Kevin Humphreys (Dublin South East, Labour)
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To ask the Minister for Finance when he intends to commence Section 31A of the Stamp Duties Consolidation Act 1999, inserted by Finance (No. 2) Act 2008 section 82 which was intended as an anti-avoidance measure; the reasons it has not been commenced; the estimated foregone revenue on an annual basis from 2008 to present as a result of it not being commenced; and if he will make a statement on the matter. [46327/12]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that Section 31A of the Stamp Duties Consolidation Act 1999 makes provision, subject to the section being commenced, for a charge to Stamp Duty where land is purchased and a conveyance or transfer of the land is not executed at the time the sale is closed. Under the provision, a Stamp Duty charge would attach to the contract or agreement for sale where the vendor receives a payment amounting to 25% or more of the purchase price concerned. Section 31A of the Stamp Duties Consolidation Act 1999 was subject to a commencement order on the basis that it would be prudent to consider the state of the housing and property market before the provision is put into place.

The previous Government commissioned an independent study of the potential effects that such a provision may have on the market. Of particular importance is that the report indicates that it would have led to a rise in land prices, with a knock-on increase in house prices, especially for first-time buyers, and possibly risked exacerbating the down-turn in the property market. The independent study examined Section 31A of the Stamp Duties Consolidation Act 1999 as inserted by section 110 Finance Act 2007. This was repealed by section 82 Finance (No. 2) Act 2008, which inserted a similar provision to the original section 31A provision.

The commencement of Section 31A of the Stamp Duties Consolidation Act 1999 is kept under constant review and has to take into account circumstances in the housing and property markets. There is currently no requirement to make Stamp Duty returns to the Revenue Commissioners in respect of these transactions as they are not liable to Stamp Duty. There is therefore no specific data on which to accurately estimate any revenue forgone as a result of the provision not being commenced. However, having regard to the fall in Stamp Duty rates, the reduction in property values and inactivity in the property market it is estimated that any revenue foregone is minimal.

Joe Higgins (Dublin West, Socialist Party)
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To ask the Minister for Finance the impact in increased revenue from the introduction of three new tax bands of a rate of 50% for tax cases of more than €100,000, a rate of 60% for income of more than €135,000 and a rate of 70% for income of more than €200,000; the amount of extra income tax that would be raised; and the estimated effective tax rate paid by these different groupings as a result. [46354/12]

Michael Noonan (Limerick City, Fine Gael)
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It is assumed that the threshold for the proposed new tax rates 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. In addition, it is assumed that the 3 new tax rates and bands proposed would be integrated in the current tax system together rather than in isolation. On the above basis, I am advised by the Revenue Commissioners that the estimated full year yield to the Exchequer, estimated by reference to 2013 incomes, of the introduction of a new rates and bands would be of the order of €1.1 billion. However, given the current band structures, major issues would need to be resolved as to how in practice such new rates could be integrated into the current system and how this would affect the relative position of different types of income earners.

It is not possible to measure in a precise manner the impact that changes to tax rates and tax bands, which are based on taxable income values, will have on effective tax rates, which are normally measured by reference to gross income, because these income types are, generally speaking, not comparable. However, an indicative measure can be derived by examining the effect of the proposed changes on the average effective tax rate on all earners with gross incomes exceeding €100,000. On that basis the proposed changes would give rise to average effective income tax rate of 31.1% compared with a rate of 25.6% under the existing system.

The figures refer to income tax only, excluding USC and PRSI. These figures are estimates from the Revenue tax-forecasting model using latest actual data for the year 2010, adjusted as necessary for income and employment trends in the interim. They are, therefore, provisional and subject to revision. It should be noted that Gross Income is as defined in Revenue Statistical Report 2010.

Joe Higgins (Dublin West, Socialist Party)
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To ask the Minister for Finance the impact of treating capital tax gains the same as other source of incomes subjected to income tax, universal social charge and PRSI. [46355/12]

Michael Noonan (Limerick City, Fine Gael)
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A schedular system of taxation operates in Ireland, as in many other countries, under which income is grouped into separate schedules for tax assessment purposes. Different rules apply for calculating taxable income under each schedule and for determining the timing of the charge to tax. Any change to treat capital gains on asset disposals as income subject to income tax would have fundamental implications for the schedular system. In the case of income tax, for example, a system of allowances, rate bands and tax credits are in place, the extent of the availability of which depends on the personal circumstances of each taxpayer. Income is charged to tax on a graduated basis at rates of 20% and/or 41% depending on whether an individual is single, married, a single earner couple or a two earner couple. The result is a highly progressive system with individuals paying more tax as they earn more income.

Capital Gains Tax (CGT) is chargeable on gains made on the disposal of assets. Persons are chargeable to CGT on such gains for a year depending on their residence and domicile. Gains subject to CGT are generally less recurring events for the majority of individuals than annual income chargeable to income tax. The first €1,270 of an individual’s net gains for a year (that is gains minus current year losses and losses brought forward from earlier years) is exempt from CGT with the balance taxed at a standard rate of 30%. The standard rate of CGT has increased from 20% to 30% in recent years. The non-recurring nature of many capital gains and the equitable treatment, under an income tax system which taxes income as it arises in a single year, of gains accrued over a number of years from the periodic disposal of capital assets are some of the considerations inherent in the Deputy’s question.

It should also be noted that income earned from capital assets (e.g. rental income from property or dividend income from investments) is liable to income tax and USC etc in the hands of an individual. The taxation system therefore imposes a charge to income tax, and consequently imposes PRSI and USC, where any income arises, whether that income is in the form of pay or emoluments of an individual or profits from an investment.

Any decision to apply higher taxes to gains from asset disposals would have to consider, among other things, the negative implications for ongoing investment in productive assets. To impose a charge equivalent to income tax, USC and PRSI on capital disposals is also likely to lead to other behavioural impacts with an effect on the transfer of ownership of assets, possibly leading to stagnation in the market in terms of such transfers, as assets will pass on death rather than by disposal. Charging capital gains to income tax will raise the question of when relief would be granted for capital losses.

Finally, I am informed by the Revenue Commissioners that the yield from applying income tax, USC and PRSI to capital gains would depend on the individual circumstances of each affected taxpayer such as the amount of each gain, the amount of other income, the marital status and the PRSI class. There would also be an uncertainty about the behavioural changes on the part of taxpayers, as outlined above, where a significant increase in the tax rate on gains may not produce a corresponding increase in tax yield. In current economic conditions any estimate of additional yield would have to be treated with caution.

Joe Higgins (Dublin West, Socialist Party)
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To ask the Minister for Finance the impact of the extra amount of income raised if corporation tax was increased to 15%, 17.5%, 20% and 21.8%. [46356/12]

Michael Noonan (Limerick City, Fine Gael)
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The Taoiseach, myself and other members of the Government have repeatedly expressed the Government’s commitment to the retention of the 12.5% rate. In that context, I must state that this is a hypothetical exercise. It is possible to provide an estimate on a straight line arithmetic basis. However in reality it is impossible to estimate the level of additional tax revenue that would be realised due to behavioural change on the part of taxpayers as a result of such a measure which would be a significant factor.

I am informed by the Revenue Commissioners that the full year yield to the Exchequer, estimated in terms of expected 2012 profits, of increasing the standard rate of corporation tax from 12.5% to 15%, 17.5%, 20% and 21.8% is tentatively estimated on a straight line arithmetic basis to be about €675 million, €1,350 million, €2,025 million and €2,511 million respectively.

While this estimate is technically correct it does not take into account any possible behavioural change on the part of taxpayers as a consequence. In terms of an increase in the 12.5% rate, estimating the size of the behavioural effects is difficult but they are likely to be relatively significant. An OECD multi-country study found that a 1% increase in the corporate tax rate reduces inward investment by 3.7% on average. On this basis, it would take only a 2.5% increase in the rate (to 15%) to decrease Ireland’s inward investment by nearly 10%. This assumes the average applies across the board but in fact the effect is likely to be more extreme for Ireland.

The very major importance of maintaining the standard 12.5% rate of corporation tax to Ireland’s international competitive position in the current climate must also be borne in mind. Ireland, like other smaller member states, is geographically and historically a peripheral country in Europe. A low corporate tax rate is a tool to address the economic limitations that come with being a peripheral country, as compared to larger core countries. Ireland’s low corporation tax rate plays an important role in attracting foreign direct investment to Ireland and thereby increasing employment here. Recent research by the OECD also points to the importance of low corporate tax rates to encourage growth.

Further, it would be difficult to justify such a move in the context of Ireland’s stated position that we will not change our corporation tax strategy. Even a marginal change would undermine both our long held stance on this issue and the certainty of business, domestic and international, in our resolve to maintain that position.

Joe Higgins (Dublin West, Socialist Party)
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To ask the Minister for Finance the amount that a tax on uninvested profits of corporations domiciled here after deducting corporation would raise at various rates of 10%, 20%, 25%, 30%. 40% and 50%. [46357/12]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that specific information on the amount of uninvested profits of companies is not available from corporation tax returns. There is therefore no basis on which an estimate of the Exchequer yields from the changes mentioned in the question could be provided.