Richard Boyd Barrett warns tax reliefs may exceed €8bn estimate
Richard Boyd Barrett questioned the Department of Finance's estimate of tax expenditures at about €8 billion and urged much greater parliamentary scrutiny. He argued selected corporate tax reliefs in his group's budget submission totalled about €22 billion and highlighted other large items such as employers' contributions to benefits in kind of about €700 million.
Key points raised
Richard Boyd Barrett challenged the government's €8 billion figure for tax expenditures, saying it understates major corporate reliefs. He listed capital allowances, intergroup transactions, company reconstructions and amalgamations, carried-forward losses including capital allowances, the R&D tax credit, group relief and the knowledge development box as examples his submission aggregated to roughly €22 billion.
Scrutiny concerns and follow-up
He warned that many tax expenditures act as a "shadow budget" and are insufficiently examined over time, urging the committee to scrutinise not just year-one costs but year-two and beyond as measures can balloon. He cited the film tax credit review as a case where a stakeholder forum was convened but there was no sustained follow-up to assess contributions to quality employment and training.
Assessment of official costings
A respondent in the transcript acknowledged difficulty in agreeing cost estimates because they are measured against chosen benchmark systems. The reply said some items may be understated and others overstated by the Department of Finance, and that underlying information often resides only within the Department, complicating independent scrutiny.
Capacity and methodological issues
Speakers agreed credible tax-expenditure costing requires dedicated resources, careful benchmarks and accounting for behavioural responses. The discussion raised the question of whether capacity to produce those credible costings should sit in the Department of Finance or the Parliamentary Budget Office, and emphasised the need for more capacity to make estimates robust.
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Okay, yeah, I have to go as well, so I'm going to have to leg it, but this is an area I've a lot of interest in, and previous budget scrutiny committees, I've strongly urged the committee to look at these issues, so I think it is very important, because it is in effect a shadow budget, really, that's what it is. One question I have for you is, you estimate the tax expenditures at about 8 billion, Department of Finance, do you agree with that? Because when I look at the tax expenditures, and we, in our budget submissions, we always itemise some of the big corporate ones, and even just on some of those, we can add them up to being a hell of a lot more than 8 billion in some of the things when you include capital allowances. I mean, just list some of the, in our last budget submission, we added them up to 22 billion, right, so capital allowances, intergroup transactions, certain companies' reconstructions and amalgamation, losses, including capital allowances brought forward, research and development tax credit, group relief, knowledge development, box, just those ones alone added up to 22 billion in, in a tax give back to corporations, and that's not exhaustive, I was looking at another one here, to do with employers' contributions to benefit in kind, and that's up at 700 million, and I'm just thinking, wow, that's a lot of money, right, and who's looking at this stuff, and properly scrutinising it? So, do you think the government's estimates are good enough of 8 billion, because there is actually a hell of a lot more than that, and they obviously say some of them are kind of part of the base, isn't that, that's their argument, it's part of the base, so we don't really need to look at them. Do you accept where they draw the line of what's part of the base, and what isn't, and what needs to be scrutinised, do you, are you concerned that some of these aren't, that some of the big tax expenditures are not sort of properly scrutinised, and I hear the point you're making about it, let's estimate not just what they might cost in year one, but what are they going to cost in year two, year three, year four, when they're even less examined often than in year one, and then they begin to balloon, and maybe you want to talk about some of the ones that have ballooned, but I just want to say I agree with your recommendations, I think we need to scrutinise these things, and our committee should be looking at them. I mean, we pushed, and I personally pushed hard, and I'm glad our committee did it, on the film tax credit to examine it, and something good came out of that, which was the tax, the stakeholders forum for the film industry, because of the report that we produced, but that forum happened one year, and there was no follow-on from it, and it's a question, nothing has happened since, so it's like the government was put a bit on the back foot to look at the film tax credit, and what actual contribution it was making to quality employment and training, and there was a stakeholder forum, great, but there's been no follow-on to that stakeholder forum, we don't quite know what happened subsequently, so we need a lot more examination of these things, we've made a good start, and I accept that, we started to do it because this committee particularly has pushed for it, and people like yourselves who've been campaigning for it, but yeah, maybe you'd respond to a few of those plans. I have two other, or I have Dr. Furman wants to come in as well, but, yeah, I'm happy to respond just very quickly, so I think in terms of agreeing with the costing that the Department of Finance provide, one, it's hard to say, because lots of information that kind of underlies it, only the Department of Finance have, as a point was made earlier on, I mean, fundamentally, these are costings of tax foregone relative to a benchmark system, I think you can have legitimately different views on what the benchmark system is, and so it's, you know, I think myself and Dr. Collins, might have different views on, say, the pensions tax system, what might be the benchmark, although we both agree on the tax-free lump sum, not being part of that, and being very much tax relief, but you can have different views on these things, and so in terms of what the Department of Finance have there, it is what they have there, I think they probably understate some, they maybe overstate others, but the key bit I pick up on is that there's just some that they consider part of that tax relief, and they don't have any information on it, and that they would be the ones I'd focus on first, and I think you could then also ask questions about, well, is this right, and, you know, actually estimating the amount of tax foregone, that is a really difficult question a lot of the time, and requires a lot of resources to be devoted to, requires really, I think, you know, particularly for those costings to be credible, requires proper, careful consideration of it, and there isn't the capacity there at the moment in the Department of Finance, and again, you can, I think you can have a discussion about, should the capacity be within government in the Department of Finance, or should it be in the PBO, you can have different views on that, but we really need that, because being able to say something about, well, do we have a credible costing, and does it account for behavioural responses, is really important, so, for example, if we did say there's a particular reef that we thought didn't, wasn't delivering benefits, want to withdraw it, we want to be sure that we have good evidence around, well, how are people going to respond to that, because that's fundamentally linked to how much it costs, and again, I'm not trying to understate the difficulty of these questions, but at the moment there isn't resources. Do you want, yeah, very briefly, Chair, thank you, Deputy, for those, those comments. It's been a huge step forward to get a baseline list, we never had one before, so, you know, that's at least an improvement. Of course, it implies, then, we should have a look at it, and, and I would encourage the committee, indeed, to invite the Department of Finance, and the Revenue Commissioner is in, to discuss that, so why have they put things, they've made a decision that this is a discretionary tax relief, and therefore it's on the list, and then the other ones are structural relief, which are parts of the functioning of the system. I think it's worth getting them to justify that, and I think part of the process should be to continue to review that, so I'd encourage you to do that. Deputy, you asked an interesting question, who's looking at this stuff, and can I honestly say the answer is you. It really does fall to this committee, which is really the only area that this huge, what you call a shadow budget, gets the focus, and I think it is important that the work of this committee continues to look at those issues. It's a huge area, and therefore, you know, kind of systematic engagement with it over time has already worked, and the committee's work today, it has been excellent, to continue to improve further the scrutiny on this, which is kind of in society's interest overall. A very quick point on the structural reliefs, what some of some best practicing countries do, they actually also provide costs for those structural reliefs when possible, so this could further improve the transparency. Besides improving the definition of the benchmark and making it clear what goes in which side and why, what can be done as well is to provide some costs for at least the larger structural reliefs. Thank you. Thank you very much.
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