I propose to take Questions Nos. 183 and 187 together.
I am advised by the Revenue Commissioners that the total identifiable costs to the Exchequer which are currently available relate to income tax and corporation tax allowances, reliefs, exemptions and tax credits available as set out in the following tables for 2008 and 2009, the most recent year for which the necessary detailed historical information is available. Work is ongoing to update the costs to 2010 terms but this is not yet complete. Data is not yet available for 2011 as the tax returns for that year are currently being processed for statistical purposes. Tax returns from self-employed for 2012 are not due until the latter part of 2013.
It should be noted that there have been changes since this period, i.e. some schemes have been abolished or modified and others have been introduced. For instance, as the Deputy will be aware, virtually all of the area-based and property tax incentive schemes have ended and Finance Act 2012 provided for a cap on property-based Accelerated Capital Allowance Schemes (in line with the tax life of the particular scheme) to be introduced from 1 January 2015. Relevant notes relating to items in the tables are also included.
Tax reliefs available exclusively for business reasons such as Stock Relief, Exempt Rental Income from Leasing of Farm Land, Capital Allowances, Rate of 10% for Manufacturing and Certain Other Activities, Group Relief and Research & Development are included in the tables. A number of tax reliefs, credits and deductions (for example, personal credits, pension contributions, BES, Film relief and property based tax incentives), which are included in the tables are also available to self-employed and PAYE taxpayers, but are not exclusively available for business reasons.
Index of Tables and Notes
a) Note on the Cost of Tax Credits, Allowances and Reliefs 2008 and 2009
b) Table IT 6 showing Cost of Tax Credits, Allowances and Reliefs 2008 and 2009. Figures of cost in relation to corporation tax are included in the “Income Tax and/or Corporation Tax” section of this table.
c) Notes on Table IT 6
d) Note on Green Paper on Pensions
e) Estimate of cost of certain property-based tax incentives and incomes exempt from tax for 2008 and 2009.
f) Note on reliefs in respect of which costs are not currently quantifiable or are negligible or are not identifiable within total aggregates.
a) Cost of Tax Credits, Allowances and Reliefs 2008 and 2009
The following table IT 6 shows the estimated cost in terms of revenue forgone of the personal tax credits and the main reliefs and deductions allowable under the income tax system. A number of reliefs which apply both to individuals and companies is also included and the cost shown in relation to these reliefs covers income tax and corporation tax. An adjustment is included in the cost figures applying to income tax to compensate for incomplete numbers of tax returns on record at the time of compiling the estimates.
The tax credits and reliefs listed in the table serve varying purposes. Many are essentially structural reliefs through which individual tax liabilities are adjusted to reflect relative taxable capacity. The main personal tax credits are a good example of this since they may be regarded as part of the progressive income tax structure representing a band of income chargeable at a zero rate. Others, such as relief for interest paid in full or investment in corporate trades, are tax-based incentives in favour of specific groups or activities which are designed to promote certain aspects of public policy.
In computing taxable profits, account needs to be taken in some way of the depreciation of capital assets incurred in earning those profits. To this extent, the figures in the table of the “costs” of capital allowances should not be regarded as measuring a “loss of tax revenue” on profits. To compute such “loss”, regard would have to be had to the excess of the amount of the capital allowances at current rates over the amount of the normal allowances.
The figures shown for the basic personal tax credits (married, single and widowed) are the costs of these tax credits as if all other tax credits and the exemption limits did not apply. They do not include individuals who are not on Revenue records because their incomes are below the income tax thresholds. The cost figures for the exemption limits are based on the excess of the exemption limits over the basic personal tax credits.
The figures of cost are for 2008 and 2009 and all figures are based on tax due in respect of assessments for each year and not on tax receipts within that year.
The figure against each credit or allowance represents the additional tax which would become payable if the tax credit or allowance were withdrawn assuming no consequent change in the behaviour of taxpayers (for example, in relation to the reliefs for savings), or the amounts of payments (for example, interest payable on certain savings schemes might need adjustment to take account of the new tax liability).
The numbers of claimants of each credit or relief are shown for both years to the extent that they are available. The numbers included are the taxpayers who would be adversely affected by the withdrawal of the respective credit or relief.
In the calculations, each tax credit or allowance has been dealt with separately and on the assumption that the rest of the tax system remained unchanged. It would be therefore inaccurate to calculate the effect of withdrawing all the credits, reliefs and allowances by simply totalling the figures. For example, the costs shown for capital allowances and stock relief are also calculated on the basis of separate withdrawal of these reliefs. Their combined cost would be greater than the sum of the separate costs because allowances are not always fully set off against available profits. For instance, a person with €1,000 gross trading profits, €1,000 capital allowances and €1,000 stock relief would pay no tax if either of the reliefs were withdrawn but would pay tax on €1,000 profits if both reliefs were withdrawn. In this case, the cost of each relief separately is nil but the combined cost is tax on €1,000. Basic data is not available to enable an estimate of the combined cost of these reliefs to be made.
The figures for estimates based on tax returns have been grossed up to an overall expected level to adjust for incompleteness in the numbers of returns on record at the time the data was extracted for analytical purposes.
Apart from the artists exemption, these figures do not take account of the application of the restriction of reliefs originally provided for in section 17 of Finance Act 2006, which took effect from 1 January 2007. The restriction was extended by Section 23 Finance Act 2010.
Finally, the estimates shown in many cases are tentative and are subject to revision in the light of later information.
The figures shown include the amounts claimed in the year but exclude amounts carried forward into the year either as losses or capital allowances, and include any amounts of unused losses and/or capital allowances which will be carried forward to subsequent years.
|
Tax Incentive/Income Exemption 2008
|
Amount Claimed
|
Assumed maximum tax cost €m
|
Number of claimants
|
|
-
|
€m
|
€m
|
-
|
|
Urban renewal
|
230.8
|
87.0
|
3,367
|
|
Town Renewal
|
61.6
|
24.2
|
998
|
|
Seaside Resorts
|
16.1
|
6.4
|
1,091
|
|
Rural Renewal
|
88.4
|
35.7
|
2,803
|
|
Multi-storey car parks
|
16.8
|
6.6
|
134
|
|
Living Over the shop
|
6.4
|
2.6
|
81
|
|
Enterprise Areas
|
6.3
|
2.5
|
138
|
|
Park and Ride
|
1.8
|
0.7
|
21
|
|
Holiday Cottages
|
36.9
|
14.8
|
844
|
|
Hotels
|
305.5
|
116.4
|
1,996
|
|
Nursing Homes
|
48.4
|
19.8
|
734
|
|
Housing for the Elderly/infirm
|
7.4
|
3.0
|
179
|
|
Hostels
|
1.68
|
0.69
|
22
|
|
Guest Houses
|
0.29
|
0.12
|
10
|
|
Convalescent Homes
|
1.4
|
0.5
|
32
|
|
Qualifying Private Hospitals
|
30.2
|
12.3
|
342
|
|
Qualifying sports injury clinics
|
4.1
|
1.7
|
60
|
|
Buildings Used for certain child care purposes
|
30.3
|
12.2
|
519
|
|
Qualifying Mental Health Centres
|
0.1
|
0.0
|
3
|
|
Student Accommodation
|
60.0
|
23.5
|
814
|
|
Caravan Camps
|
1.5
|
0.6
|
10
|
|
Mid-Shannon Corridor Tourism Infrastructure
|
1.8
|
0.7
|
12
|
|
Exemption of profits or gains from Greyhounds
|
0.0
|
0.0
|
10
|
|
Exemption of profits or gains from Stallions
|
92.3
|
15.1
|
192
|
|
Exemption of profits or gains from Woodlands
|
51.0
|
13.6
|
2,492
|
|
Exempt Patents (Section 234, TCA 1997)
|
198.3
|
51.7
|
1,209
|
|
Totals
|
1,299.2
|
452.6
|
18,111
|
|
Tax Incentive/Income Exemption 2009
|
Amount Claimed
|
Assumed maximum tax cost €m
|
Number of claimants
|
|
-
|
€m
|
€m
|
-
|
|
Urban renewal
|
233.8
|
93.1
|
3410
|
|
Town Renewal
|
45.4
|
18.3
|
1,001
|
|
Seaside Resorts
|
13.3
|
5.3
|
875
|
|
Rural Renewal
|
70.0
|
28.0
|
2,653
|
|
Multi-storey car parks
|
13.2
|
5.2
|
130
|
|
Living Over the shop
|
4.1
|
1.7
|
66
|
|
Enterprise Areas
|
5.4
|
2.1
|
118
|
|
Park and Ride
|
2.0
|
0.8
|
20
|
|
Holiday Cottages
|
34.7
|
13.9
|
786
|
|
Hotels
|
263.2
|
102.1
|
1,906
|
|
Nursing Homes
|
54.4
|
21.6
|
750
|
|
Housing for the Elderly/infirm
|
6.8
|
2.8
|
145
|
|
Hostels
|
0.73
|
0.3
|
14
|
|
Guest Houses
|
0.24
|
0.1
|
8
|
|
Convalescent Homes
|
1.3
|
0.5
|
28
|
|
Qualifying Private Hospitals
|
30.5
|
12.5
|
346
|
|
Qualifying sports injury clinics
|
3.6
|
1.5
|
67
|
|
Buildings Used for certain child care purposes
|
30.8
|
12.5
|
527
|
|
Qualifying Mental Health Centres
|
0.1
|
0.0
|
1
|
|
Student Accommodation
|
48.3
|
19.1
|
751
|
|
Caravan Camps
|
0.6
|
0.2
|
2
|
|
Mid Shannon Corridor Tourism Infrastructure
|
0.6
|
0.2
|
2
|
|
Exemption of profits or gains from Greyhounds
|
0.0
|
0.0
|
5
|
|
Exemption of profits or gains from Stallions
|
2.0
|
0.4
|
32
|
|
Exemption of profits or gains from Woodlands
|
48.2
|
14.4
|
3,570
|
|
Exempt Patents (section 234, TCA 1997)
|
260.7
|
71.7
|
1,268
|
|
Other
|
52.6
|
19.5
|
635
|
|
Totals
|
1,226.6
|
447.8
|
19,116
|
These figures do not take account of the application of the restriction of reliefs originally provided for in section 17 of Finance Act 2006 and which took effect from 1 January 2007.The restriction was extended by Section 23 Finance Act 2010.
As the Deputy will be aware, virtually all of the area-based and property tax incentive schemes have ended and Finance Act 2012 provided for a cap on property-based Accelerated Schemes (in line with the tax life of the particular scheme) to be introduced from 1 January 2015.
Notes:
- The figures shown relate to the various reliefs/incentives and exemptions as specified in the 2008 and 2009 form 11 and CT1.
- There were concerns that in some instances the new, separately categorised data on property incentives may not have been correctly entered on the Tax returns. Revenue drew the attention of the relevant tax practitioner bodies to these deficiencies to rectify them in future returns and also increased awareness among its own staff involved in processing tax returns of the need to ensure, through closer examination of the returns, that they are correctly completed.
- The estimated costs have assumed tax foregone at the 41% rate in the case of income tax and 12.5% in the case of corporation tax. This means the figures shown correspond to the maximum Exchequer cost in terms of income tax and corporation tax. However, the actual Exchequer cost could be lower, particularly in relation to the exempt income items, as the income could be subject to deductions for allowable expenses and other costs thereby reducing the level of income that would be actually subject to tax.
- Some of the costs shown above are included in the costs shown for capital allowances and section 23 relief in Table IT6. However, exempt income included above is not part of capital allowances.
f) Note on reliefs in respect of which costs are not currently quantifiable or are negligible or are not identifiable within total aggregates.
Examples of this type of relief would include:
Relief from averaging of farm profits;
Exemption for income arising from payments in respect of personal injuries;
Exemption of certain payments made by Haemophilia HIV Trust;
Exemption of lump sum retirement payments;
Relief for allowable motor expenses;
Tapering relief allowable for taxation of car benefits in kind;
Reduced tax rate for authorised unit trust schemes;
Reduced tax rate for special investment schemes;
Exemption of certain grants made by Údarás na Gaeltachta;
Relief for investment income reserved for policy holders in life assurance companies;
Relief for various business related expenses such as staff recruitment, rent, legal fees, and other general expenses;
Exemption in certain circumstances on the interest on quoted bearer Eurobonds;
Exemption of payments made as compensation for loss of office;
Exemption of scholarship income;
Exemption for income received under Scéim na bhFoghlaimeoirí Gaeilge.
