asked the Minister for Finance whether his Department has conducted or commissioned any investigation into the costs and administrative implications of transforming tax allowances into tax credits; and if he will make a statement on the matter.
Written Answers. - Tax Allowances Conversion.
36.
It is assumed that the reference to tax allowances in the question refers to all existing allowances such as personal allowances, PAYE allowance, age allowance etc.
The question of converting all such allowances to tax credits has been investigated by my Department and by the Revenue Commissioners on a number of occasions in the past. The conclusions reached were that a changeover of this kind would be very difficult to justify because, in the context of our current sharply progressive tax structure, it would lead to an increase in the tax burden of a large number of taxpayers with relatively modest incomes; in any event it could not be implemented within the present tax-free-allowance-based PAYE tax collection system. In order to bring about such a transformation, an entirely new system would have to be devised, which would entail very considerable research, development and preparation. The changeover would involve a substantial disruption of the operations of both the Revenue Commissioners and employers and could put the PAYE yield at risk during the transitional period.