use for tax exemption purposes? Would a figure of 10% be reasonable?

Brian Cowen (Laois-Offaly, Fianna Fail)
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As I stated, I introduced restrictions on tax reliefs, the benefits of which will emerge in the statistics over time. Some of those who criticise me did not introduce these types of restrictions when they had an opportunity to do so.

To respond to Deputy Bruton's point, an evaluation of the tax schemes I have introduced was published on the Department's website. I am, therefore, aware of the recommendations. As I indicated, in having a general discussion about tax reliefs I do not want to create anticipation that schemes will be introduced either in the budget or subsequently. This is a matter for decision at the appropriate time.