Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context

Question 112: To ask the Minister for Finance the potential savings to the Exchequer from limiting the capital allowances available to business at €2 million. [25951/11]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context

I am informed by the Revenue Commissioners that based on claims for capital allowances on the income tax returns and corporation tax returns for 2009, the latest year available, the notional cash flow saving to the Exchequer of limiting capital allowances available to business at €2 million in a tax year could be in the region of €1 billion if applied to all existing and new claims. The estimated cash-flow yield does not take account of any potential additional yield from applying the proposed cap to claimed but unused capital allowances which have either been brought forward from prior years or will be carried forward into future years as losses and are no longer separately identifiable as capital allowances.

Neither do the estimated savings take into account the potential substantial loss to the Exchequer of taxes such as Corporation Tax, Value Added Tax and PAYE as a result of the probable disincentive effect the proposal would have on businesses investing in large capital projects. For example, as capital expenditure on plant and machinery is generally written off for tax purposes on a straight-line basis over eight years, the proposed cap would impact on any project in excess of €16 million.

Furthermore, no account can be taken of any possible changes made to corporate structures which could result in an effort by businesses to maximize their use of capital allowances restricted as proposed.

It would be more difficult to quantify the saving to the Exchequer if the proposal were confined to new expenditure only as there is insufficient data on the timing and quantum of such expenditure to allow for a meaningful estimate to be made.