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. 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 this year’s Finance Act 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.
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.
Work is ongoing to update the costs to 2010 terms but this is not yet complete.
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.
b) Table IT 6 showing Cost of Tax Credits, Allowances and Reliefs 2008 and 2009
INCOME TAX AND CORPORATION TAX
Table IT6
Cost of Tax Credits, Allowances and Reliefs 2008 and 2009
|
Tax Relief Provision
|
(1) Estimated cost for 2008
|
-
|
(1) Estimated cost for 2009
|
-
|
|
INCOME TAX
|
€m
|
Numbers
|
€m
|
Numbers
|
|
Exemption limits:
|
|
|
|
|
|
General Exemption (2)
|
0
|
0
|
0
|
0
|
|
Child Addition (2)
|
0.3
|
900
|
0.2
|
800
|
|
Age Exemption (2)
|
90.8
|
57,700
|
82.4
|
54,900
|
|
Married Person's Credit (3)
|
2,944.90
|
853,100
|
2,853.20
|
835,000
|
|
Single Person's Credit (3)
|
2,406.80
|
1,503,300
|
2,088.20
|
1,316,900
|
|
Widowed Person's Credit (3)
|
184.3
|
81,100
|
184.8
|
81,100
|
|
Additional Credit to Widowed Person in Year of Bereavement
|
4.9
|
4,000
|
4.9
|
4,000
|
|
Additional Bereavement Credit to Widowed Parent
|
6.9
|
2,300
|
6.2
|
2,400
|
|
Additional Personal Credit for Lone Parent
|
197.4
|
116,700
|
174.1
|
103,600
|
|
Homecarer Credit
|
79.5
|
93,100
|
63.9
|
77,500
|
|
Additional Credit for Incapacitated Child
|
39
|
12,300
|
38
|
12,200
|
|
Employee (PAYE) Credit
|
3,253.80
|
1,710,200
|
2,995.20
|
1,560,600
|
|
Dependent Relative Credit
|
2
|
18,700
|
2.1
|
18,200
|
|
Person Taking Care of Incapacitated Taxpayer
|
5.8
|
1,260
|
5.9
|
1470
|
|
Age Credit
|
42.3
|
88,100
|
43.7
|
90,700
|
|
Blind Person's Credit (incl.Guide Dog Allowance)
|
2.1
|
1,320
|
1.9
|
1190
|
|
Medical Insurance Premiums (4)
|
321
|
1,322,400
|
589.6
|
1,233,900
|
|
Health Expenses
|
266.8
|
542,600
|
145.5
|
492,800
|
|
Contributions Under Permanent Health Benefit Schemes, after Deduction of Tax on Benefits Received (5)
|
4
|
29,200
|
3.9
|
27,300
|
|
Employees' Contributions To Approved Superannuation Schemes (6)
|
655
|
792,600
|
729
|
713,600
|
|
Employers' Contributions To Approved Superannuation Schemes (6)
|
165
|
362,700
|
153
|
342,200
|
|
Exemption of Investment Income and Gains of Approved Superannuation Funds (6)*
|
685
|
N/A
|
780
|
N/A
|
|
Exemption of employers' contributions from employee BIK (6)
|
595
|
362,700
|
558
|
342,200
|
|
Tax Relief on "tax free" lump sums (6)
|
140
|
N/A
|
140
|
N/A
|
|
Retirement Annuity Premiums
|
352.8
|
116,000
|
237.2
|
101,300
|
|
Personal Retirement Savings Accounts
|
73.8
|
53,900
|
77
|
56,200
|
|
Interest paid:
|
|
|
|
|
|
Loans relating to Principal Private Residence
|
704.6
|
778,100
|
486.3
|
782,700
|
|
Other (7)
|
48.5
|
5,400
|
26.5
|
5,000
|
|
Rent Paid in Private Tenancies
|
96.5
|
222,100
|
85.9
|
196,900
|
|
Expenses Allowable to Employees under Schedule E
|
75.2
|
835,900
|
73.7
|
744,300
|
|
Third Level Education Fees
|
19.9
|
36,000
|
20.6
|
34,700
|
|
Exemption of Certain Earnings of Writers, Composers and Artists
|
21.8
|
2,630
|
22.1
|
2,590
|
|
Dispositions (Including Maintenance Payments made to Separated Spouses)
|
22.33
|
7,820
|
19.5
|
6,840
|
|
Exemption of Interest on Savings Certificates, National Installment Savings & Index Linked Savings Bonds
|
88.1
|
N/A
|
138.2
|
N/A
|
|
Rent a Room
|
5.6
|
3,600
|
5.6
|
3,770
|
|
Exemption of Income of Charities, Colleges, Hospitals, Schools, Friendly Societies, etc. (8) (10)
|
35.8
|
N/A
|
40.7
|
N/A
|
|
Retirement Relief for certain Sports Persons.(9)
|
0.2
|
17
|
0.2
|
15
|
|
Exemption of Irish Government Securities where owner not ordinarily resident in Ireland (10) *
|
320.8
|
N/A
|
486.7
|
N/A
|
|
Exemption of Statutory Redundancy Payments (11)*
|
85.4
|
29,800
|
147.8
|
77,000
|
|
Service Charges
|
27.1
|
455,200
|
26.8
|
452,600
|
|
Top Slicing Relief - Reduced Tax Rate for Payments in Excess of Exemption Amounts Made as Compensation for Loss of Office
|
44.7
|
3,790
|
47.8
|
6,110
|
|
Revenue Job Assist allowance
|
0.2
|
330
|
0.3
|
390
|
|
Allowance for seafarers
|
0.3
|
160
|
0.2
|
150
|
|
Trade Union Subscriptions
|
26.4
|
341,900
|
26.7
|
345,800
|
|
Exemption From Tax of Certain Social Welfare Payments:
|
|
|
|
|
|
Child benefit *
|
435.3
|
401,200
|
390.7
|
372,900
|
|
Early childcare Supplement*
|
98.3
|
195,200
|
47.5
|
154,300
|
|
Maternity allowance *
|
18.2
|
23,420
|
19
|
23,300
|
|
Foster Care Payments
|
28.09
|
3,470
|
28.4
|
3,360
|
|
Exemption of Income arising from the Provision of Childcare Services
|
0.8
|
440
|
0.8
|
470
|
|
Approved Profit Sharing Schemes *
|
99
|
111,190
|
37.6
|
62,900
|
|
Savings-Related Share Option Schemes*
|
1.3
|
2,800
|
0.8
|
1,800
|
|
Approved Share Option Schemes*
|
0.1
|
280
|
0.5
|
370
|
|
Relief for New Shares Purchased by Employees
|
0.3
|
280
|
0.3
|
250
|
|
Investment in Corporate Trades (BES)
|
55.7
|
3,200
|
25.6
|
1,640
|
|
Investment in Seed Capital
|
1.7
|
56
|
2.9
|
77
|
|
Stock Relief *
|
2
|
N/A
|
2
|
N/A
|
|
Exempt Rental Income from Leasing of Farm Land
|
N/A
|
N/A
|
4.4
|
2,960
|
|
Relief for expenditure on significant buildings and gardens
|
5.9
|
290
|
4.6
|
150
|
|
Donation of Heritage items
|
4.7
|
5
|
0.7
|
2
|
|
Donation of Heritage property to the Irish Heritage Trust.
|
3.6
|
4
|
0
|
0
|
|
INCOME TAX AND/OR CORPORATION TAX (12)
|
|
|
|
|
|
Donations to Approved Bodies
|
52.4
|
131,100
|
54.1
|
155,100
|
|
Donations to Sports Bodies. (9)
|
0.3
|
850
|
0.7
|
2100
|
|
Employee Share Ownership Trusts*
|
8.4
|
29,200
|
1.3
|
16,400
|
|
Total Capital Allowances:(13)
|
2,176.60
|
270,200
|
2,281.60
|
298,800
|
|
of which Energy Efficient Capital Allowances
|
N/A
|
N/A
|
1.6
|
93
|
|
Rented Residential Relief - Section 23 (13) *
|
74.7
|
2,429
|
46.9
|
1,620
|
|
Effective Rate of 10% for Manufacturing and Certain Other Activities (15)
|
160.9
|
1,046
|
340.6
|
1,370
|
|
Double Taxation Relief
|
596.5
|
18,000
|
589.1
|
18,900
|
|
Investment in Films*
|
32.8
|
3200
|
42
|
2,553
|
|
Group Relief
|
450.3
|
2430
|
390.5
|
2,507
|
|
Research & Development Tax Credit (16)
|
146
|
582
|
216.1
|
900
|
c) Notes on Table IT 6
(1) Figures accompanied by an asterisk * are particularly tentative and subject to a considerable margin of error.
(2) The cost figures for the exemption limits are based on the excess of the exemption limits over the basic personal tax credits. They include the cost of marginal relief for taxpayers whose incomes are not greatly in excess of the exemption limits.
(3) 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.
(4) Arising from the change over to Tax Relief at Source the figures relate to the number of policies issued. These include policies where subscriptions were paid by businesses on behalf of their employees.
(5) Part of the cost of contributions to Permanent Health Benefit Schemes is not identifiable as a result of the move to a “net pay” basis for contributions by PAYE taxpayers from 6 April 2001.
(6) See the following note on “Green Paper on Pensions” for background commentary on the basis of the cost figures .
(7) “Other” relates to borrowings for purposes such as acquiring an interest in a company or partnership .
(8) The income on which the cost of exemption from income tax for charities, colleges, hospitals, schools, friendly societies, etc. is based includes dividend income on which income tax deducted at source has been repaid, other investment income, payments received under covenant, donations by the PAYE sector to approved bodies together with the associated tax relief and donations by the self-employed and corporate sectors to approved bodies and approved sports bodies. Information is not available about other income received gross.
(9) The cost figures for relief for certain Sports Persons are based on income tax self assessment returns and for donations to Approved Sports Bodies are based on income tax and corporation tax self assessment returns.
(10) In the absence of other information, tax has been assumed at the standard rate of income tax even though a different rate might be more appropriate.
(11) The costs and numbers for the Exemption of Statutory Redundancy Payments are based on external data. From 2009 the “numbers” indicate the numbers of claims received in the year and not the numbers of claims approved.
(12) The costs included for corporation tax are by reference to accounting periods which ended in the years 2008 and 2009.
(13) The cost shown for capital allowances does not include any cost associated with “unused capital allowances”, that is, capital allowances which are not absorbed by a company in the accounting period in which they arise because they exceed the amount of the company’s profits of that accounting period which are available for offset. Unused capital allowances can be offset as losses against taxable profits arising in the previous accounting period and against certain profits arising in future accounting periods and can be offset against the profits of another company in the same group of companies. It is estimated that €3587 million and €5373 million of unused capital allowances were claimed in respect of 2008 and 2009 accounting periods respectively but as the proportion of this item which is included in previous years losses and in group relief is not separately identifiable a reliable estimate of the cost of the capital allowance element cannot be provided.
(14) The tax cost shown for section 23 type relief is the estimated ultimate tax cost relating to the total allowable expenditure in respect of claims made in 2008 and 2009 tax returns for the first time. The cost shown is for income tax cases only.
(15) the cost shown for manufacturing relief for 2008 is compiled using the basic data available but for technical reasons associated with a system redesign it is understood to be understated by at least €100m.
(16) The costs shown for R&D is for claims for R&D on corporation tax returns for accounting periods ending in 2008 and 2009. However, the cost for 2009 includes the amount of credit allowed against 2009 tax together with the amount offset against tax of previous accounting periods and as payable credits.
d) Note on Green Paper on Pensions - Review of estimates of cost
As part of the work on the Green Paper on Pensions, a review was carried out of the current regime of incentives for supplementary pension provision with a view to developing more comprehensive and reliable estimates of the cost of reliefs in this area. The review examined, among other things, the current reliefs and incentives for investment in supplementary pensions and the data available on which to base reliable estimates of the costs in revenue foregone to the Exchequer.
The review drew on newly available 2006 aggregate data on contributions to pension schemes by employers and employees arising from a P35 initiative introduced on foot of provisions that were included in Finance Act 2004 with a view to improving data quality. Estimates of the cost of tax for private pension provision updated for 2008 and 2009 are included in table IT6.
The breakdown and make-up of these estimated costs of reliefs differ from presentations of costs in this area for years PRIOR TO 2005 in a number of respects and are not directly comparable. further details on the cost of tax and other reliefs and the changes in the methodology are contained in pages 106 and 107 of the Green Paper on Pensions which is available at www.pensionsgreenpaper.ie.
e) Estimate of cost of certain property-based tax incentives and incomes exempt from tax for 2008 and 2009
Certain property-based tax incentives and incomes exempt from tax - uptake and estimated potential cost to the Exchequer in terms of income tax and corporation tax forgone based on 2008 and 2009 tax returns
Provisions were included in the Finance Acts of 2003 and 2004 to enable new statistical data on the uptake of tax relief for certain property-based tax incentives and incomes exempt from tax to be obtained from tax returns. This information, derived from changes introduced by the Revenue Commissioners to income tax returns and corporation tax returns for 2008 and 2009, is set out in the following tables.
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 this year’s Finance Act 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 Sceim na bhFoghlaimeoiri Gaeilge.
