Trevor Sargent
Question:63 Mr. Sargent asked the Minister for Finance if he has considered the possibility of introducing refundable tax credits; and if he will make a statement on the matter. [29985/04]
Other Questions.
Tax Collection.
The issue of making unused tax credits refundable was considered by a working group established under the Programme for Prosperity and Fairness to examine the role refundable tax credits can play in the tax and welfare systems. The group was made up of representatives of the social partners and was chaired by my Department.
The current established approach to taxation in Ireland and other OECD countries is that while the tax system has a role to play in the broader issue of equitable income distribution, it is not the primary mechanism for the distribution of income to low-income households. Instead, the social welfare system is the main instrument for this.
It is also the established and generally accepted view that the fundamental role of taxation is to raise revenue to fund the provision of services by the State. The introduction of a refundable tax credit system would be a major departure from this position. It would have significant implications for the social welfare system as well as wide-ranging economic, cost and administrative implications.
The Minister has not expressed an opinion, he has outlined the views of the working group which met on the last partnership agreement. In the debate on tax equity, the question of refundable tax credits deserves consideration, given that people on the minimum wage are paying tax at the moment on 90% of their income. That means that a large number of PAYE workers benefit only partially from the tax credits they have been allocated or are unable to take advantage of them.
As to the excuse regarding the effect on the social welfare system of refunding tax credits, it might be argued that administratively it would be a better mechanism for redistributing income. Other mechanisms under social welfare to bring up the pay of low paid workers are very complicated and are not being accessed. The family income supplement is accessed by only one third of the people who are entitled to claim that supplement. By using the tax system creatively in this way, the Minister might, at lower cost and with better efficiency, go a long way towards solving the problem of low paid workers not getting full advantage from the tax system.
I am advised by the Revenue Commissioners that the most recent estimated cost of making all personal tax credits refundable when they are unused, including personal employee credits, the home care tax credit, the one-parent family credit and the age credit, as well as the minor personal credits, such as the incapacitated child credit and the blind person's credit, would be approximately €1.3 billion annually. The main category of refund would relate to the basic personal credit where the annual cost of refunding the unused portion of the credit to income earners with insufficient earnings to fully absorb it would amount to approximately €700 million. The next two categories of refund in order of scale are the employee credit, which would cost approximately €590 million, and the home care credit which would cost approximately €35 million.
The estimate of €1.3 billion relates only to the cost of extending refundable tax credits to all those on Revenue's tax files. If a refundable tax credit system were to be introduced, one would have to consider those who are not on the tax files, for example, those who are of employable age but not working, including those on social welfare. That would increase the cost significantly.
Would the Minister consider going part of the distance along this route? I have in mind particularly the family income supplement. Family income supplement has a very low take-up, not because there are not many people in the income categories that are eligible but because they must apply for it. Would the Minister consider making administrative arrangements to pay family income supplement through the tax code? He rightly states social welfare is the way in which many of these needs should be addressed. Is the Minister aware that if a person is unemployed and in receipt of rent supplement, 95% of the rent is paid but if that person gets a job at the minimum wage or higher, the supplement towards the rent, either from tax or supplementary welfare, drops to zero? This unwittingly creates an unemployment trap in our system. Between the Minister for Finance and the Minister for Social and Family Affairs, some solution must be found. If Deputy Boyle's solution is not the correct one, perhaps the Minister will find a different one.
We are getting into a potential budgetary area and I am not prepared to comment on what, if any, amendment I will make to the tax credits system. However, with regard to the broader point on the facts, costs and problems that come with this, there are negative effects with such a system of refundable tax credits without the characteristics of a partial basic income system.
That is not what I asked.
I am coming to the point. I am sorry if I do not answer as precisely as the Deputy wishes. I could say to the Deputy that he could have asked his question differently or more quickly but he would not find that appropriate or helpful. I will answer the Deputy's question.
The issue of the impact of secondary benefits is a continuing problem.
Miriam Lord was right.
The Deputy does not have to interrupt me every time I open my mouth. Question Time is about providing information, not interrupting each other.
The problem is that we are time limited.
There is no point being juvenile about it.
As we are time limited, we do not have the luxury of waiting for answers.
The Minister is wasting time.
I made a point in regard to this question. It was suggested that I have a discussion with the Minister for Social and Family Affairs in regard to the impact secondary benefits have in preventing people coming into the jobs market. I will take up that offer. However, an economic paper prepared by the European Commission in 2001 refers to the major negative aspects regarding this system as including high budgetary costs, which imply higher taxation and, therefore, increased rather than reduced distortions of the labour market. In addition, it suggested that another problem with universal public assistance schemes which are not usually combined with work, for example, a simple negative income tax system, is the disincentive effect they have on persons or families not already on welfare but who become windfall beneficiaries of universal schemes.
What about the family income supplement?
The point I am making indicates that no matter how we try to deal with the impact of supplementary benefits or the loss of eligibility to them in the event of people entering the workplace, a refundable tax credit system is not a component that would bring about a solution, according to those more expert than I in this area.
Decentralisation Programme.
Paul McGrath
Question:64 Mr. P. McGrath asked the Minister for Finance if he intends to use budget 2005 to make further announcements on decentralisation. [29917/04]
Budget 2005 will be presented to the Dáil and published on Wednesday, 1 December. As the Deputy knows, it is not the usual practice to speculate in advance of the annual budget on what it will contain. I do not propose to deviate from this practice.
Will the Minister comment on the fact that he has not included any figure for decentralisation in the Estimates for 2005? Was this an oversight or the deliberate policy of the Minister? The Minister of State responsible for decentralisation has already acquired eight facilities for decentralisation throughout the country. The Minister's predecessor, Deputy McCreevy, in last year's budget stated that no deals could be entered into until a corresponding building or property in Dublin was disposed of. With regard to the eight properties which have been acquired and the Departments which will use them, will the Minister outline the matching properties which have been disposed of in Dublin city to comply with the former Minister's budget statement of 2004?
I cannot refer to my predecessor's reference to the question of corresponding buildings. The issue of buildings is one which my colleague is dealing with in conjunction with the Office of Public Works. With regard to the non-involvement of decentralisation costs or a provision for next year, these will arise in the multi-annual Estimates 2005-2009 which will be published with the budget. They were not included in the previous multi-annual envelope.
Will the Minister forward to me the information on the properties?
I will. The properties are already in the process of being disposed of.
I understand the Minister lives in Parlon country. Will the Minister speculate as to whether there will be signs next week in Parlon country reiterating the Minister of State's coup last year in regard to decentralisation? Specifically, is the proposal to decentralise certain public bodies, such as the IDA, still on track or will it be held back until such time as agreement can be reached with the staff in those organisations?
The only signs of a political nature I expect to see next week are those asking where the Labour Party is in that area, a question which is often asked of me in my constituency. Regarding the question of the IDA, there will be ongoing consultations with staff in regard to ensuring a successful roll-out of this programme.
The Minister was probably in the House some three weeks ago when the Tánaiste indicated that an announcement on decentralisation was due within a day or two days at most. What has happened to that announcement? Is it being held back for the budget, as would appear to be the case? What is the Minister saying about the multi-annual envelope? The Minister of State kindly told the Joint Committee on Finance and the Public Service it would cost €800 million to accommodate the new staff and that proceeds from sales would be €400 million. Will we see a multi-annual spread of these costs published with the budget?
Decentralisation costs were not part of the 2004-2008 five year multi-annual envelope because they had not been assessed at that time. Obviously, the Office of Public Works has to take account of those costs going forward.
Are they built into the 2005 Estimates?
The Deputy will discover on budget day what is built into the 2005 Estimates. On the other question, these are matters discussed by Government which I am sure will be announced in due course.
The Minister seems to accept the €800 million figure given by the Minister of State, Deputy Parlon, to the Joint Committee on Finance and Public Service in regard to the cost of physically moving to centres throughout the country. The Minister of State admitted this did not include ancillary costs, such as providing services like child care, and did not cover additional current expenditure such as logistical costs or the cost of travel to and from the secretariat in Dublin and the new locations of many of the agencies, wherever they will be. Have the figures been researched and can the Minister estimate what the likely costs will be in a year?
I have no idea what those costs, if any, will be. However, I am sure the Deputy will welcome the investment these funds represent.
I would welcome the figures.
On the last occasion we addressed this sequence of questions, the Minister indicated that the calculation was that some 4,813 Dublin based civil servants had applied to participate in the proposed relocation or decentralisation scheme. Has there been any advance on that figure in regard to Dublin based civil servants seeking to move from the city to other rural locations? Mindful of the words of the former Minister, Deputy McCreevy, when he stated that the prospect of a hanging concentrates the mind wonderfully, does the Minister believe the deadline of the next general election is unlikely to be met in the context of the announcement made in last year's budget? Would the Minister consider a changed proposal that might have a more realistic target date and would allow time to consider the proposed locations and for civil servants to properly plan for the advent of such a move?
The Government's policy on decentralisation is proceeding as planned. Despite many, such as the Deputy, claiming this or that will not happen, progress is constantly being made by the implementation group. Some 3,711 Dublin based civil servants are interested in moving to new locations; that figure was 2,195 in July.
Tax Code.
Seymour Crawford
Question:65 Mr. Crawford asked the Minister for Finance if he is satisfied all persons eligible for tax relief are receiving the relief to which they are entitled under medical relief, rent paid to private landlords, home carers and so on; and if he will make a statement on the matter. [29925/04]
I am advised by the Revenue Commissioners that each year all PAYE taxpayers receive a certificate of tax credits and standard rate cut-off point setting out their entitlements. This certificate is accompanied by a detailed information letter setting out the main personal tax credits available for the year, tax rates and tax bands, exemption limits, and how to claim an adjustment to the tax credit certificate.
Once credits are claimed, they are in most cases automatically carried forward from year to year to avoid the necessity to reclaim. For self-employed taxpayers, their statutory return form that is issued annually contains reference to all claimable reliefs and allowances. Information on the full range of reliefs is available on the Revenue website with a range of claim forms for download and a "what's new" section.
Revenue also provides information via the Aertel service on RTE 2, on page 451. Revenue is reminding people via media advertisements of the tax relief available to taxpayers who maintain relatives or certain other persons in approved nursing homes. Revenue is developing a system to simplify procedures for claiming certain credits using a self-service facility via the Internet. When available, which is likely to be early in 2005, this will be advertised widely to encourage taxpayers who have entitlements to various tax credits to claim them.
This matter arose from the recent visit by the Chairman of the Revenue Commissioners to the Joint Committee on Finance and the Public Service. I was staggered to note how low the take-up was in medical relief, for example. Most people would spend at least €125 annually on medicine, and a family would spend at least €250, yet only 105,000 people out of a population of 4 million claimed the relief. In the private rental area there are 90,000 people claiming relief. We know from the CSO that there are 220,000 people in rented accommodation, though some of those are in local authority housing. Only 100,000 people claim home carer credits. It is clear that many people are not claiming their entitlements so the Minister for Finance and the Revenue Commissioners are exacting tax which they should not be exacting. Will the Minister make a better effort to look at the particular categories where there is clear evidence of under-claiming, and make it easier for people to receive their entitlements? This is excess taxation on many people in the low-paid categories in those areas.
Reliefs are made available for all citizens to claim and we try to make people as aware as possible. There is no policy to do otherwise and the Revenue Commissioners are proactive in this area. Much discussion takes place during the time of the budget and I hope that will heighten awareness. After each budget the budget book is placed on the Department's dedicated website, www.budget.gov.ie.
Will the Department add a note to people's tax credit notification asking if they have claimed tax reliefs to which they are entitled if they spend more than a certain amount on medicines or on private rental?
The budget summary leaflet is prepared in Irish and English.
Would it help if the Department put the information in bright lights on the tax certificates sent to people in March each year?
Whatever about bright lights on tax forms, we could ask the Chairman of the Revenue Commissioners to see what could be done to assist.
One tax relief which seems to have a low take-up is the standard tax rate relief on refuse charges. From 1 January 2005, with the application of the polluter pays principle, seven local authorities are threatening to grossly increase the level of charges in their areas. Has the Minister made allowance for this anticipated increase and does he anticipate a greater take-up of this relief in the next tax year?
I cannot comment on any issue that might be related to the budget
Tax Collection.
Brendan Howlin
Question:66 Mr. Howlin asked the Minister for Finance the progress made by the Revenue Commissioners into allegations that tax improprieties may surround trust operations in a bank (details supplied) in Jersey; if the Revenue has reached a determination regarding whether these trusts facilitated tax evasion as distinct from tax avoidance; and if he will make a statement on the matter. [29849/04]
I am informed by the Revenue Commissioners that substantial progress has been made regarding this inquiry. Arising from a voluntary disclosure programme, 254 individuals came forward and made voluntary disclosures. To date this programme has recovered in excess of €105 million for the Exchequer.
Inquiries by the Revenue Commissioners have identified those individuals who failed to make voluntary disclosures. They are under investigation by the investigation and prosecution division of the Revenue Commissioners. It is clear from some of the disclosures and the amount collected to date that in some instances taxpayers used trusts to facilitate tax evasion.
Will the Minister confirm that there are 59 or more individuals who have not come clean to the Revenue Commissioners with regard to these trusts? Will prosecutions follow? The Revenue Commissioners have allowed these people a great deal of time in which to come clean. The Minister has acknowledged that a number of them are guilty of tax evasion. How many are involved and will they be prosecuted?
From its investigation and inquires, the Revenue Commissioners have identified 43 individuals holding trusts who failed to avail of the voluntary disclosure programme. The other 85% of individuals holding offshore trusts availed of that programme. The action to be taken under the tax laws is a matter for the Revenue Commissioners, in whom I have total confidence.
Written answers follow Adjournment Debate.