Charlie McCreevy (Kildare North, Fianna Fail)

The question of compiling or collating statistical information regarding the cost of these reliefs has been on my mind for some time. Section 86 of the Bill makes changes in this regard to allow the compilation of extra statistics on the person's income tax return.

This has a history attached to it and much of it is to do with the efficiency, new methodology and changes in practice adopted by the Revenue Commissioners over the past 20 years, which are all for the better. The changes are being made from the old system to the new system. Those of us who remember the old system will testify that it was very labour-intensive with lots of writing to the Revenue Commissioners, lots of questions for them to return and lots of replies. We spent years doing this as did the accountancy practices before we came to the self-assessment system for the year 1988-9.

Over the years the Revenue Commissioners have developed the desk audit principle in that one sends in returns. The Revenue Commissioners nowadays do not wish to have any forms sent to them. They do not need to see accounts, letters or receipts. It is becoming more like that.

Form 11 is very large, containing approximately 20 pages. In order to be more efficient, there are group figures for capital allowances in various areas. For example, most of these questions relating to capital allowances such as urban and rural renewal and seaside resorts are grouped together. This is more efficient but the consequence is that one cannot identify the number of capital allowances going to the various areas of seaside resorts, multi-storey carparks or whatever.

I have been thinking about this for some time. There have been tremendous benefits in the manner in which the Revenue Commissioners have changed their methodology. The capture of relevant information at the same time is the goal without clogging up the system, thus making it more difficult for the compliant taxpayer. In section 86 of the Finance Bill 2004, as passed by the Dáil, there is now a provision under which the forms will be redesigned to capture more information.

As I stated yesterday, the P35 form to be submitted in February 2005 will capture the information regarding occupational pension schemes for employers and the amount they have contributed. There are also other changes. Senator McDowell is correct in this regard. Some information used over the years is exact. For example, it is very easy to do it now on mortgage interest relief because the change is made at source. One does not have to put it on one's form as the Revenue deals with one's mortgage provider. The same system applies to medical insurance relief. Therefore, one can find out the exact costs. Some of the other reliefs such as the capital allowance type relief have not been captured but will be in the future. To get exactitude in terms of the losses, one would have to go through every single tax case which claimed them, find out information from the individual's files and write to him or her.

Some surveys are carried out by tax offices, for example, on the seaside resorts relief and so on but it is not totally exact. The new information will allow this to be captured in an exact form. Some of the costs of the reliefs are exact and some are not. On the survey carried out on the top 400 individual earners, each file would have been gone through to see what allowances those people claimed and how they reduced their tax. That would be an exact figure. One cannot extrapolate from that that all taxpayers are using all those particular breaks. Hopefully the new method of capturing information on the forms will make it much easier to do so.

Senators raised the issue of lost taxes. To be fair to Senator McDowell, he gave a fair commentary on this issue last evening. A balance must be struck at all times. The Senator asked about the loss of tax revenue to the Exchequer and the economic activity a particular tax incentive will give. It has to be accepted by all, including those who write regularly on this subject, including politicians, that tax breaks-incentivised capital allowances will always be used more by high earners. Irrespective of whether reliefs are to the film industry, multi-storey car parks seaside resorts or urban renewal schemes, they will be used in the main by high earners who pay tax at the rate of 42%.

Irrespective of the confused debate on the matter, no one doubts that arising from the benefits of relief for the film industry where there is a competitive market, gains are made in terms of economic activity. There is considerable evidence that much of that relief is being abused. Even if all the abuse were eliminated, the cost of that tax relief would be gained by high income earners. Some Members in the Lower House wanted to have it both ways, which is not unusual for politicians on all sides for generations. It is high income earners who will benefit from these reliefs. One has to weigh up whether the benefit of the relief outweighs the tax loss. One can put any figure one wishes on the amount lost on the seaside resorts relief or multi-storey car parks given the caveat I have entered about the exactitude of the figures. One has to weigh up whether the money would have come to the Exchequer through those income tax earners. On the other hand, one must weigh up the activity that would have been lost if that relief had not existed. For example, in the construction industry, thousands of additional employees were taken on because of the relief and many spin-off jobs came about as a result of those people being in employment. Many of those would have been unemployed and, as such, would have been drawing assistance or benefits from the State, and that also has to be factored in. One can add up the amount of extra VAT that would be earned, the PAYE, income tax and corporation tax those people would save. One side must be weighed against the other. It is important that everybody understands the parameters involved.

I have introduced as many, if not more, focused income tax incentives, some of which have been a roaring success, than any other Minister for Finance. One that has not been a success is the park and ride tax incentive scheme. Nobody disagreed with that scheme when I introduced it. Even though Senator McDowell was an Opposition spokesperson, I do not think he opposed that particular relief.