Gerald Nash (Louth, Labour)
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372. To ask the Minister for Finance his views on the finding from a recent report (details supplied) which states that restricting some of the less well targeted, tax expenditure reliefs and exemptions that apply to taxes such as CGT and CAT could not only contribute to raising significant sums of tax revenue but could also result in a simpler, more efficient tax system; his plans to examine such reliefs in order to put Exchequer funding on a sustainable footing, especially in view of the proposed international changes on corporation taxation; and if he will make a statement on the matter. [31612/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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I welcome the ESRI report entitled “Options for raising tax revenue in Ireland,” and note their own wording in the report that they “do not seek to advocate any particular tax-raising measure,” but instead seek “to provide evidence for policymakers who are in a position to make these decisions.”

This is the basis on which I and my officials consider such findings, and as such any changes to tax policy are also considered within a wider framework of the fiscal space, impacts on income distribution and other concerns.

With regards to the specifics of Ireland’s Capital Acquisitions Tax (CAT), I would note that the recent OECD paper entitled “Inheritance Taxation in OECD Countries,” acknowledged our CAT regime as the only gift or inheritance tax applied over lifetime transfers, rather than a given time period, in the OECD. The analysis highlights the advantages of the Irish system, in particular with regard to horizontal equity, by ensuring that those who receive the same amount of wealth pay the same amount of tax. In this context, it is also important to consider that Ireland’s CAT is much less generous with exemption thresholds than many other OECD countries, as CAT exemptions apply on a lifetime basis.

In relation to Capital Gains Tax (CGT) and more specifically the reference in the report to the Revised Entrepreneur Relief, I would refer to the external review by Indecon Consultants published as part of the Budget 2020 documentation. A number of possible modifications, amendments and potential improvements were suggested in respect of the relief. These recommendations are under continuous review through the annual Tax Strategy Group (TSG) and Budget process.

Referring to the Principal Private Residence Relief, as the ESRI rightly point out, a removal of this relief could have a significant impact on 'lock-in' effects. Given the current economic impact of the pandemic, it is important to ensure CGT does not act as a barrier to the reallocation of firms and workers.

As with all taxes, a low rate can be funded through a wide base, similarly a narrower base designed to encourage/reward certain behaviour through targeted reliefs requires a higher rate. My Department will continue to examine current reliefs to ensure the sustainability of revenue while balancing the need for targeted incentives and reliefs to address certain market failures through the annual budgetary cycle.

Gerald Nash (Louth, Labour)
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373. To ask the Minister for Finance his views on the finding from a recent report (details supplied) that eliminating some of the fossil-fuel tax reliefs could generate a significant amount of revenue while simultaneously promoting a cleaner environment; his plans to examine the elimination of such fossil-fuel tax reliefs; and if he will make a statement on the matter. [31613/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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While there is no globally accepted definition of Fossil Fuel Subsidies, the OECD defines a subsidy as the result of a government action that confers an advantage on consumers or producers, in order to supplement their income or lower their costs. This definition includes tax expenditures such as tax rebates, tax repayments and reduced tax rates, as well as direct subsidies.

The Central Statistics Office (CSO) Fossil Fuel Subsidies 2019 publication estimates total fossil fuel subsidies amounted to €2.4 billion in 2019. Direct fossil fuel subsidies accounted for 11% of total fossil fuel subsidies in 2019 while indirect subsidies arising from revenue foregone due to tax abatements accounted for 89%. The CSO estimates that the largest of these reliefs was the exemption from excise and carbon taxes of jet kerosene used for commercial flights, costing €634 million per year, while the lower rate of fuel duty applied to auto-diesel relative to petrol is estimated to amount to €400 million per year. The ESRI May 2021 Budget Perspectives Paper referenced by the Deputy refers to the possible removal of these reliefs and the potential additional revenue raised.

With regard to the exemption on aviation fuel for commercial flights, the Deputy will be aware that Ireland’s excise duty treatment of fuel used for air navigation is based on European law as set out in Directive 2003/96/EC on the taxation of energy products and electricity, commonly known as the Energy Tax Directive. Under this Directive, Member States are obliged to exempt certain fuels used for commercial aviation purposes from excise duty. The scope of this exemption must include jet fuel (which is the most commonly used heavy oil in air navigation) and must encompass such fuel used for intra-Community and international air transport purposes. The Commission is working on a proposal to revise the ETD and it is expected that changes to the current fossil fuel related reliefs and exemptions will be proposed.

On a national level, it is recognised that gradual removal of fossil fuel subsidies will play an important role in phasing out reliance on fossil fuels in the transition to a low carbon economy. To achieve this transition with minimum disruption, the Programme for Government commits to providing timely signposts as well as regulatory changes and incentives giving society and industry the chance to adapt.

As part of the annual budget process, the Tax Strategy Group will examine indirect environmental tax subsidies and examine options in this regard, having due regard to the EU legislative framework in this area.