Written answers

Wednesday, 14 September 2011

9:00 pm

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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Question 83: To ask the Minister for Finance the revenue that would be raised for the Exchequer if the individual incomes in excess of €100,000 were taxed at 49%. [23258/11]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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It is assumed that the threshold for the proposed new tax band mentioned by the Deputy would not alter the existing standard rate band structure applying to single and widowed persons, to lone parents and married couples. I am advised by the Revenue Commissioners that the estimated full year yield to the Exchequer, estimated by reference to 2012 incomes, of the introduction of a new 49% rate would be of the order of €436 million.

However, given the current band structures, major issues would need to be resolved as to how in practice such a new rate could be integrated into the current system and how this would affect the relative position of different types of income earners.

This figure is an estimate from the Revenue tax-forecasting model using latest actual data for the year 2009, adjusted as necessary for income and employment trends for the year 2012. It is therefore provisional.

The current basis of cost also reflects a revision of the cost basis that was used to underpin my reply of 19 July last to a question about a 48% rate which was tabled by the Deputy under Parliamentary Question reference 21030/11.

The impact of this would be to raise the top marginal rate for people with income in excess of €100,000 to 60% or over.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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Question 84: To ask the Minister for Finance the savings to the Exchequer if mortgage interest relief for landlords was abolished. [23259/11]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that based on personal income tax returns filed by non-PAYE taxpayers for 2009, the latest year available, the amount of tax foregone by allowing a deduction for interest on borrowings to be offset against all rental income assessable under Case V, Schedule D for both residential and commercial property is estimated at €745 million. This is an update of an estimate of €730 million provided on 21 July last in my reply to Parliamentary Question number 22016/11.

On this basis, the full year yield to the Exchequer from abolishing this relief would be of the same order. The estimated 2009 cost is based on assuming that tax relief was allowed at the top income tax rate of 41% and the figure provided could therefore be regarded as the maximum Exchequer cost in respect of those taxpayers. This figure is subject to adjustment in the event of late returns being filed or where returns already filed are subsequently amended.

It should be noted that any corresponding data returned by PAYE taxpayers in the income tax return form 12 is not captured in the Revenue computer system. However, any PAYE taxpayer with non-PAYE income greater than €3,174 is required to complete an income tax return form 11. This return is the source of the figure provided in this reply.

A basis for providing an estimate of the current yield to the Exchequer from such an abolition is not available.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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Question 85: To ask the Minister for Finance his views on abolishing group relief for incorporated bodies, which cost the Exchequer €450.3 million in 2008; the position regarding holding companies here; and if he will make a statement on the matter. [23260/11]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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In recognition of the fact that groups of companies generally comprise a single economic entity, the Taxes Consolidation Act 1997 provides for the allowance of trading losses of a group company in an accounting period against profits of another group company in the corresponding accounting period. Essentially, two companies are members of a group of companies if one company is a 75% subsidiary of the other or both are 75% subsidiaries of a third company— and in many instances there will be more than 75% common ownership throughout the group. It is important to note that only current year trading losses may be surrendered between companies under the group relief provisions. As regards holding companies, the position generally is that such companies hold shares in subsidiaries, do not carry on a trade and do not, therefore, incur trading losses. In many instances, for commercial reasons, group borrowings may be controlled by the holding company. Where this is the case, similar to the treatment of losses, under the group relief provisions the interest paid by the holding company may be surrendered to subsidiaries for deduction against their profits.

Group relief is a standard feature of corporation tax codes and similar relief is available in most other countries. The availability of such relief is an important facility for Irish and multinational enterprises which conduct their business operations within a group of companies. The absence of a group relief provision would put Ireland at a significant competitive disadvantage vis-À-vis other jurisdictions.

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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Question 86: To ask the Minister for Finance the return of the Exchequer arising from an increase in tax charge to companies licensed to avail of Ireland's natural resources to 25% to 75%. [23261/11]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that the information furnished on corporation tax returns does not generally require the yield from a particular sector or sub-sector of economic activity to be identified. In these circumstances the amount of tax revenues collected in respect of the activities specified in the question cannot be readily identified from the overall corporation tax yield. There is, therefore, no statistical basis on which the Exchequer impact of the changes mentioned in the question could be estimated. I am further informed by Revenue that even if the basic information was available the obligation on the Revenue Commissioners to observe confidentiality for taxpayers and small groups of taxpayers might preclude them from disclosing it.

Section 45 Finance Act 2008 introduced new tax provisions in relation to profits derived from petroleum exploration and production activities. A new tax called a "profit resource rent tax" will apply at rates of 5%, 10% or 15% in addition to the corporation tax rate of 25% that currently applies to profits from petroleum activities. It will apply when profits exceed certain defined levels. This will be worked out by a formula that relates the profits from a petroleum field to the capital investment in the field. The new tax provisions give effect to the Government Decision of 30 July 2007 that a new regime would apply in relation to petroleum profits from discoveries made from 2007 onwards.

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