Labour Party Tax Breaks

The Bell Tolls For Tax Breaks Labour Pre-Budget Forum November 27th 2010 Micheรกl Collins Department of Economics Trinity College mlcollin@tcd.ie

Definition • A formal method for taxpayers to reduce their tax liability below that which would otherwise apply ALSO • A method for Government to reduce its current tax take below what it would otherwise collect

How Many and How Much?

Number of tax expenditures

Number with available costs

Estimated Cost â‚Źm

Children

8

8

723

Housing

6

6

3,256

Health

10

7

579

Philanthropy

16

7

89

Enterprise

28

12

457

Employment

28

18

2,816

Savings and investment

8

6

2,995

Age-related and other

7

5

144

Property investment

20

20

435

Total

131

89

11,494++

Source: Commission on Taxation, DĂĄil Question

Data & Monitoring Problems • • • • • •

To get a full list was a big job Costs for 89 of 131 Many of these are not robust Good info on the biggest ones Overall, little ongoing monitoring Little detailed consideration of: – Why introduce – Objectives etc

• “Beneficiary induced demand”

How we Spent to Boom:

ic Se O th ctor er cu sala rr r en ies a tg oo nd p ds e an nsio d O In se n ld te Ag r vic re st es on e Pe n N s io a ns Di tion sa al bi lit De b yB t en ef it s La R bo C ur hil oad M dB s ar e ke ne f M t B e it ed n Pa ica efi ym l B ts en en ts ef to its r H es Lo t o ous ne Pa f w ing or Su r pp ents ld e lem t al lo c e wa nt W ar nc at y er e W Su e lfa pp re Ag H ly / Se ric ou w si ul tu ng B age re an ene fi d Fi ts Sc sh e ho ol r ies B ui H ld ea in lt h g Ve In h i fr as cles tru ct ur e CI O E Su PW bv en tio n

Pu bl

How we Spent the Boom, 1995-2009 (â‚Źb)

200

180

100

80

40

20

178.9

160

140

120

96.9 67.6

60

33 24 21.7 21.5 18.4 16.2 12 11.2 9.4 8.4 8.3 7.4 5 4.9 4.8 4.7

0

3 2.6

O

ic Se ct or s

th er

al ar i TA es a cu nd rr X E pe en X t g PE nsi on oo N ds DI an TU d R In O E se l te rv * re d A i g ce st s on e P e N ns a i Di tion ons sa bi al D lit y B e bt en ef it s La bo Ro C u r hi ad l d s M B ar ke e ne M t B fit e ed Pa ica nefi ym l B ts en en ts ef to its Lo res H t o ou ne Pa f w sing o Su r pp ent r ld et lem s a c l l o W ent w an at ar ce er y W Su e pp lfa re Ag H ly / Se ric ou si wa ul tu n g B e ge re ne an fit d F ish s Sc ho e ol r ie Bu s H i ld ea in lt h g In Veh fr i as cles tru ct ur e CI E O Su PW bv en tio n

Pu bl

How we Spent the Boom, 1995-2009 (â‚Źb) + TE

200

180

120

80

40

20

178.9

160

140

100 96.9

100

67.6

60

33 24 21.7 21.5 18.4 16.2 12 11.2 9.4 8.4 8.3 7.4 5 4.9 4.8 4.7 3

0

2.6

Reform Needed - 1 • Many are worthy, but…

• We should be watching them • An Annual Tax Expenditures Report as part of Budget documentation • Procedures for new ones (COT report) – Examine before we introduce – Time limits and specific aims – Monitor them

• COT recommend some to abolish and reform (start made at last!)

Reform Needed – 2 • Finance Bill process • Department of Finance approach • More broadly: – Tax system is (normally) a €55b system – Tax collected (€45b) plus tax breaks (€10b) – We should systematically watch it – We watch many smaller (and less important) things

Tuesday 6pm Policy Institute TCD •A Full List •A Review •A Reform Agenda All Welcome