Tuesday, 7 June 2011
Question 25: To ask the Minister for Finance the reason he was unable to provide the Commission on Taxation with costings for 42 of the 131 tax expenditures that were in place at the time of the Commission's research for its 2009 report; the number of these tax expenditures currently in operation; if he will provide an estimate of the cost to the State for 2008, 2009, 2010 and projected cost for 2011 from these 42 tax expenditures; and if he will make a statement on the matter. [14499/11]
The Deputy will be aware that the Office of the Revenue Commissioners is the main source of statistics and data on tax incentives and expenditure. However, Revenue's primary functions are the administration of the tax system and the collection of tax. The extraction of statistical information flows from those primary functions.
In Part 8 of its report the Commission on Taxation reviewed 115 tax expenditures that were in place at the time. Of these, costings were provided for 73 expenditures and it is accepted that Revenue were not in a position to provide tax cost estimates for 42 of the tax expenditures examined in the report. One key reason for this is that many of the tax reliefs in question relate to incomes which are tax exempt and not required to be returned to Revenue, for example, those of credit unions, sports bodies and charities. Others are constituent parts of larger tax reliefs where estimates of cost are only compiled by Revenue at aggregate level. In situations such as these the detail at sub-aggregate level is either not sought or provided in annual tax returns or is not separately captured on the computer system which generates the statistics. Another reason for the limited data is where new reliefs had been recently introduced and the relevant tax returns were not due until after the publication of the commission's report.
In recent years, the Department of Finance and the Office of the Revenue Commissioners have worked closely to identify mechanisms for enhancing the level of information captured in respect of tax reliefs, and significant progress has been made in that direction. However it is necessary to balance the need of the Exchequer for statistical information with the desire to minimise, as far as possible, the administrative burden placed on individual taxpayers and on the business community.
In addition the Revenue Commissioners have made major advances in data capture and in the e-filing of tax returns to create a supportive environment for acquiring tax-based statistical data. The development of e-filing was the specific recommendation of the Commission on Taxation in respect of securing additional data relating to tax expenditures.
As regards these 42 tax expenditures I can now provide additional information in respect of nine. Five have been abolished including long-term care policies, BIK exemption for employer-provided art objects in a heritage building or garden, accelerated capital allowances for farm buildings for the control of pollution, payments made to National Co-operative Farm Relief Services Limited and payments made to its members, and investment allowances in respect of mining exploration expenditure and plant and machinery.
There are four further measures which Revenue has been able to provide cost estimates for, namely, stamp duty exemption for single farm payment entitlements, estimated at €2,845; palliative care units, for which no claims were allowable as the scheme was not commenced; relief for investment in renewable energy generation, namely, €100,000; and the mid-Shannon corridor tourism infrastructure investment scheme, namely, €700,000.
According to his reply, to date the Minister for Finance cannot outline to the House the cost of 33 tax reliefs, namely, almost one in every three tax reliefs that exist in this State. Some of the information was truncated but I presume that is what is stated therein.
I refer to the report in 2009 of the Commission on Taxation. Of the 42 reliefs, five were abolished, the Minister can provide additional information on four but cannot do so for the remaining 33. A number of them apply in areas such as health, enterprise and employment. When we come to deal with Committee Stage of the Finance (No. 2) Bill how will we be able to make accurate decisions in this regard if we do not have information as to how much these tax reliefs will cost? Does the Minister plan within his Department to have information prior to the 2012 budget on all the other 33 tax reliefs available? Will he publish the costs and benefits that apply to each of those tax reliefs prior to the budget?
At a level of principle there is merit in the Deputy's point. However, the primary purpose of the Revenue Commissioners is to collect tax. It is obviously very useful if they supply us with data so that when the Government makes decisions on the incidence of taxation it knows where to direct it. However, the Revenue has information on all principal tax reliefs and those for which it does not are minor in nature. I reiterate there are 33 remaining tax expenditures, or, as the Deputy terms them, tax reliefs, for which the costing data is not available. However, the bulk of these are small in nature and targeted at particular deserving sectors that continue to need support from the Exchequer. A number of tax expenditure measures support Irish sport, for example, and there are income tax exemptions and capital gains tax exemptions for sport bodies. Others support Irish charities, such as capital acquisition tax exemptions from gifts taken by charities, in addition to income tax exemptions. A significant number of the measures support the farming sector, for example, capital allowances on the purchase of milk quotas and capital gains tax relief for the disposal of a farm on retirement. Others include measures to support the unemployed, such as the income tax exemption for termination payments related to death or injury, and benefits in kind exemption for retaining a part of a redundancy package.
The information on big yield or big cost tax reliefs is available to me, as Minister for Finance. If I wish to change the reliefs in the budget I have that information. I am advised by Revenue that those reliefs for which it does not have information are small in nature and limited in cost or yield. The reason Revenue does not have such information is probably threefold. In the first place, Revenue does not wish to add additional bureaucracy to compliant taxpayers in order to gain a great deal of information that is of little value. More important, it must measure the cost of obtaining information and the manpower required to so do against the potential yield or cost to accrue from any such benefits.
I believe the situation is in order even though the Deputy has a case to criticise at a level of principle. I will make further inquiries.
I do not argue the merits of tax reliefs and expenditures among the 33 quoted. Does the Minister believe it is good practice that, as Minister for Finance, he does not know the costs of almost one third of all tax reliefs in the State? How can he, as Minister, make any decision on any of those reliefs or how can we, as Opposition, make proposals in their regard if we do not have a clue about how much tax is foregone to the State? The Minister is making guesses as to why we do not have the figures. Does he intend to have them? Is it not good practice for us to have the cost, or at least the estimated cost, of all tax reliefs? We do not have any figures for one third of them.
It is acceptable, provided Revenue can assure me that the cost of the tax reliefs is nugatory and that if they were abolished the yield would be insignificant. Revenue can do that. If it tells me a certain tax relief exists but does not amount to more than €50,000 there is no point in diverting resources from tax collection into an examination, purely in order to have statistics. One might lose more revenue than one would gain. However, if there is any serious tax relief to which the Deputy can draw my attention, concerning which he believes the cost is great and the abolition thereof would lead to a significant yield, I will ask Revenue to provide as detailed a costing as possible.
If the Deputy can bring any serious tax relief to my attention - if he thinks its cost is big and its abolition would lead to a significant yield - I will get the Revenue Commissioners to do as detailed a costing as possible on it.