Róisín Shortall
Ceist:199. Deputy Róisín Shortall asked the Minister for Finance his estimate of the cost of introducing refundable tax credits. [30862/16]
Amharc ar fhreagraTuesday, 18 October 2016
Ceisteanna (199)
Freagraí scríofa
By a "refundable tax credit", I assume the Deputy is referring to a process whereby, should an income earner have insufficient income to use all of his/her tax credits, the unused portion of the credit would be paid to the income earner by means of a cash transfer.
I am advised by Revenue that they have not undertaken any exercise to estimate a projected cost of refundable tax credits to the Exchequer or the administrative cost of establishing the necessary systems to facilitate the refund of tax credits.
Any such exercise in estimation would be highly complex as it would involve assumptions about the manner in which such a system would operate, its possible effects on individuals not currently in the tax net and how such a system might interact with any social protection payments. In the absence of a fully designed scheme of refundable tax credits that addresses all of the relevant issues outlined, an estimated cost of refunding of credits referred to by the Deputy is not currently available.
The Deputy may also be aware that this matter was looked at in some detail by the Working Group established under the Programme for Prosperity and Fairness to examine the role which refundable tax credits can play in the tax and welfare system. The Group was chaired by the Department of Finance and included representatives from ICTU, IBEC, the various farming organisations, the Community and Voluntary Pillar, relevant Government Departments and the Office of the Revenue Commissioners.
The Working Group found that there were significant disadvantages with such a system. These included the potential negative impacts on the incentive to work, labour supply, labour force participation and overall productivity and output. The Commission on Taxation in its 2009 report also did not recommend the introduction of refundable tax credits.
In Budget 2017 I have continued the process of reducing the income tax burden for low and middle income earners commenced in Budgets 2015 and 2016. These changes are designed to ensure that work pays and to help individuals to transition from unemployment back into jobs and indeed to remove potential blockages that may be deterring part-time workers from taking on additional hours of employment. I do not believe refundable tax credits will assist us in this regard.