Dáil debates

Wednesday, 17 April 2019

Ceisteanna Eile - Other Questions

Tax Code

11:30 am

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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45. To ask the Minister for Finance if he has examined the recent report by the Committee on Budgetary Oversight in relation to tax expenditures and the estimated cost that revenue forgone could be as much as €10 billion to €15 billion per annum; his plans to implement the recommendations of the committee in respect of same; and if he will make a statement on the matter. [17826/19]

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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I hope the Minister will convey the good wishes he conveyed to Deputy Wallace with other Deputies and parties who may be contesting the European and local elections.

My question relates to the recently published report by the Committee on Budgetary Oversight. Evidence given by Professor Micheál Collins from UCD suggested that tax expenditures could be costing the State between €5 billion and as much as €10 billion to €15 billion per annum. Is the Minister aware that more than 80% of these tax reliefs, once put into effect, have no sunset clauses? Some 23% of these reliefs have never been reviewed.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I am aware of the Committee on Budgetary Oversight's work in the area of tax expenditures, and the publication of a report on the topic earlier this month. The committee met with representatives of my Department and Revenue in January 2019. It also met separately with the Parliamentary Budget Office, and with the economist, Dr. Micheál Collins from the school of social policy in UCD.

The Committee on Budgetary Oversight report acknowledges that estimates of revenue forgone can be different due to different definitions of what is included in tax expenditure. The figures of €10 billion to €15 billion of revenue forgone quoted in the Deputy’s question is from the opening statement to the committee by Dr. Micheál Collins. The Parliamentary Budget Office aggregate cost estimate is in the region of €5 billion based on the Department of Finance's classification which is narrower and is aligned with an OECD’s definition of tax expenditure.

The work on tax expenditures review is a continuous process. The 2017 tax strategy group paper on the topic noted that significant advances have been made in the analysis of tax expenditures. Therefore, in the Department’s 2014 tax expenditure guidelines, a comprehensive analytical process for evaluations and ex-anteevaluations of proposed new tax incentives were put in place.

With regards to the eight recommendations made in the report by the committee, these are currently being considered by my Department and by the Revenue Commissioners.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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The essence of a tax expenditure, tax incentive, a tax break or whatever one wants to call it is that it is provided to incentivise individual taxpayers, companies or others to do certain things, create certain activities and generate economic activity. It is genuinely shocking that there are no sunset clauses. At a minimum, we should try to address an approach this where as companies grow and develop, they contribute their proper share of tax contribution to the Exchequer.

It is important that tax expenditure should be reviewed. The research and development tax credit is a case in point. We know it was intended for a certain type of activity but we have not had sufficient analysis done to find out who and how the country are benefitting from it. I have put forward a Private Members' Bill to create a standing commission which would constantly look at tax breaks.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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It is worthwhile acknowledging that all tax expenditures that have been commenced since 2014 have been subject to sunset clauses. Since that point in time, we have brought in the requirement the Deputy is referring to. In the last four annual reviews done via the tax strategy groups, we have looked at different elements of tax expenditures. In the 2018 report, for example, we included reviews of the employment and investment initiative, agri-tax, help-to-buy, the film relief and start-up relief for businesses. Each year, as we move through our tax strategy group process, we have looked at various tax expenditures.

As the Deputy may be aware, we are currently in the process of doing that for the research and development tax credit. Each initiative brought forward since 2014 has had a sunset clause. The most recent change made by me in the last budget on the tax credit for the film industry was also sunsetted.

11:40 am

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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That is information that the Minister and his Department did not communicate to the Committee on Budgetary Oversight. The essence of the problem is that these kinds of tax breaks, where merited, can be extremely useful in generating economic activity and employment, especially in regions or parts of the country that need employment. We know many parts of the country are not getting the employment bonus that they should be getting which is evident in the big cities and towns. I am at a loss to understand why the Minister, the Department of Finance and indeed the Revenue Commissioners should be so reluctant to provide detailed information so that each year, three years or four years we can make decisions on which have outlived their usefulness and which deserve to be continued and if there are cases for new measures.

Photo of Pat GallagherPat Gallagher (Donegal, Fianna Fail)
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I will afford Deputy Pearse Doherty a short supplementary.

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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I want to focus on one issue of tax forgoing, which is vulture funds in the State buying up billions of euro of assets in the form of individual mortgages and business loans and putting them in structures which are tax-exempt. The Minister is well aware that the vultures are setting up special purpose vehicles under section 110 which means that they pay no tax on the multi-billion euro assets that they hold in the form of Irish mortgages. It is a scandal that they are being sold in the first place but the fact that they are paying no tax on it is another scandal. The Taoiseach said in response to our questions that he would look at this issue. Will the Minister confirm to the House that this will be blocked and not allowed to continue after the Finance Bill this year?

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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In response to Deputy Burton, I am sure that the information I have shared in the House was shared with the Committee on Budgetary Oversight.

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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It was not.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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As I have indicated over the last number of years, we have already looked to review tax expenditure. I thought a good example of that was the work that we did with the film industry. While we might have had different views on the outcome of that review, I do not recall anybody criticising the content of the review or the way that it was being done.

In response to Deputy Doherty's question, as the Deputy will no doubt remember from the debate on the Finance Bill, I committed to reviewing these matters in the context of the tax strategy group process and the papers that it will produce before the summer. I explained the issue that we have with timing and that if we do it as part of the tax strategy group, by that point we will have a full set of data on tax returns from that part of our economy. I will deliver against that commitment and that will inform choices that I may or may not make later in the year.