We will now hear a presentation by officials from the Department of Finance and the Revenue Commissioners on the possibility of making tax credits refundable. I welcome Mr. Eugene Creighton, assistant secretary, Mr. Padraic Dooley, principal officer, Mr. Paddy Molloy, principal officer, and Ms Kathleen Corley, assistant principal officer, from the Revenue Commissioners. I also welcome Mr. Vincent Palmer, principal officer, and Mr. Ambrose Murray, principal officer, from the Department of Finance. I would like Mr. Creighton to commence his presentation but before doing so I draw witnesses' attention to the fact that members of the committee have absolute privilege but the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make or her identifiable.
Tax Credits: Discussion with Department of Finance and Revenue.
Mr. Eugene Creighton
I thank the Chairman for the invitation but my colleague from the Department of Finance, Mr. Vincent Palmer, will make the presentation if the Chairman agrees.
Mr. Vincent Palmer
I thank the Chairman for the invitation to brief the joint committee on the possibility of making tax credits refundable. We have provided three documents for the committee which may be of use during the discussions today. The first is a copy of the opening statement, which I am reading. The second is a document prepared by the Revenue Commissioners demonstrating how the costs of making tax credits refundable have been derived. The third document is a copy of the draft report of the working group established under the Programme for Prosperity and Fairness to examine the role which refundable tax credits can play in the tax and welfare systems. This was requested, and was sent to the committee last year. In our briefing we will limit ourselves to the factual issues surrounding making tax credits refundable. We are not in a position to give views on policy which is the bailiwick of the Minister and of the Government.
It might be useful to commence by putting forward a definition of the term "refundable tax credit". The OECD used the following definition: "a refundable tax credit, or a non-wastable tax credit is one where if an income earner has insufficient income to use all his or her tax credit the unused portion of the credit is paid to the taxpayer by means of a cash transfer". Other credits and subsidies are sometimes referred to as refundable tax credits but they are technically different in nature. I refer here to tax reliefs granted at source. We have some examples in our system in the form of mortgage interest relief and health insurance relief. There are also subsidies paid through the payroll which, though similar in nature to a refundable tax credit, do not fit the precise definition I have given. An example of such a subsidy would be the UK's working family tax and child tax credits. There are no such subsidies paid through the payroll system in Ireland.
When discussing refundable tax credits it is important to define which type of refundable tax credit is being employed. A universal tax credit could, for example, be an amount that everybody of employable age would get, regardless of whether they were on the tax file. One could envisage also a limited form of refundable tax credit, for example, one confined to those in employment or with an employment record. There are also tax credits related to specific policy areas, such as the child tax credit and the working family tax credit in the UK that I mentioned previously.
It is obvious that the issues arising and the costs involved to the Exchequer can differ significantly depending on the type of tax credit in question. The most comprehensive study in this area in recent years was conducted by the working group established under the Programme for Prosperity and Fairness to examine the role which refundable tax credits can play in the tax and welfare system. The group was chaired by the Department of Finance and included representatives from ICTU, IBEC, various farming organisations, the community and voluntary pillar, relevant Departments and the Office of the Revenue Commissioners. Areas of particular focus for the group were: a system of universal refundable tax credits; a more limited system of refundable tax credits for people on low or irregular incomes; family income supplement, FIS, paid through the tax system; refundable tax credits for rent relief; tax relief for the long-term unemployed; and tax relief for child care.
I propose to focus on the concept of a refundable tax credit or a limited refundable tax credit. If the committee wishes to discuss other specific areas we can return to them, in particular, the UK experience in the area of payroll subsidies.
A universal refundable tax credit is one that would be granted to everybody of employable age, regardless of whether they are on the tax file. This would include people who receive social welfare payments. The main advantages suggested for this form of refundable tax credit are that it could provide income support for those on low incomes. It would ensure that each person would get the full value of any improvement made to tax credits in the context of the annual budget. The working group which looked at this area pointed out that, apart from the costs involved, there were also significant disadvantages in such a system. There were negative impacts on the incentive to work, on labour supply and labour force participation and on overall productivity and output. These disadvantages, as well as the practical issues of classification, unemployment income or social welfare income and the administrative complexity that would arise in such a system led the group to reject the option of universal refundable tax credit. The Revenue has recently estimated that the cost of a universal refundable tax credit system would be approximately €3.5 billion per annum. The document provided to this committee indicates how this cost is estimated and we will be happy to discuss this if members wish.
A limited refundable tax credit could, for example, provide refundable tax credits for people on low or irregular incomes, including those in employment, those with an employment record or those in self-employment. People with sufficient taxable income could get the benefit of their tax credits in the normal way while those on low income, who would not have enough income to absorb the credits, would have the credits paid directly. Such a system could be delivered through the PAYE system for those in employment though with some increase in the complexity of that system. Self-employed persons would have to make an annual claim. Depending on the complexity of the limited refundable tax credit system adopted, it might be necessary for both the employed and the self-employed to make an annual claim.
An alternative would be to tax a person's entire income from the first euro, with the Department of Social and Family Affairs paying a person's entire credits directly. A system of this type would benefit those on low incomes and could also include those working in the home. In its examinations the group to which I referred believed that, to overcome some of the administrative difficulties associated with the universal system, payments would need to be made by the Department of Social and Family Affairs. The group believed that eligibility criteria would need to be put in place, such as minimum and maximum qualifying ages and a work earnings record involving a certain number of hours worked over the previous 12 months. Their examination proceeded on that basis. It was found that a significant number of issues related to eligibility would have to be resolved before establishing such a system. These included such questions as what constitutes income. For example, one could have an individual on a low income who had a large amount of money on deposit, or significant capital allowances, or tax reliefs. Decisions on these questions would be required because they would determine who was to benefit. As a restriction relating to hours worked was envisaged, a system would have to be established as to how hours worked would be accounted for and checked. Many of the potential beneficiaries of such a system would be part-time workers. To provide a refundable tax credit for part-time workers who also receive a social welfare payment, for example, the lone parent, this would mean that the social welfare payment would have to be taxed at source. This would mean a radical change to the social welfare system.
Examination of the interaction between the tax system and the social welfare system revealed that certain equality issues would arise. For example, a scenario could be envisaged where two individuals, both on jobseeker's benefit or jobseeker's allowance, would receive different amounts of money because one had a work record and the other did not. Another issue would be whether refundable tax credit payments would be seen as means for the purposes of calculating social welfare payments. The system would need to take account of that. Because of the eligibility criteria, new systems would be required and the social welfare system would become more complicated.
It was also found that the interaction between FIS, the farm assist scheme and refundable tax credits would be very complex and, in most cases, the extent of the benefit would be quite modest to the individual, having regard to the additional complexity of the system that would be involved. Having regard to the costs, the complexities and the equity issues that would have to be resolved, and the fact that many of the negative aspects of the universal system still remained, including the potential disincentives to enter and remain in employment, it was concluded that a more limited system should not be recommended as a priority at that time. Some members of the group considered that it was not feasible at all.
Revenue has recently estimated the cost for a system such as this as being approximately €3 billion per annum. The document provided for the committee illustrates how these costs are estimated. Again, we will be happy to discuss these estimated costs if the committee wishes.
Aside from the issues highlighted by the working group, it is worth pointing out that in a payroll-driven system, the introduction of refundable tax credits could also give rise to difficulties such as cash flow problems for small employers and more PAYE workers having to make tax returns, and a system of this type could be susceptible to error and fraud.
We carried out some research recently on the extent to which refundable tax credits or other similar transfer payments are provided in other EU and OECD countries. We found that out of a total of 35 countries examined, 11 have some form of refundable tax credits. However, in some of these countries income support payments made through revenue collection authorities are designated as refundable tax credits. It is true that refundable tax credits are not a widespread feature of income tax systems. Countries with highly developed social support systems do not tend to use the tax system as a vehicle to provide income support. It should also be noted that as far as we are aware there is no precedent in other jurisdictions providing for refundable tax credits on a universal or limited basis that operates through a cumulative tax system such as the Irish PAYE system.
Refundable tax credits and other similar mechanisms of making payments and providing subsidies through the revenue side of the budget can be very useful tools, as we know. Where a policy is decided, the question that needs to be asked is what the most effective and efficient delivery mechanism is and if this policy can be best achieved through a public expenditure scheme, a refundable tax credit, tax relief at source or a payroll subsidy. These are essentially choices and decisions policy makers need to make, having regard to the implications of those choices.
We will be happy to try to answer any questions or provide any further information the Chairman or members of the committee may seek.
I welcome the delegation. The presentation dealt with both universal and limited tax credits. I am open to correction, but I understood from listening to CORI that it looked at the limited situation as it mentioned people who were actually working. I would like to address that issue.
Unfortunately, I have only received the draft of the report now and have not been able to read it. Many people were involved in it. It is dated November 2002, and if changes have not happened since then I am not overly optimistic that there will be change in the very near future. Who is in favour of the idea and who is against it? I appreciate the delegation is not responsible for policy and is responsible for its implementation.
From what the delegation can tell us, was there support in principle for this idea from the Department of Finance and the Revenue Commissioners? The delegation gave us many reasons for the difficulties and where it sees difficulties arising. If difficulties are accepted in principle they can be teased out. From that perspective, we need to know if the delegation was in favour of or against the idea. I appreciate the situation is complex, and every single scheme that deals with the Revenue Commissioners or social welfare is complex, but those complexities have to be worked out if we want things to progress.
On the Revenue Commissioners figure of approximately €3 billion per annum, is that for limited or unlimited tax credits? The figure of €2.5 billion which CORI gave earlier was dated some time ago. What is the view of the delegation on the validity of that figure at the time it produced that figure?
The CORI estimate of 10% of what was mentioned by the delegation is a very rough estimate. Does the delegation think it is valid? Has it based its figures, as CORI has, on an assumption of an overall picture of everyone receiving the full amount rather than some people receiving a limited amount?
I welcome the representatives from the Department of Finance and the Revenue Commissioners.
To say that Mr. Palmer is unenthusiastic would be an understatement. It is extraordinary that he has raised so many problems and spoken about the complexity of the matter. Regarding the announcement yesterday of a levy on all earned income, one wonders if he raised the same concerns about income from other sources which was not earned and the complexity of placing a levy on that. The approach seems to be entirely different. Like Deputy Enright, I am interested to know if Mr. Palmer's colleagues share his lack of enthusiasm for exploring this proposal.
I would also ask Mr. Creighton, in particular, if he is concerned that in recent budgets where taxes were reduced on a cumulative basis, a significant number of people got no benefit from the tax cuts. I am talking about people who are already out of the tax net. Was the fact that the system he operated did not assist a considerable number of people, many of whom would be regarded as the working poor, a matter of concern to him? If he was concerned about it, does he have any other proposals to assist those people?
I know we are now in a very different economic situation but in recent years, where the benefits of a booming economy were being passed on to people, a significant number of people at the lower levels received no benefit at all. If Mr. Creighton is not in favour of refundable tax credits, does he have any other proposals to make on how to share the wealth in a more equitable manner?
Does the delegation accept the criticisms of the report which we heard from Fr. Healy this morning, in particular where he maintained that the comments on basic income were out of date and the costings which were provided were not relevant? It provided costings for a full universal refundable tax credit system, whereas nobody actually campaigned for that. It outlined its proposals for a limited refundable tax credit system today. Why did the delegation not cost that?
The principle of refundable tax credits has already been accepted. In 2001, when the Minister for Finance, Deputy Charlie McCreevy, introduced the system of tax credits rather than tax allowances, he received a great deal of praise for doing so because it was a move towards a much more progressive tax system. In many respects, he only started the process and did not follow through on it because having a proper and progressive tax credit system obviously entails having refundable tax credits.
Regarding policy, I know political decisions are taken, but from the point of view of completing the changeover to a tax credit system, why has the delegation not followed through and introduced refundable tax credits over all allowances? Why did it decide to do it in two areas, medical insurance and mortgage interest relief? If it accepts the principle that people should get relief for health insurance and mortgage interest, even though they are not paying any tax, why does that principle not apply to other tax credits which are available? I find it difficult to understand the reason there appears to be a double standard operating within the tax system.
On a wider issue, what is Mr. Palmer's view on the need to integrate the tax and social welfare systems? Is any progress being made on that front? Does he accept there is a need to progress that issue?
Regarding Deputy Enright's comment about the people who are working, in the current climate it was disappointing to hear Mr. Palmer's negative response. I accept the issue is complex and that it would be a modest amount of money at the end of the year for the person working, but that is not a good enough reason not to follow through on it. It has been established already that refundable tax credits have been agreed in principle and it is incumbent on us and the Department to ensure that it works. What appears to be a modest amount could mean a great deal to the individual. I find the anomaly very strange. Ten minutes ago Fr. Healy was able to say that to their surprise this measure appears to be costing very little, yet Mr. Palmer came in and offered a different view of the entire position. Will Mr. Palmer explain that?
I would like to make an important point before the officials respond. A civil servant, while giving evidence to a committee, may not question or express an opinion on the merits of any Government policy or policy objectives.
Mr. Vincent Palmer
I am sorry if I appeared negative. We are neither for nor against. This is a matter for Government and the Minister. We are not the policy makers; that is their function. Our duty is to point out the pros and cons of whatever policy they may wish to examine or put forward.
The purpose of the report was to examine the role refundable tax credits would have in the tax and welfare system. It was not to examine any particular proposals being put forward. The report is comprehensive. It examines all the issues and sets out the issues the policy makers have to decide if they wish to go this route.
I wish to address one question in particular, that is, the principle of a refundable tax credit being accepted. That is true to a certain extent but in my opening statement I said the definition of refundable tax credit and relief at source is not, strictly speaking, falling in with that definition.
Will Mr. Palmer explain the difference?
Mr. Vincent Palmer
I will leave that question to my Revenue colleague to answer. Technically they are different, although their effect is essentially the same.
Perhaps it could be answered now to ensure we are clear on the issue.
Mr. Eugene Creighton
As this is the first time I have had an opportunity to address the committee I will make a brief preamble to the issue. I concur with the comments made by my colleague from the Department of Finance in his statement. I would also like to assure the joint committee that the Revenue Commissioners are in no way opposed to the introduction of refundable tax credits. It is not our job to oppose or propose such a major policy shift. It is for the Minister for Finance, the Government and, ultimately, the Oireachtas to decide and make the policy. If a decision is taken to introduce refundable tax credits, we in Revenue will ensure that the policy decision is implemented as effectively and efficiently as possible, given the resources made available to us to do so.
It is incumbent on us, however, to point out that it is important for policy makers to be fully aware of the issues that might arise from the implementation of such a major structural change to the tax and social welfare system before they make that decision. In particular, policy makers should be aware of the problems that have arisen in near and similar jurisdictions.
On the question about the difference between the tax relief at source system, TRS, and a refundable tax system, there appears to be a perception that Ireland already has refundable tax credits in the case of mortgage interest reliefs and health and insurance relief. Those reliefs are given under what is known as the TRS system. There is a fundamental difference, however, between the operation of the TRS system in respect of those reliefs and a refundable tax credit system for personal and PAYE tax credits.
The TRS system works on the basis that mortgage lenders and insurance companies accept a reduced payment from their customer, the policy holder or the mortgagee, with those financial institutions then recouping that reduction direct from Revenue. Revenue pays the relief direct to the health insurers and the financial institutions. We do not pay it direct to the individual taxpayers who are getting the relief. That is the key fundamental difference.
Would Mr. Creighton accept that is an administrative issue? It is not a principle.
Mr. Eugene Creighton
I would accept it is an administrative——
VHI does the tax collecting for Revenue or administers the system——
Mr. Eugene Creighton
It enables the system to work.
——but the principle is the same. Does Mr. Creighton accept that the principle is the same?
Deputy Shortall, Mr. Creighton is making a statement and there should be no interruptions from anybody.
He is responding to a question.
He is responding to a question. Some back and forth exchange must be allowed to have a meaningful discussion.
I am chairing this meeting, Deputy.
Not very well.
I ask Mr. Creighton to continue.
Mr. Eugene Creighton
The effect of the TRS system is to deliver a refundable tax credit. I have no problem in accepting that. The system works well because of the mechanism used to deliver the relief to the financial institutions and the health insurers concerned. In the case of the health insurance there are only three main players in the system. In the case of the financial institutions I understand approximately 21 lending institutions are involved. From a delivery point of view, therefore, we are dealing with fewer than 30 institutions for these two significant reliefs in the system.
The effect of the relief is to deliver a refundable tax credit, even to those not in the tax system. We have no problem in acknowledging that. The mechanism used allows the system to work, to be accurate and minimise the red tape and administrative burden on all concerned.
Refundable tax credits of the nature proposed do not work on the same basis as TRS. That is the main point I want to get across.
Administratively.
Mr. Eugene Creighton
On an administrative basis.
Mr. Eugene Creighton
There are many more people involved in the delivery mechanism and in the entire apparatus in terms of deciding who is entitled to the relief and who is not entitled to the refundable credit.
In terms of dealing with all the stakeholders, which would involve both the taxpayers — PAYE and self-employed people — employers, Revenue and possibly, depending on the system adopted, even the Department of Social and Family Affairs, a major administrative infrastructure would need to be put in place to deliver those refundable tax credits for the personal and the PAYE credit. That potentially could give rise to real difficulties that have been experienced in the United Kingdom in terms of their delivery of what is essentially a transfer payment through the tax system. It has given rise to major administrative and real difficulties for low income families in terms of not getting the correct relief delivered to them. We can come back to that but that clarifies the difference as we see it.
Does Mr. Creighton accept that the objective and the outcome is the same? It means that people who do not have taxable income get a refund of money.
Mr. Eugene Creighton
They do not get a refund.
They get money back, which is the principle.
Mr. Eugene Creighton
The reduction in their policy or mortgage given to them by the financial institution is made up by Revenue. That was done primarily for reasons of administrative convenience. It would have been too difficult to take that class of person out of the system.
Surely the principle is accepted that even if somebody does not pay tax, he or she is still entitled to the same kind of relief a taxpayer gets?
Mr. Eugene Creighton
I accept those reliefs work whether or not one pays tax.
The principle is established there, so it is then a matter of its administration.
Mr. Eugene Creighton
I am not sure it is the same thing because the principle of the policy that drove the way those reliefs are delivered is that it would have been inherently expensive to exclude those people. It was a negative decision to allow them in, if I may put it that way.
I wonder.
Mr. Eugene Creighton
That is why they get the relief in the way they do. Does the committee want me to continue with answers to some other questions?
No, that is fine. Does Mr. Palmer want to come back in?
Mr. Vincent Palmer
Not unless the committee has specific questions that its members think we have not answered.
There are some outstanding questions.
Mr. Eugene Creighton
If I may, Chairman, I will answer some of the outstanding questions.
Mr. Vincent Palmer
There is the cost issue.
Mr. Eugene Creighton
Yes. Deputy Enright asked whether we would agree that CORI referred to a limited form of refundable tax credit. I accept that CORI talked about a limited refundable tax credit. I broadly answered the question as to whether the Revenue believes in refundable tax credits. It is not really our place to opine on that sort of thing. We will do what we are directed to do. The €3 billion cost in Dr. Palmer's presentation refers to a limited refundable tax credit system based on current figures and current employment, so there is a certain difference. Someone else referred to CORI's costs. In fairness to Fr. Healy, he said they had no final costings available. I am not sure therefore that it is worthwhile comparing their costs with ours. We are willing to explain where our costs have come from.
Dr. Palmer's presentation said that a universal refundable tax credit system was costed at €3.5 billion.
Mr. Eugene Creighton
Yes. In his statement he also refers to a more limited system with a cost of €3 billion. I think it is on the last or second last page.
The limited one is €3 billion.
Mr. Eugene Creighton
Yes.
Whose version of a limited one is it?
Mr. Eugene Creighton
I was not here for all of Fr. Healy's presentation. I think they are quite alike. They are talking about the personal tax credit and the PAYE tax credit.
Maybe Mr. Palmer can clarify that.
Mr. Vincent Palmer
They are very similar. Fr. Healy referred to a system that would be refunded end-year, which I do not think I had heard before from him. Much of the work of the group I mentioned was devoted to looking at how it could be done during the year.
Was it for over-21s and people who had a work record?
Mr. Vincent Palmer
Yes, as far as I recall, it was over 20s or 21s — around that area. Mr. Molloy has given a costing to the committee of a limited system which takes account of hours worked, limiting it to people at a certain number of hours worked and an age limit. It is very similar to what Fr. Healy put forward today.
What is the cost of that? I am sorry but we have only just been handed this. That is just under €3 billion.
Mr. Vincent Palmer
Just under €3 billion. I think Fr. Healy referred to one tenth of that as being the likely cost.
Fr. Healy has estimated roughly — I stress, roughly — that the costs CORI is looking at are somewhere in the region of 10% of what Mr. Palmer is saying. He does not have the up-to-date figures for 2009, but we are quoting the earlier figures which were €2.5 billion.
Mr. Vincent Palmer
Yes.
Does Mr. Palmer agree or disagree with what CORI said — this is a factual question, not a policy one — as to whether it would be in the region of 10%? Is CORI accurate in those figures, or does Mr. Palmer think it is much closer to the figure he is giving us?
Mr. Vincent Palmer
I accept the figures Revenue has just handed the Deputy as being correct, in so far as we can be correct about a costing.
Therefore, Mr. Palmer thinks a limited tax credit would cost €2.5 billion.
Mr. Vincent Palmer
Absolutely.
Therefore, there is a 90% difference in the two positions.
Mr. Vincent Palmer
I think €3 billion is the figure that Revenue has cited in its document.
There were other questions.
Mr. Paddy Molloy
May I comment on the questions, please?
Yes, certainly.
Mr. Paddy Molloy
I distinguish between "limited" and "universal". Limited is not that much limited compared to universal, as the difference between €3.5 billion and €3 billion would suggest. In our terms, "limited" is just confining the refundable tax credit to anybody who is on the tax record, for any reason, once they are working any hours, at any age. That is the totality of what makes up our €3 billion cost. The €3.5 billion is simply allowing for the fact that there are adults in the population who are not on the tax record. On a calculation, looking at the census figures from the CSO, I came up with a figure that was close to 500,000 people who were not on the tax record, but were in the census of population. All we are doing there is scaling up the €3 billion to €3.5 billion to allow for the fact that there are 500,000 people outside the tax record. It is a straightforward thing. The bulk of the cost to be argued over is really the €3 billion based on the tax record itself and what that encompasses.
What is the explanation for that number of people being outside the tax record?
Mr. Paddy Molloy
We are talking about €500 million in respect of the 500,000 people.
Yes, but what is the explanation for 500,000 people being outside the tax record?
Mr. Paddy Molloy
There is a difference between what the census of population describes as being the number of adults in the country and those on the tax record.
I am asking the Revenue Commissioners what is the reason for that disparity.
Mr. Paddy Molloy
The reason is that not everybody is on the tax record. Some people will have low incomes, social welfare incomes or fixed pension incomes. It is not the Revenue's policy to have people on the tax record where there is no chance of them ever having a tax liability. It is administrative.
Then they would not qualify for refundable tax credits.
Mr. Paddy Molloy
Perhaps not. The figure of €3.5 billion we mentioned is just to round it off in a total sense. The figure that is at issue between our costing and CORI's costing is in reality the €3 billion, not the €3.5 billion.
CORI said it will have full worked up figures later on in the year. At that point we should request both the Revenue Commissioners and the Department of Finance to sit down with CORI to go through the figures. Then they can all report back to us on the figures.
Fine.
I know the Chairman does not encourage it, but may I suggest we invite them together so that we can discuss the figures? Is that possible?
No, I am sorry.
What about the question concerning the integration of the tax and welfare systems?
Mr. Eugene Creighton
There is a certain amount of integration already in both systems. There is an exchange of data that happens on a regular basis. We work together on joint inspections. We collect, on an agency basis, PRSI, health levies, etc. However, there may be a need for further integration. Provision is certainly made in respect of the exchange of information with regard to inquiries. We are working with the Department of Family and Social Affairs to obtain additional information in that way. We also have a memorandum of understanding to regulate the interaction involving our office and the Department. There may be a need to examine the position with regard to further integration in certain areas.
Some of the other questions posed by the Deputy are policy-related in nature and I feel I am not in a position to reply to them. One of these questions related to the budget reductions in tax rates and increases in credits and the Deputy referred to people on low incomes not obtaining the same benefits as others. Budgets must be considered in the overall context on both the social welfare and tax sides. As stated, however, I am not in a position to comment.
On the basis that one would expect that the principle of equity should underpin the tax system, does Mr. Creighton accept that the system needs to be refined on an ongoing basis?
Mr. Eugene Creighton
Equity is a principle in the tax system and it needs to be borne in mind, on an ongoing basis, in the review of the tax and welfare system.
In pursuit of that objective, I presume Revenue would be proposing changes.
Mr. Eugene Creighton
Again, it is not for the Revenue Commissioners to propose that type of change.
Who holds responsibility in that regard? Is it the Department or it is all political and should everything just continue as before? Does Mr. Creighton accept that the principle of equity should underpin the taxation system.
I made it clear that the witnesses cannot comment on Government policy.
I did not ask Mr. Creighton to comment on Government policy.
The Deputy is pressing Mr. Creighton to comment on Government policy. I have given the Deputy a fair degree of latitude since the commencement of proceedings but in future she will address her remarks through the Chair when I am present.
There has to be a point to these meetings; they should not merely follow a format.
Mr. Eugene Creighton
Senator McFadden's question related to costs. We dealt with that matter and indicated that CORI will have to supply its figures.
On integration between the Department of Social and Family Affairs and the Revenue Commissioners, one of the most difficult issues with which we have continually tried to deal — through legislation and by other means — is that of rent supplement and the fact that it is being paid to landlords via social welfare recipients. There does not appear to be a foolproof system or a follow-up mechanism aimed at ensuring that these landlords are paying tax on the money they are obtaining, effectively from the State, in the form of rent supplement. We have been informed that social welfare recipients are entitled to this money and that it cannot automatically be paid to landlords. How is Revenue addressing this matter?
Mr. Eugene Creighton
We are examining the position in respect of this matter. Proposals relating to the exchange of information in respect of payments to landlords, by means of access for Revenue to the database of the Private Residential Tenancies Board, PRTB, are being worked on. In the context of the memorandum of understanding to which I referred, we are involved in ongoing discussions with the Department of Social and Family Affairs. Issues of this nature are, therefore, discussed with a view to ensuring that landlords who are in receipt of Exchequer funds are properly taxed.
Approximately €450 million is paid out each year in the form of rent supplement. I am not suggesting that all landlords are not paying tax in respect of moneys they receive and I am sure the majority are compliant in this regard. However, there is a great deal of money at stake and we should pursue the matter further in order to ensure that such money comes into the system.
Mr. Eugene Creighton
I agree.
The Committee of Public Accounts examined this matter last year. One of its recommendations was that Revenue should have access to the PRTB register. When I raised the issue in the context of the Finance Bill, I was informed that it would be dealt with in another item of legislation. Is it envisaged that this will now happen?
Mr. Eugene Creighton
I believe that is the position. I was present when a statement to that effect was made on Committee Stage of the Finance Bill. We are working on the matter and we are hoping that our proposals will be included in a Bill that will come before one or other of the Houses within the next month or six weeks.
I inquired about the matter in respect of the Finance Bill and I was informed that it would be dealt with in the context of the Housing (Miscellaneous Provisions) Bill. However, the latter did not prove to be the case.
Mr. Eugene Creighton
I believe the Housing (Miscellaneous Provisions) Bill was published prior to the Finance Bill. I understand that a provision relating to the matter to which the Deputy refers will be included on Committee Stage in the Seanad.
Are the Revenue Commissioners still on track in that regard?
Mr. Eugene Creighton
Yes, that is my understanding. I did not prepare in advance for questions on this matter but it falls broadly within my area of responsibility. I am not aware that it is not on track.
Therefore, a Government amendment will be tabled to the Housing (Miscellaneous Provisions) Bill.
Mr. Eugene Creighton
Yes. That would be the idea.
I thank Mr. Creighton.
I thank the officials for their attendance and for such a comprehensive briefing.