Michael D. Higgins
Question:
82
Mr. M. Higgins
asked the
Minister for Finance
if he intends to introduce new procedures to ensure that Irish citizens claiming residency abroad for tax purposes comply with the requirement to be out of Ireland for a minimum of 183 days; if the large cases division of the Revenue Commissioners is putting together recommendations as to the way in which to best monitor the situation in regard to those who claim residency abroad for tax purposes; and if he will make a statement on the matter.
[12976/04]
View answer
The administration of the validation procedures for claims of non-residency is a matter for the Revenue Commissioners and I am informed by them that these procedures are kept under constant review.
John Gormley
Question:
83
Mr. Gormley
asked the
Minister for Finance
the number of tax expenditure currently made available; the estimated annual tax foregone from each measure; and if he will make a statement on the matter.
[12960/04]
View answer
I presume the Deputy when referring to tax expenditures means certain provisions that represent spending within the tax code, for example, the homecarers' credit, but not to those which are part of the structure of the income tax system, such as the personal tax credits.
Tax expenditures and tax reliefs are spread through the tax system and are found under all tax headings, including income tax and corporation tax, the capital taxes and the indirect taxes. The number is dependent on the interpretation of what constitutes a tax expenditure. A wide definition would be that it is a provision that reduces or eliminates the tax due to be paid in certain circumstances and there are very many examples of these in the tax code. An example might be the exemption from capital gains tax which is granted to transfers of assets between spouses. A narrower definition would be a tax provision which has a clear public policy aim separate from the tax system and that there could be alternative measures for promoting this aim such as grants, an example here might be the business expansion or film relief schemes.
The following table which details major tax incentives-expenditures, that is, those where estimates can be made and are estimated to cost in excess of €20 million per year, under the headings: provisions; numbers benefiting; cost — € million — per annum; and year to which the costing refers. Each figure represents the reduction in tax liabilities arising from the existence of the tax incentives-expenditures and should not be regarded as the yield that would be secured should the tax incentives-expenditures be withdrawn. I draw the Deputy's attention to the footnotes to the table, which are important.
In addition, I refer the Deputy to table IT6 on page 63 of the most recent Revenue statistical report for 2002 which sets out the cost of income tax and corporation tax allowances and reliefs for the tax years 1999-2000 and 2000-01, the most recent for which data are available. It is available to be downloaded from the website of theOffice of the Revenue Commissioners at www.revenue.ie/publications/corppubs/anreports.htm. Due to the substantial number of footnotes I regret that this table cannot be reproduced in this reply.
The Deputy may also be aware that the Revenue Commissioners will be introducing a number of changes to the forms relating to the annual return of income by PAYE and self-employed individuals and companies in respect of 2004 as well as to the P35 form, which is returned to Revenue by employers at end year with totals for earnings and deductions for each employee, in respect of the tax year 2005. The changes to the return of income forms will, over time, yield additional information regarding the cost of various tax reliefs particularly in the area of capital allowances. The P35 return will supply additional data concerning tax relief on pensions. To underpin this work, the Finance Act 2004 made legislative changes to require an employer to provide the aggregate pension data sought on the P35 form and which will mean that if a taxpayer declines to fill in the additional sections of the return of income form, they will be liable to the usual surcharge and penalties for making an incomplete return.
Tax-based schemes are kept under constant review, especially in the context of the annual Budget Statement and Finance Bill process, to ensure they continue to meet the purpose or purposes for which they were introduced.
Major Tax Incentives-Expenditures.
|
Numbers benefiting
|
Estimated Cost (€ million)
|
Year of Costing
|
Notes
|
|
Corporate
|
|
|
|
|
|
Capital Allowances (includes business capital allowances and capital allowances to incentivise certain behaviour such as urban and rural renewal)
|
n/a
|
1,720
|
2000/01
|
(1)
|
|
Group Relief
|
1,789
|
337
|
2000/01
|
|
|
Resort Relief
|
n/a
|
106*
|
2000
|
(2)
|
|
Pensions/Savings
|
|
|
|
|
|
Exemption of the Income of Approved Superannuation Funds (Net of Pension Payments)
|
n/a
|
1,292*
|
2000/01
|
(3)
|
|
Employers’ Contributions to Approved Superannuation Schemes
|
n/a
|
645*
|
2000/01
|
|
|
Employees’ Contributions to Approved Superannuation Schemes
|
n/a
|
472*
|
2000/01
|
|
|
Special Savings Investment Accounts
|
1,143,400
|
433
|
2002
|
(4)
|
|
Retirement Annuity Premiums by Self-Employed
|
109,300
|
205
|
2000/01
|
|
|
Pension Lump Sums
|
n/a
|
124
|
2000/01
|
(3) (5)
|
|
Exemption of Interest on Savings Certificates, National Instalment-Savings and Index-Linked Savings Bonds
|
n/a
|
124
|
2000/01
|
|
|
Personal
|
|
|
|
|
|
Child Benefit — exemption from income tax
|
730,000
|
315*
|
2003
|
|
|
Loans relating to principal private residence — interest relief
|
488,400
|
211
|
2003
|
|
|
Relief in respect of Medical Insurance Premiums
|
600,000
|
192
|
2003
|
|
|
Expenses allowable to Employees under Schedule E (work related)
|
845,500
|
61
|
2000/01
|
|
|
Health Expenses Relief
|
107,800
|
41
|
2000/01
|
|
|
Rented Residential Accommodation
|
n/a
|
28*
|
2000/01
|
|
|
Investment in Corporate Trades (BES)
|
n/a
|
17
|
2000/01
|
(6)
|
|
Investment in Films
|
n/a
|
29
|
2000/01
|
(7)
|
|
Capital Taxes
|
|
|
|
|
|
Principal Private Residence — CGT exemption
|
n/a
|
1322
|
2002
|
(8)
|
|
Stamp Duty Relief for new homes
|
n/a
|
112
|
2001
|
|
|
Indirect Tax
|
|
|
|
|
|
Exemption from CGT on occasion of Death
|
n/a
|
47
|
2002
|
(8)
|
|
Disabled Drivers and Disabled Passengers Tax Concessions
|
7,500
|
38
|
2002
|
(9)
|
|
Farm Buildings and Land (VAT Refund)
|
n/a
|
31
|
2002
|
|
|
Excise relief for local public transport vehicles
|
n/a
|
20
|
2002
|
|
|
Other Income Tax
|
|
|
|
|
|
Exemption of income of Charities, Colleges, Hospitals, Schools, Friendly Societies etc.
|
n/a
|
34
|
2000/01
|
(10)
|
|
Artists Relief
|
1,200
|
37
|
2000/01
|
|
|
Donations to Charitable Organisations
|
n/a
|
13
|
2000/01
|
|
|
Relief under Profit Sharing Schemes
|
n/a
|
31*
|
2000/01
|
|
NOTES ON TABLE
Figures accompanied by an asterisk * are particularly tentative and subject to a considerable margin of error.
(1) The cost shown for capital allowances does not include any cost associated with unused capital allowances, that is, capital allowances which are not absorbed by a company in the accounting period in which they arise because they exceed the amount of the company's profits of that accounting period and which are available for offset. Unused capital allowances can be offset as losses against taxable profits arising in the previous accounting period and against certain profits arising in future accounting periods and can be offset against the profits of another company in the same group of companies. Approximately, €2,270 million of unused capital allowances were claimed for carry forward in respect of 1999-2000 accounting periods but as the proportion of this item which is included in previous years losses and in group relief is not separately identifiable a reliable estimate of the cost of the capital allowance element cannot be provided.
There are no statistics available on urban renewal for 1999-2000 because Revenue figures on urban renewal are merged with figures for other reliefs under existing computer codes and the urban renewal segment is not distinguishable. However, an exercise was done to estimate the urban renewal element. Based on 1998-99 figures the urban renewal element of the total capital allowances figure of €1,406 million was estimated to be €68 million. This cost represents a tentative estimate of the cost of capital allowances derived from the Department of the Environment, Heritage and Local Government's estimates of expenditure on new construction and refurbishment projects for urban renewal. These statistics do not include any estimate in relation to seaside resorts, island resorts, Custom House Docks and certain Temple Bar projects. The cost is mainly based on expenditure figures for 1997.
Budget 2003 announced the termination of a range of capital allowance schemes on 31 December 2004, including the urban, rural and town renewal schemes, the multi-storey car park scheme and the park and ride scheme. The immediate termination of the capital allowance schemes for hotels and for holiday cottages was also announced.
(2) The resort relief figure relates to an exercise carried out by Revenue and is a very tentative estimate. The figure for the cost of the relief from its introduction until September 2000, the scheme was introduced in January 1995, is estimated at €317 million; the figure shown is an annual estimate.
(3) In the absence of other information, tax has been assumed at the standard rate even though a different rate might be appropriate in many cases.
(4) For the period January 2003 to September 2003, tax credit payouts amounted to €398 million. Based on this level of payout, the expected full year cost in 2003 is €531 million. The cost of the scheme is affected where participants die, withdraw from the scheme or vary their monthly contributions and this estimate for 2003 assumes that these variations will broadly cancel each other out. The SSIA scheme will end five years from when the first contribution was made, that is, between 1 May 2006 and 30 April 2007.
(5) This is the most recent estimate provided by Revenue; it is not currently possible to capture this figure by way of tax returns.
(6) Due to an increase in the BES investment limit, there will be an additional cost of €3.7 million in 2002.
(7) Budget 2004 brought forward the termination of the film relief scheme by one year to 31 December 2008.
(8) CGT is not payable where the capital gain is in respect of the disposal of a person's principal private residence. The figure for the cost of this relief makes no allowance for the number of cases where the disposal of the property was on death, and would therefore be exempt from CGT even in the absence of this relief. The Revenue Commissioners have no basis upon which to estimate the proportion of disposals of principal private residences which are sales on the death of owners. If this relief was abolished it would however, in all probability, be necessary to introduce a form of rollover relief for taxpayers changing residence, though rollover relief for business assets was abolished in budget 2003.
(9) Benefits here include refunds of VRT and VAT on the purchase of the vehicle, VAT, subject to a limit, on the cost of adaptations carried out, repayment of excise duty up to a maximum of 600 gallons and anyone with a primary medical certificate is exempt from road tax.
(10) The cost of exempting the income of charities, colleges, hospitals, schools, friendly societies, etc. from income tax includes the sums repaid in respect of tax credits and income tax deducted at source, certain dividends, other investment income and payments received under covenant. It also includes the cost of exempting certain bodies from the deduction on income arising from Government securities.
