Tuesday, 20 March 2007

Ceisteanna (82, 83)

Martin Ferris


149 Mr. Ferris asked the Minister for Finance the reasons for his failure to introduce increased restrictions on the use of specified tax reliefs by high income individuals as part of recent finance legislation. [10183/07]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Minister for Finance)

In Budget 2006 I announced the introduction of a limit, with effect from 1 January 2007, on the use of tax reliefs, including certain exemptions, by some high-income individuals. Section 17 of Finance Act 2006 gave effect to this announcement. This measure was designed to address the issue of a small number of individuals with high incomes who, up to now, mainly by means of the cumulative use of various tax incentive reliefs, have been able to reduce their income tax liability to a very low level or to zero. Such individuals are no longer able to do so. This provision will ensure that such individuals who use tax incentive schemes will have an effective rate of income tax for each year of not less than about 20 per cent on the income sheltered by such schemes.

The method used to increase the tax rates at which these high income individuals pay tax effectively addresses the equity concerns raised over the past number of years while, at the same time, ensuring that the intended incentive effects of tax schemes will continue to be delivered.

Broadly, the reliefs restricted are those reliefs that have primarily been used by high income individuals to significantly reduce their tax liability. These are:

the various sectoral and area based property tax incentives,

certain exemptions including artistic income and patent royalties,

the reliefs for donations, and

certain investment incentive reliefs such as the Business Expansion Scheme, film relief and interest relief for investment in companies and partnerships.

The more usual items claimed by taxpayers such as medical expenses, trade union subscriptions, the personal tax credits and exemptions such as that for child benefit are not restricted. In addition, normal business expenses and deductions for capital allowances on plant and machinery, genuine business related trading losses and genuine losses from a rental business have not been restricted.

Finally, I would like to advise the Deputy, that I introduced a number of technical amendments to the restriction in Finance Bill 2007 which will help to ensure that the measure will work as intended. Included in these are provisions to enable the Revenue Commissioners to seek whatever information may be necessary from individuals affected by the restriction, so as to ensure that Revenue are in a position to monitor and assess the impact of the restriction in terms of numbers affected, the additional tax paid and the nature of the reliefs restricted.

Seán Ryan


150 Mr. S. Ryan asked the Minister for Finance the value of the tax relief for each year from 2000 to date in 2007 under capital allowances for the construction of private hospitals; and if he will make a statement on the matter. [10238/07]

Amharc ar fhreagra

I am informed by the Revenue Commissioners that for the tax year 2003 and earlier years claims for capital allowances for the construction of private hospitals were aggregated in tax returns with other claims and could not be distinguished from other reliefs claimed. Accordingly, the specific information on costs for 2003 and earlier years are not available.

Information on the scheme of tax relief for private hospitals was for the first time specified and separately included in personal income tax returns for the tax year 2004, the latest year available, and were filed in October, 2005. Based on the information that has been received and collated for the tax year 2004, a total of €4.5 million was included in 37 claims for capital allowances for the construction of private hospitals. This figure would correspond to a maximum Exchequer cost of the order of €1.9 million for these returns in terms of income tax foregone.

I should point out, however, that Revenue were concerned at preliminary indications that in some instances the new, separately categorised data on exempt income and property incentives may not have been correctly entered on the 2004 Income Tax returns. Revenue has engaged with the tax practitioner bodies in order to ensure that this situation is rectified for future years. Corresponding data based on 2005 returns is in the process of being compiled and should be available shortly. Data for the tax year 2006 is not yet available as the income tax returns for that year are not due for filing until October 2007.