TASC argue for savings to be made (approx 5 billion) from removing various tax breaks. The document contains a useful list of the large number of tax expenditures in the Irish system, taken from the Commission on Taxation report. They argue that reducing many of these breaks would be an equitable way of raising finance.
6 replies on “TASC Pre-Budget Submission”
Very interesting submission. While there are undoubtedely many of these exemptions that should be removed immediately, there are many which are standard tax exemptions around the world or are valuable. These should be retained.
Does anyone know how TASC estimated the exemptions and if they have the individual breakdown for each exemption.
estimates in the document seem to be taken directly from OECD reports referenced in the document and the Commission on Taxation report (The review of tax expenditures from that report is below)
http://www.irishtimes.com/focus/2009/oecd/index.pdf
http://www.commissionontaxation.ie/downloads/Part%208.pdf
I absolutely agree with TASC on this:
“TASC calls for the creation of a formal system to
define and categorise tax breaks/tax expenditure, followed by an equality
audit and economic efficient audit of all of them.”
There are also a whole host of other data I’d like to see, not least timely statistics.
I have to confess, I don’t understand the OECD’s figures on P.60 –
Total tax credits: 12.22 billion
Total excluding person credits: 5.65 billion
Yet this is supposed to be 18.3% of the total tax take? Was the total tax take only 31 bn in 2005? I thought it was already bubblicious?
Short of slashing personal credits or removing all other classes of credit I don’t see that there are 5 billion of savings to be made this year. Perhaps rolling forward, but not in a single year.
I do agree that it is a ridiculous situation that, even in 2005 when revenues were buoyant, you give away more in various credits than you bring in in tax.
To my mind there’s a case for introducing low levels of initial tax, adjusting the tax bands and allowing no credits at all. All income to be considered income, none of this tax exempt income stuff. Do away with a rake of other taxes (CGT/CAT etc.) that serve no interest in this regard.
Hey, it’d keep people busy, anyway!
@ yoganmahew. Reform of Income Tax system is essential. But will it happen? I read somewhere about the reaction of a dog if you attempt to take away its bone. Can be done, but better use a long metal tongs.
Can’t see ANY of the current cast of the Leinster House (un)Reality Show making any move in the direction of reform – unless it forced to from without – which is also unlikely. All they can (collectively) muster up is some weasel-word versions of business-as-usual rubbish.
The ‘rake of other taxes’ you mention only complicate and confound the situation -distracts from the main task of reform. Simplify the tax code as much as you can. Tax ALL types of incomes for all citizens – irrespective of source, say at 20% (or whatever is needed) – dispense with the bands. Tax should include mandatory PRSI, health, etc deductions. Also, equalize VAT and Excise duties with respect to that ‘other region’ – beyond the land frontier. Won’t stop cheating, but should reduce the problem a bit.
Do you reckon that future commitments (ie. interest payments on state debt) might become a problem? What are the unstated assumptions about the ability of the citizen-taxpayer to carry these payments? If they are what I believe them to be – then we do have a real predicament ahead.
B Peter
@B Peter
“Do you reckon that future commitments (ie. interest payments on state debt) might become a problem? What are the unstated assumptions about the ability of the citizen-taxpayer to carry these payments? If they are what I believe them to be – then we do have a real predicament ahead.”
I certainly do think it is a problem already. According to the estimates, interest payments will rise by 2 billion next year to 4.5 bn. This is 14% of tax revenue. This is before next years deficit which, even excluding NAMA, will, I reckon, be bigger than this years by the time the banks are recapitalised, even with no spending on the NPRF and the capital budget cut by a third.
What’s not in the estimates:
5.7 bn for Anglo
More for the Anglo wind-down vehicle (the bad bank)
More the the new Anglo good bank
INBS & EBS merger capital
BoI and AIB recapitalisation post NAMA
Add to this the unavoidable deflationary effects of the budget…
Then think about the increase in the cost of money whether interest rates increase or not… (t-bills and commercial paper may not be such an easy sell).
Then add in something for residential mortgages as the ECB closes the short-term window and variable rates rise again (whether the ECB raises or not).
It’s a depressing list.
@ yoganmahew: Thanks for the info. Its what I had in mind, but lacked the specifics to understand it.
Since ‘growth’ – as in more credit + debt is now improbable, whence the ‘cure’? Can the ECB slowly inflate (increase money supply)? This would be equivalent to a depreciation. Make for some very unhappy bond holders.
Stopping the deflation spiral requires ‘cramming down’ vast amounts of real debt. This would result in IRL pcl moving forward into the past – 1970s? or 1950s? What level of negative income shock would this entail? Res property values -80%?? Make for some very unhappy voters!
Looks like the slurry is ‘locked and loaded’ and ready to spray! A small farm – 10ht maybe, looks like a good bet.
B Peter