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