Joanna Tuffy
Question:74. Deputy Joanna Tuffy asked the Minister for Finance if he will provide an update on tax reliefs (details supplied); and if he will make a statement on the matter. [19451/13]
View answerWednesday, 24 April 2013
Questions (74)
Written answers
I am informed by the Revenue Commissioners that the estimated cost to the Exchequer of all “legacy” property-related tax schemes in 2010, the latest year for which this information is available, was €327 million. It should be noted that any corresponding data returned by PAYE taxpayers in the income tax return (Form 12) is not captured in the Revenue computer system. However, any PAYE taxpayer with non-PAYE income greater than €3,174 is required to complete an income tax return (Form 11). The estimated relief claimed has assumed tax forgone at the 41% rate for 2010 in the case of individuals and 12.5% in the case of companies. The figures shown correspond to the maximum Exchequer cost in terms of income tax and corporation tax. Corresponding data cannot yet be provided for 2011 and 2012, as the tax returns for these years are either in the early stages of being filed or are not yet due.
I would like to remind the Deputy that Finance Act 2012 contained two measures related to property reliefs designed to reduce the ongoing cost of these schemes to the Exchequer and to eliminate it in as short a time as possible. With effect from 1 January 2012, a USC surcharge was introduced on all investors with annual gross incomes over €100,000. The surcharge applies at a rate of 5% on the amount of income sheltered by property reliefs in a given year and will be in addition to any normal USC payable on this income. This USC surcharge applies to all investors with this level of gross income regardless of whether they invested in Section 23 type investments or accelerated capital allowance schemes.
In addition, investors in accelerated capital allowance schemes will no longer be able to use any capital allowances beyond the tax life of the particular scheme where that tax life ends after 1 January 2015. Where the tax life of a scheme has ended before 1 January 2015 no carry forward of allowances into 2015 will be allowed. The delayed implementation of this measure is designed to give individuals time to adjust to the absence of the carry forward provision.
In relation to capital allowances in respect of capital expenditure on certain qualifying hospitals, the termination date for incurring qualifying expenditure was 31 December 2009. However, where certain conditions were met a later termination date of the 31st December 2013 may apply. There are now only two property based tax incentive schemes remaining in the tax code: the Mid-Shannon Corridor Tourism Infrastructure Investment scheme (only 80% of expenditure can qualify in certain areas) and the Qualifying Specialist Palliative Care Units scheme, which was not commenced.
All other such schemes have been terminated, subject to transitional arrangements for certain schemes where projects were already in the pipeline. However, due to their nature these reliefs continue to entail ongoing costs on the Exchequer in terms of tax foregone. Because of the nature of some of those reliefs, individuals have a right to claim them for a seven-year period. There are a number of legal considerations that would hinder the abolition of the reliefs during such run down periods.
I would like to assure the Deputy that the high earners’ restriction continues to apply to these legacy reliefs, and ensures that those subject to the full restriction pay a minimum effective rate of income tax of 30% in addition to USC, PRSI and the surcharges mentioned above, where applicable. The latest report from Revenue “Analysis of High Income Individuals’ Restriction 2010” which can be found at http://taxpolicy.gov.ie/wp-content/uploads/2012/07/High-Income-Individuals-Report-2010.pdf highlights the rates of tax paid by individuals subject to the restriction.