Tommy Broughan (Dublin Bay North, Independent)
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56. To ask the Minister for Finance his views on the refunding of unused tax credits to persons and couples on lower incomes; if his Department has costed different income levels of such refunds in the preparations for budget 2020; and if he will make a statement on the matter. [17650/19]

Paschal Donohoe (Dublin Central, Fine Gael)
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This matter was looked at in some detail in 2002 by the Working Group established under the Programme for Prosperity and Fairness. The Group was chaired by the Department of Finance and included representatives from ICTU, IBEC, the various farming organisations, the Community and Voluntary Pillar, relevant Government Departments and the Office of the Revenue Commissioners.

The Working Group found that there were significant disadvantages with such a system.  These included the potential negative impacts on the incentive to work, labour supply, labour force participation and overall productivity and output.  The Commission on Taxation in its 2009 report also did not recommend the introduction of refundable tax credits.

Furthermore, the cost of providing refundable tax credits would be extremely high.  Revenue have in the past estimated the cost of providing a limited refundable tax credit, that is, refundable only to those currently on the tax record, at approximately €2 billion per annum.

I am aware that certain Groups have proposed different schemes for refundable tax credits which are based on a number of arbitrary restrictions such as age, hours worked, income and PRSI contributions in the previous year.  These Groups have claimed much lower costs for these schemes.  However, my Department and the Revenue would dispute these lower costings. 

What is not in doubt, however, is that refundable tax credits can have a negative impact on the incentive to work. 

In these times when we need to encourage people to join the workforce and remain in the workforce, however very significant difficulties exist with the use of refundable tax credits.