Tax Breaks - whats the cost?

munchkin_utd

I was just looking at the public transport taxsaver website and they reckon that you can save €639.60 a year on tax and PRSI by this scheme.
If just 10% of workers in the country have such savings, thats 115 million euro each year not being collected.
But does the government know themselves what its costing?

Through pension tax breaks people can reduce their tax bill by 1000s, and then when retired they have an INCREASED tax free allowance of €20k, meaning you neither pay tax on your income nor on your pension (or majority of it) when you draw it down.
And does the government know what both these breaks are costing.

Medical expenses are also tax deductible for whatever reason.
And does the government know what these are costing?

During the boom there were section 23 schemes and all other classes of property related tax dodges.
Did we ever see what those cost the nation in lost tax income on building houses in random places where they werent needed?
(I dont remember Bertie and co ever working out before hand what it would cost the nation anyhow)

A couple of months back I was listening to german radio and they were discussing a report by the federal auditing committee on how certain german tax breaks were costing billions in lost revenue and recommending that they be abolished.
In Ireland though, does the government have a clue of all the freebees they are giving away and the cost in Euros of it?

Or do they simply give away cash without any clue of what its costing them?

Geuze

http://www.tcd.ie/policy-institute/assets/pdf/Collins_Walsh_Presentation.pdf


Hard to know, but the paper above estimates that 131 tax expenditures cost 11bn.

Geuze

Annual cost of Top 10 tax expenditures
€m % GDP % Total Tax Take
1 Pension tax reliefs 2,900 1.64 5.09
2 Employee tax credit 2,522 1.42 4.43
3 CGT exemption on principal private residence 2,440 1.38 4.29
4 Mortgage interest relief 705 0.40 1.24
5 Property tax incentives 435 0.25 0.76
6 Child benefit tax exemption 427 0.24 0.75
7 Medical insurance relief 321 0.18 0.56
8 Agricultural relief for CAT 100 0.06 0.18
9 Tax exemption on patent royalties 84 0.05 0.15
10 Stamp duty relief for young trained farmers 71 0.04 0.12
Total 10,005 5.64 17.58

munchkin_utd

Geuze wrote: »

http://www.tcd.ie/policy-institute/assets/pdf/Collins_Walsh_Presentation.pdf

Hard to know, but the paper above estimates that 131 tax expenditures cost 11bn.

Thats my point.

A bankrupt country borrowing from the IMF should know exactly what tax breaks are costing and be able to justify their existance and extent !!!

thebman

Pensions are taxed out the far side so if the government removes incentives they will be double dipping...

We also have a massive pension shortfall anyway. The only way this could work is if they invert the way it works now IMO. Tax it now and remove the tax the other side so pensions that get taxed now will not be subject to tax out the far side.

Would provide a temporary increase in tax revenue but discourage people from investing in pensions now which might cause us to have a pension shortfall in the long run which the state will end up paying for anyway if it happens.

Godge

http://taxpolicy.gov.ie/wp-content/uploads/2011/05/FAtaxexpenditure2010.pdf

To answer the OP, yes, the Irish government does analyse tax reliefs. See above link for analysis of new reliefs introduced in 2010.


The Commission on Taxation Report of 2009 included a review of tax expenditure

http://www.commissionontaxation.ie/Report.asp



Have a read of both of these.

murphaph

munchkin_utd wrote: »

Thats my point.

A bankrupt country borrowing from the IMF should know exactly what tax breaks are costing and be able to justify their existence and extent !!!

We should eliminate the complicated system of so-called "progressive taxation" and introduce a flat tax of 15%, payable on all income with no allowances, credits, exemptions or loopholes. Poorer people pay a bit more and mega rich people can't avoid tax with high-priced accountants and for once the middle-income families who usually get it in the neck see no major change. The savings in administering such a simple system would in themselves reap huge financial rewards (assuming the redundant Revenue people were made, erm, redundant).

If we want to encourage people to use public transport through the public purse (and I agree we should) then we should do it directly and reduce the fares paid by ALL commuters on all modes, not just ones who are lucky enough to have an employer who partakes in the tax-saver ticket scheme. (usual disclaimer: many parts of our public transport system are themselves not fit for purpose, Irish Rail especially and should be completely reformed before getting any more money from the taxpayer).

The reason our tax system (like most of them) is complicated is simply so that government can hide what they take from you. A flat tax makes it all so much more transparent. Governments hate that.

earlyevening

murphaph wrote: »

We should eliminate the complicated system of so-called "progressive taxation" and introduce a flat tax of 15%, payable on all income with no allowances, credits, exemptions or loopholes. Poorer people pay a bit more and mega rich people can't avoid tax with high-priced accountants and for once the middle-income families who usually get it in the neck see no major change. The savings in administering such a simple system would in themselves reap huge financial rewards (assuming the redundant Revenue people were made, erm, redundant).

If we want to encourage people to use public transport through the public purse (and I agree we should) then we should do it directly and reduce the fares paid by ALL commuters on all modes, not just ones who are lucky enough to have an employer who partakes in the tax-saver ticket scheme. (usual disclaimer: many parts of our public transport system are themselves not fit for purpose, Irish Rail especially and should be completely reformed before getting any more money from the taxpayer).

The reason our tax system (like most of them) is complicated is simply so that government can hide what they take from you. A flat tax makes it all so much more transparent. Governments hate that.

er, that plan would screw the low earner and MASSIVELY benefit higher earners.

Someone on 100,000 euro currently pays and effective rate of 37% at present for example. Someone on 500,000 would pay a higher effective rate.
Equally, theres no way someone on 20,000 pays anywhere close to 15% at present. It would be lower.

murphaph

earlyevening wrote: »

er, that plan would screw the low earner and MASSIVELY benefit higher earners.

Someone on 100,000 euro currently pays and effective rate of 37% at present for example. Someone on 500,000 would pay a higher effective rate.
Equally, theres no way someone on 20,000 pays anywhere close to 15% at present. It would be lower.

First off, why should low earners be exempt from income taxes (as the were until the the USC)? If more people pay tax, maybe more people will take an interest how their taxes are spent, and vote accordingly!

Secondly, the rate I suggested could be adjusted but it should remain the same for all.

Taxes that increase with income discourage work and industry as the more I work the less of my money I get to take home.

People who make "silly money" are not usually PAYE types. These people have ways and means under the current system to abuse the various reliefs to minimise the tax they pay. These people would be caught under a flat tax with no exemptions.

thebman

murphaph wrote: »

First off, why should low earners be exempt from income taxes (as the were until the the USC)? If more people pay tax, maybe more people will take an interest how their taxes are spent, and vote accordingly!

Secondly, the rate I suggested could be adjusted but it should remain the same for all.

Taxes that increase with income discourage work and industry as the more I work the less of my money I get to take home.

People who make "silly money" are not usually PAYE types. These people have ways and means under the current system to abuse the various reliefs to minimise the tax they pay. These people would be caught under a flat tax with no exemptions.

You can have a non complicated non flat tax system. I don't see the problem with a non-flat tax system if it is simple. In most cases, you could pretty much automate the whole thing and develop a computer system to mine data on people to find outliers that are most likely cheating the system for investigation by revenue.

The rich can't exploit loop holes if there are none and even if we had a flat tax, is there any real evidence they wouldn't still use loop holes just because there is a flat tax?

murphaph

thebman wrote: »

You can have a non complicated non flat tax system. I don't see the problem with a non-flat tax system if it is simple. In most cases, you could pretty much automate the whole thing and develop a computer system to mine data on people to find outliers that are most likely cheating the system for investigation by revenue.

The rich can't exploit loop holes if there are none and even if we had a flat tax, is there any real evidence they wouldn't still use loop holes just because there is a flat tax?

I see your point but I'm not just in favour of flat taxes because I believe it's easier to catch the rich. I believe it's fundamentally fair that we all pay the same percentage of our income in tax.

earlyevening

I think you over estimate the tax loopholes that are available to the wealthy. Even the ones that exist were mainly property based and so people who invested in those have lost their shirts.

I agree that lower earners should pay more tax but I think a flat rate tax would heavily disadvantage them.

While it might catch a very small amount of very high earners, the tens of thousands of people in the 80-200,000k income bracket would be laughing. Plus I'd say the overall take would be way down. The current system relies heavily on heavy taxation of middle income earners, 50-90k range.

murphaph

earlyevening wrote: »

I think you over estimate the tax loopholes that are available to the wealthy. Even the ones that exist were mainly property based and so people who invested in those have lost their shirts.

I agree that lower earners should pay more tax but I think a flat rate tax would heavily disadvantage them.

While it might catch a very small amount of very high earners, the tens of thousands of people in the 80-200,000k income bracket would be laughing. Plus I'd say the overall take would be way down. The current system relies heavily on heavy taxation of middle income earners, 50-90k range.

Perhaps that's a failing of the current system, relying so heavily on the higher earners for our taxes. I genuinely believe it would make for a better society of people who currently pay little or no tax were to be brought into the net. I think these people would take an interest in how their taxes are spent (possibly for the first time).

I'm not sure the take would be way down but admit I am throwing the percentages out there and have done no maths to back it up. I think we are underestimating the sheer numbers that currently pay virtually nothing (just the USC) in income tax.

Taxing everyone at (say) 15% means entrepreneurs might look at Ireland and think...hmm, if I make a go of my business there (and employ people in the process hopefully) I'll be able to keep more of my income than most other places. At the end of the day, without entrepreneurs and the jobs they create, there's no income to tax!

earlyevening

murphaph wrote: »

Perhaps that's a failing of the current system, relying so heavily on the higher earners for our taxes. I genuinely believe it would make for a better society of people who currently pay little or no tax were to be brought into the net. I think these people would take an interest in how their taxes are spent (possibly for the first time).

Agreed.


Taxing everyone at (say) 15% means entrepreneurs might look at Ireland and think...hmm, if I make a go of my business there (and employ people in the process hopefully) I'll be able to keep more of my income than most other places. At the end of the day, without entrepreneurs and the jobs they create, there's no income to tax!

Entrepreneurs are already attracted to the country by the 12.5% corporation tax that they'll pay on company profits. What do they care about the rate of tax their employees pay? I think their personal rates of tax are probably of secondary importance relative to the rates of tax their comapnies would be pay.

murphaph

earlyevening wrote: »

Entrepreneurs are already attracted to the country by the 12.5% corporation tax that they'll pay on company profits. What do they care about the rate of tax their employees pay? I think their personal rates of tax are probably of secondary importance relative to the rates of tax their comapnies would be pay.

When a person starts a company they are not in a position to flit about the place to avoid income tax. They are usually tax resident somewhere, usually where their start up business is located. They know the business will only be levied at 12.5% (forgetting lots of other things like rates that make business expensive in Ireland for non-big ticket FDI employers) but they also know that after the business pays its taxes they will then have to pay income tax on the earnings they take out of the business. Ultimately their personal rate of taxation is what makes the difference. There's no point in me having a business that's taxed at 5% on profits when my income from the same business is taxed at 90%-I just won't bother.

I don't think we really attract entrepreneurs in number, not do we encourage our own citizens to become ones. I think we attract FDI from large multinationals but that's not the same.

Diarmuid

earlyevening wrote: »

Entrepreneurs are already attracted to the country by the 12.5% corporation tax that they'll pay on company profits. What do they care about the rate of tax their employees pay? I think their personal rates of tax are probably of secondary importance relative to the rates of tax their comapnies would be pay.

Most "entrepreneurs" that start companies in Ireland usually have one or two employees starting out (ie themselves). Corporation tax is meaningless to them as they usually are barely keeping head above water for the first few years (corpo tax is on profits)

earlyevening

Fair point