Brian Lenihan Jnr (Dublin West, Fianna Fail)

On the wider aspects of this important question, one of the experiences I had in government on tax expenditures was that individual Departments defend the tax expenditures associated with their particular Department. The Department of Enterprise, Trade and Innovation will defend the tax expenditures associated with the incentivisation of research and development, patent royalties or shared bonuses for employees. The Department of Agriculture, Fisheries and Food will defend the various tax reliefs associated with the farming community. Although those tax expenditures involve substantial postponement of public revenue, no real evaluation of them is done at departmental level.

For example, when one prepares the annual Estimates for expenditure, a detailed evaluation of the expenditure plans from each Department arrives in my Department and there is debate about what the expenditure allocation should be in individual Departments. When I was first appointed, I found the debate about the tax expenditures was far more nebulous but because taxation is imposed at a later stage of the budgetary cycle, the degree of dialogue between individual Departments and the Department of Finance on those issues was somewhat limited. In the budget I announced in December 2009, I insisted that there would be a process whereby Departments would be compelled to justify the tax expenditures as if they were ordinary voted expenditure. I was quite struck by the paucity of response. It enabled me to eliminate quite a number of tax reliefs in the budget because of the inadequacy of any departmental response in defence of tax expenditures which had been axiomatically defended every year in the weeks leading up to the presentation of the budget.

Senator Bradford made the point that this is an area where our budgetary system needs to be improved. First and foremost, we need to understand that when one provides a tax relief, it is a form of expenditure. That is why it is called tax expenditure. The actual budgetary process within the Administration has to reflect that far more so that, in effect, tax expenditures have to be included with the routine Estimates process, justified and stood over.

There have been far more cost benefit analyses and economic impact assessments in recent years than used to take place, but they also must form part of the process.

Although we see this type of impact assessment going on all the time for actual expenditure, we have not seen it as much for tax expenditures until recent years. However, we had the Indecon report on property tax expenditures and the bulk of these were eliminated. The argument about section 23 reliefs and capital allowances is not about the merits of the particular expenditures. It is about their phasing out, the timescale for their phasing out and the economic impact and elimination of these reliefs.

Senators may reflect on and discuss different tax expenditures and there has been a strong focus on the property area. There is no doubt that some of the tax expenditures were misplaced. I do not say it out of partisanship but the previous rainbow Government introduced the seaside village incentive while Deputy Kenny was Minister with responsibility for tourism. Everyone can see throughout seaside Ireland great numbers of empty properties many years later. Clearly, that was not a correct decision. Equally, I remarked yesterday that I was surprised to learn-----