Dáil Éireann Debate, Thursday - 3 March 2005
48 Mr. Gilmore asked the Minister for Finance the progress made to date with regard to his review of tax reliefs and exemptions for high earners; if consultants have now been appointed to assist in this process; when he expects the process to be completed; and if he will make a statement on the matter. [7152/05]
Amharc ar fhreagraI announced in my Budget Statement that my Department and the Office of the Revenue Commissioners will undertake a detailed review of certain tax incentive schemes and tax exemptions in 2005. This review will evaluate their impact and operation including their economic and social benefits for the different locations and sectors involved and to the wider community. In addition the review will examine the degree to which these schemes allow high-income individuals to reduce their tax liabilities.
I subsequently announced in a press release on 6 January 2005 that my Department had advertised for external consultants to review certain tax incentive schemes. Tenders were invited from suitably qualified consultants to undertake two separate studies in economic, fiscal and social terms, as necessary, of the impact, operation, effectiveness and cost of 15 separate tax incentive schemes. The request for tenders was placed in the Official Journal of the European Union on 24 December 2004. Seven tenders have recently been received in my Department and decisions on the award of the contracts will be taken by the end of this month. It is envisaged that the consultancy review of these various reliefs will be completed by end July 2005.
The review of tax reliefs also includes a special public consultation process seeking submissions on measures that could be introduced to balance the benefit of such reliefs with the extent to which these are used by high-earners to reduce their tax bill. The public consultation was advertised on 8 January 2005 and submissions should be made to my Department before 31 March 2005.
The review will also involve the examination by my Department and the Revenue Commissioners of certain other tax exemptions, for example, for stallions, woodlands, artists and patent income. I would welcome the views of public representatives, either individually or via the forum of the relevant Oireachtas committees and of the social partners in due course in relation to all these matters.
The aim is to have all these examinations completed by the autumn so that the various issues can be examined in the context of the 2006 budget next December.
50 Mr. Cuffe asked the Minister for Finance if he has considered and costed charity tax reform as proposed by the ICTRG. [7061/05]
Amharc ar fhreagraIn the context of this year's Finance Bill, the Irish Charities Tax Reform Group, ICTRG, has proposed a reduction in the minimum threshold for donations qualifying for tax relief from €250 to €100 and an extension of the current donations scheme to cover gifts of non-cash assets. In addition, the group has proposed the introduction of a VAT refund scheme for charities.
I have considered the issues raised but am not prepared to reduce the minimum amount at this time. The relief is already very generous, being at the taxpayer's marginal rate of tax. This could be as high as 42% for an individual donor. In such cases, the value of the donation is increased by 72% as a result of the tax relief. A reduction in the minimum qualifying donation would have the effect of increasing the numbers of donations qualifying for relief and could therefore be very costly to the Exchequer.
Regarding the donation of non-cash items, the position is that where an asset is donated to an eligible charity, the donation for capital gains tax, CGT, purposes is deemed to be such that neither a gain nor loss accrues to the donor on the disposal. Therefore, no tax charge arises in respect of such a donation and any gain on a subsequent disposal of the asset by the charity is not a chargeable gain provided it is applied for charitable purposes only. Income tax relief on the value of an asset donated as proposed by the ICTRG, together with the current CGT exemption, would amount to a double relief. Such a concession could result in tax relief being granted which was well beyond the top rate of income tax.
In addition, the means whereby the relief is currently given in the case of a PAYE donor presupposes that the individual is making the donation from income on which he or she has paid income tax to the value of the relief being claimed. While there is some prospect that this is so when the donation is in the form of money, such a link may be broken where non-cash items are involved.
I very much appreciate the valuable work done by charities for the benefit of the community at large. I also understand the desire of the ICTRG to have the minimum qualifying threshold reduced still further and for the relief to be extended to non-cash items. However, the Exchequer is responding very generously in the present climate to the voluntary sector. In the circumstances, therefore, I do not consider the changes proposed are merited at this time. It is not possible to provide an estimate of the cost of the ICTRG proposals on the donations scheme but they would have significant implications for the Exchequer.
With regard to the ICTRG's proposal for the introduction of a VAT refund scheme for charities, charities and non-profit groups are governed by EU VAT law with which Irish VAT law must comply. Charities are exempt from charging VAT on the services they provide and cannot recover VAT incurred on goods and services they purchase. Essentially, only VAT-registered businesses which charge VAT are able to recover VAT. Accordingly, I have no plans to make any changes to the VAT treatment of charities.
