Dáil Éireann díospóireacht -
Tuesday, 9 Dec 1997

Vol. 484 No. 3

Written Answers. - Tax Yield.

Joe Higgins

Ceist:

202 Mr. Higgins (Dublin West) asked the Minister for Finance the amount by which the tax take and PRSI take would be reduced in 1998-99 if the 26 per cent income tax rate was reduced by 1 per cent, the 48 per cent income tax rate was reduced by 2 per cent, the personal allowance for income tax for a single person was increased by £500, the exemption limit for a single person was increased by £500, the personal allowance for income tax for a married person was increased by £1,000, the exemption limit for a married person was increased by £1,000, the lower rate, 26 per cent, income tax band was indexed by £500 for a single person and the lower rate, 26 per cent, income tax band was indexed by £1,000 for a married person. [21837/97]

Minister for Finance (Mr. McCreevy)

I am informed by the Revenue Commissioners that if the changes mentioned in the question were substituted for the changes in income tax exemption limits, personal allowances, tax rates and standard rate bands announced in the 1998 budget, they would cost £558 million in a full year. Such changes would have no direct implications for PRSI yield.

Joe Higgins

Ceist:

203 Mr. Higgins (Dublin West) asked the Minister for Finance the amount by which the tax and PRSI take would be reduced in 1998-99 if the standard rate of corporation profits tax was reduced by 4 per cent and the rate of corporation tax applicable to the first £50,000 of profits was reduced by 4 per cent. [21838/97]

Minister for Finance (Mr. McCreevy)

The estimated cost of a reduction from 1 January 1998 in the standard rate of corporation tax from 36 per cent to 32 per cent and in the reduced rate from 28 per cent to 24 per cent on the first £50,000 of profits is £8 million in 1998, £105 million in 1999 and £111 million in a full year. This is slightly higher than the estimated cost of the reductions from 36 per cent and 28 per cent to 25 per cent announced in the budget which is £107 million in a full year. These changes would have no direct implications for the PRSI yield.

Joe Higgins

Ceist:

204 Mr. Higgins (Dublin West) asked the Minister for Finance the amount by which the tax and PRSI take would be reduced in 1998-99 if the VAT refund to farmers was increased by 1 per cent and the PRSI weekly exemption limit was increased to £100. [21839/97]

Minister for Finance (Mr. McCreevy)

The position is that, in my financial statement on 3 December, I announced there would be an increase in the farmers' flat rate refund from 3.3 per cent to 3.6 per cent with effect from 1 March 1998. The cost of the measure is estimated to be £5.3 million in 1998 and £8 million in a full year and it will ensure that, on an overall basis, unregistered farmers will continue to be compensated in full for the VAT on their farming inputs. The cost of a 1 per cent increase in the flat rate would be £26.6 million in a full year.

In accordance with EU VAT law on the matter, the flat rate is calculated each year on the basis of macroeconomic data for the previous three years. It should be noted that EU rules specify that the flat rate may not be used to obtain for flat rate farmers refunds greater than the VAT on inputs. Accordingly, the scheme cannot be used to provide an indirect subsidy to farmers or to provide compensation for other purposes.

As regards PRSI, I also announced in my financial statement that the PRSI allowance for full rate PRSI contributors, which currently stands at £80 per week, non-cumulative, will be increased to £100 per week with effect from 6 April 1998. The cost of this increase is estimated at £38 million in a full year.

Joe Higgins

Ceist:

205 Mr. Higgins (Dublin West) asked the Minister for Finance the tax savings, if any, there would be in 1998-99 if the business expansion scheme was scrapped in view of the fact that there is no need for special incentives to business when the economy is booming; and the tax savings in this year if the designated areas scheme was eliminated due to the over heated state of the building industry and if the special allowances for city centre car parks was abolished. [21840/97]

Minister for Finance (Mr. McCreevy)

The last full year for which the cost of the business expansion scheme is available is 1996-97 when the cost was £42 million. Therefore, based on the 1996-97 figure the likely full year saving from the abolition of the BES would be £42 million. However, the full savings might not arise if investors in the BES were to invest their money in other schemes for which tax relief was still available.

As the Deputy will be aware, I announced in my recent Budget Statement that from budget day the cumulative amount that can be raised by any one company under the BES was reduced from £1 million to £250,000. It is estimated that the resultant savings in 1998 will be £10 million and £20 million in a full year.

With regard to the designated areas scheme, the 1996 KPMG report on urban renewal commissioned by the Department of the Environment estimated that the cost of the incentives in tax foregone was in the region of £40 million per annum. This is an average estimate over ten years. The relevant information available to the Revenue Commissioners in respect of designated area schemes relates to the cost of capital allowances in respect of expenditure on residential and non-residential urban renewal projects, except Custom House Docks and certain Temple Bar projects, and the scheme for designated seaside resorts. The aggregate cost of these is estimated at £51 million in 1996-97, the latest year for which full estimates are available.

The current urban renewal scheme ends on 31 July 1998 and the Government has approved a framework for a new urban renewal scheme to come into effect on 1 August 1998. The estimated Exchequer cost of this new scheme for 1998-99 is unknown at present as the details have not yet been provided for in the taxation code.

The pilot scheme for designated seaside resorts was due to end on 30 June 1998. However, I announced in my recent Budget Statement that the scheme was to be extended for one year to 30 June 1999 to facilitate the completion of the pipeline projects. The cost of this extension is £7 million. Precise figures are not available on the cost of providing tax relief for multi-storey car-parks but I extended the scheme in the budget for one year on the same basis as the extension for the designated seaside resorts. The cost is £1 million.

The extent to which these costs would become savings to the Exchequer in the event of their abolition would depend upon the extent to which investors could invest in other available tax incentives. The introduction of transitional measures to cater for pipeline projects would also affect the extent of savings arising from the termination of any of the schemes.

The Deputy will be aware that I announced a restriction of certain capital allowances in the budget. A ceiling of £25,000 per year is being introduced on the amount of capital allowances which an individual passive investor can claim against non-rental income in respect of expenditure incurred on certain buildings. It is estimated that these changes will raise £2 million in 1998 and £20 million in a full year.

Joe Higgins

Ceist:

206 Mr. Higgins (Dublin West) asked the Minister for Finance the tax saving, if any, there would be in 1998-99 if indexation in capital gains tax was eliminated for capital gains arising from the appreciation in the value of company shares and if stock relief for farmers was eliminated. [21841/97]

Minister for Finance (Mr. McCreevy)

Based on the new 20 per cent standard rate of capital gains tax, which applies to company shares, announced in the 1998 budget, it is tentatively estimated that the yield to the Exchequer from the abolition of indexation relief on disposals of shares by individuals could be in the region of £15 million in a full year based on current levels of share disposals which are liable to tax. The estimate does not take account of any additional yield which would arise on share disposals which are currently not liable to tax because of indexation. However, should indexation relief be abolished only from a current date, i.e. not retrospectively, the yield would be much less and it would be difficult to give an estimate at this stage.

Information from corporation tax returns is not recorded in such a way that it would be possible to provide a corresponding estimate of the yield on gains arising from the abolition of indexation relief on the disposal of shares by companies. To obtain the information it would be necessary to identify the cases and extract the information manually. Such an exercise could only be carried out at a disproportionate cost. The estimated yield to the Exchequer from the abolition of stock relief would be in the region of £1.5 million in a full year.