Denis O'Donovan (Fianna Fail)
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Cuirim fáilte roimh an Aire Stáit.

Gerard Craughwell (Independent)
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I thank the Minister of State for coming to the House today.

The last report of the Commission on Taxation was published in 2009. Many of its comprehensive range of proposals have been successfully implemented while others, such as water charges, continue to be controversial. One of the stated objectives of the report was to keep the overall tax burden low and to enhance the rewards of work while increasing the fairness of the tax system. It also sought to ensure that our regulatory framework was flexible, proportionate and up to date. One of the key words here is “fairness”. By fairness I mean, the impartial and just treatment of citizens without favouritism or discrimination.

Yet our taxation system continues to remain strategically skewed and inherently unfair. Our personal taxation system is full of anomalies and the legal loopholes and business arrangements which facilitate tax avoidance seem to be infinite. Last year’s report of the Irish Tax Institute reminded us that the nine consecutive budgets between 2009 and 2016 involved over 50 different tax changes that impacted Ireland’s personal tax system. It not only brought about some unintended consequences, it also created anomalies across all salary levels. We all know about what is called the “squeezed middle” and that a self-employed person earning €18,000 will pay €1,820 more in tax than a PAYE worker on the same salary.

I am aware that the Income Tax Reform Plan 2016 sought to address some of these issues but while we have been focusing on personal taxation successive Governments have taken their eye off the tax ball and we now know to our immense cost that the Taxes Consolidation Act 1997 created loopholes which effectively allowed for the loss of taxes to the tune of €2 billion per year. This, added to the European Commission’s judgement that Apple owes the Irish state €13 billion in unpaid taxes, points to a failure by the Government to stop a haemorrhage of taxes from the state, taxes which would have funded much needed infrastructural projects.

There has been a lot of focus on the so called vulture funds and the charities which benefitted from them, but the real question to be addressed by the Commission on Taxation is who was asleep at the wheel, who turned a blind eye to the wholesale strategic and legal avoidance of taxes over the last ten years and how can these loopholes be immediately closed. The report of the Commission on Taxation 2009 was produced through a social partnership approach with serious input from trade unions, business, agriculture, the charity sector, financial advisers and academia among others. The cynics among us might say that the Government can no longer be trusted to be the sole decision maker regarding taxation policy and that it has not acted in the public interest. I therefore believe there is a real need to return to this stakeholder model, a model which encourages public engagement and wide sectoral consultation, would strengthen the work of the Department of Finance, the Department of Public Expenditure and Reform and the Revenue Commissioners and which would bring much needed transparency and reassurance to a now very disheartened public.

The reputational damage to the integrity and fairness of our taxation system by the vulture fund revelations is enormous and has left a very sour taste in the mouths of the thousands of distressed residential mortgage holders on whose backs these immense profits were made. We owe it to them to undertake a comprehensive independent review of our taxation system. It is the very least that we can do.

I thank the Minister of State for his time and attention to this matter today. I hope that he will give my proposal serious consideration.

Pat Breen (Clare, Fine Gael)
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I first apologise for my colleague the Minister for Finance, Deputy Noonan. Unfortunately he has to go to an urgent meeting in Brussels.

I thank Senator Craughwell for raising this issue in Seanad Éireann this morning. The appointment of a Commission on Taxation by any Government is a major undertaking which often takes several years to report. Commissions of Taxation tend to focus on the medium-term to long-term as regards the appropriate development of the tax system and since it tends to take many years to implement all of their recommendations they are, as often as not, a once in a generation events. The last Commission on Taxation was in place in 2008 and 2009, with the one prior to that having existed between 1980 and 1985. Given that a Commission on Taxation has reported as recently as 2009, it is not clear what exactly would be gained by undertaking such a large-scale task again so soon.

It should be noted that, since the last Commission on Taxation reported, the Department of Finance has made major strides in improving the evidence base available to it to inform taxation policy. For example, a major review of the corporation tax system was undertaken by the Department in 2014 with the extensive range of analyses and outputs published with budget 2015. The purpose of the research was to quantify the effect of the three elements underpinning Ireland’s corporation tax policy, that is, rate, regime and reputation.

Building on this successful review, the Department entered into a research partnership with the Economic and Social Research Institute in early 2015. This agreement covers research in the areas of macroeconomics and taxation policy. As well as extensive analysis of the potential effects of Brexit on the economy, a significant volume of taxation-related research has been undertaken under the programme including on important issues such as the relationship between corporation tax rates and foreign direct investment and the volatility of tax revenues. All of the research is published and is available to inform the wider tax policy debate.

In relation to local property tax, the LPT, the 2012 report of the inter-departmental group on the design of a local property tax, the Thornhill group, considered the structures and modalities for a full property tax which was subsequently introduced in 2013. The Minister for Finance commissioned a review of the LPT in 2015 to consider its operation, and in particular, any impacts on LPT liabilities due to recent property price developments.The review was informed by the outcomes of a public consultation which received over 50 written submissions.

Senators will be aware also that the Government’s commitment to continue the process of unwinding the USC is not a measure that is being considered in isolation, but as part of a wider medium-term income tax reform plan. The Department of Finance published, in July 2016, a detailed review of the policy considerations relevant to this reform, including the necessity to maintain the breadth of our income tax base, and retain appropriate levels of taxation for higher earners.

A detailed review of agri-taxation was published by the Department of Finance in October 2014. The following year, an independent review of marine taxation was also undertaken, resulting in the Government bringing forward changes to the tax code prompted by the reviews.

The last Commission on Taxation undertook a major review of tax expenditures. Again, the Department of Finance built on this work and subsequently developed a framework for the evaluation of tax expenditures as set out in the report on tax expenditures published with the budget in 2015.

From time to time, the Department carries out reviews of existing tax expenditures andex ante evaluations of proposed new tax incentives with the various reviews and evaluations being published in the annual report on tax expenditure.

Gerard Craughwell (Independent)
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The reason I have called for this - I appreciate the 2009 review is quite recent, and that would mean this would require a very short commission - is to restore confidence, to bring on board the partnership model, particularly to bring in business, trade unions, and academics. Workers in this country have suffered hugely from the cuts in recent years. The local property tax is probably the most unfair tax in the country, given that it is location-based. God help anybody in Dublin as one can have a massive house in rural Ireland and not pay nearly the same amount of local property tax. Also, local authorities are redistributing the local property tax. I ask that we have a complete review of the entire tax system. The vulture funds, in particular, are hurting people in this country. I am sure the Minister of State is in touch with his constituency people and I know that he will be hearing the stories that I am hearing about vulture funds having ripped off this country. That is really the angle that we are looking at.

Pat Breen (Clare, Fine Gael)
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I have listened attentively to what Senator Craughwell said. I already described the recent reviews and research into taxation matters by the Department of Finance. Perhaps it would be more appropriate now to outline some of the incentives that have been undertaken this year. For example, the development of a new small and medium-sized enterprise, SME, focused share-based remuneration scheme was announced in the budget for 2017 and is scheduled to be introduced in the budget for 2018. A public consultation has been conducted by the Department of Finance as part of the development process and engagement with the EU to ensure compliance with state aid requirements and this will also be undertaken.

Also, in line with the established practice of carrying out periodic reviews of key areas of tax policy, the Minister for Finance has announced in the budget that a review of Ireland's corporation tax code would be undertaken by an independent group, led by the economist, Mr. Seamus Coffey. Since the review in 2014 there have been significant changes in the international tax environment, including new legislative proposals in the feed of company taxation from the European Union and the ongoing Organisation for Economic Co-operation and Development, OECD, base erosion and profit shifting initiative as well. In this context it is timely and prudent to carry out a review of the corporation tax code to take into account these recent developments. Terms of reference were published in the 2017 budget book. I would note also that during the Dáil Committee Stage debate on the Finance Bill 2016, it was indicated that the Minister for Finance had asked Mr. Coffey to examine the strong performance of corporation tax receipts, evident since 2015. Accordingly, this will also form part of the review itself, which is important.

The examples I have cited demonstrate that detailed taxation research is effectively continuous and is given high priority by the Minister for Finance and his officials, given the challenging times we have at the moment. I will take on board the Senator's views and will convey to the Minister for Finance the issues he raised in his supplementary question.

Denis O'Donovan (Fianna Fail)
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Senator Craughwell has a lot to chew on over the next few days.