Dáil Éireann Debate, Wednesday - 26 June 2024
35. Deputy Jim O'Callaghan asked the Minister for Finance his response to the recommendations relevant to his Department of the Joint Oireachtas Committee on Budgetary Oversight’s ‘Examination of the Commission on Taxation and Welfare Report’; and if he will make a statement on the matter. [27409/24]
Amharc ar fhreagraThe Committee on Budgetary Oversight published its report examining the Report of the Commission on Taxation and Welfare in September 2023. The committee’s report makes 40 recommendations that further build on some of the issues dealt with by the Commission’s report.
The Commission’s report sets out that the recommendations are not intended to be implemented all at once, but rather provide a clear direction of travel for this and future Governments around how the sustainability of the taxation and welfare systems may be improved in a fair and equitable manner. Many of its recommendations will need further consideration and research and the committee’s report represents useful progress in that regard.
This Government clearly recognises that many of the recommendations contained in the report are challenging, particularly in this current environment, however that should not take away from this important work which is focused on the longer term and will contribute to debates on the optimal balance of taxation for many years to come. While the recommendations are aimed at the medium to longer term, my Department has already taken a number of actions.
For example, my Department conducted a review of Ireland’s personal tax system which was published with Budget 2024. In addition, as recommended by the Commission, my Department is conducting a wide-ranging review of the funds sector under the broad and interlinked themes of “Open Markets, Resilient Markets and Developing Markets”. A public consultation has been completed and a wide range of research, analysis and stakeholder engagement has been undertaken.
Regarding tax equity and base broadening, I note that the committee broadly agrees with the Commission’s proposals to broaden the tax base.
In relation to capital taxes, my Department remains cognisant of the potential impact of any proposed capital tax measures on the property market, including any possible distortionary effects on the market’s function.
The committee has made recommendations on retirement savings, my Department and Revenue are working with the Department of Social Protection to prepare legislative provisions governing the taxation treatment of Auto Enrolment savings, and the committee’s recommendations will feed into that work.
The committee has made observations on a Site Value Tax on land not currently taxed under the Local Property Tax (LPT) regime. There are a number of factors to be considered and as noted by both the committee and the Commission report, the introduction of such a regime will be complex and challenging.
In relation to supporting enterprise and in particular small and medium enterprises (SMEs), the Finance (No. 2) Act 2023 implemented a number of enhancements to the Employment Investment Incentive (EII). A review of this incentive is currently underway. That Act increased the rate of the R&D tax credit from 25 percent to 30 percent, maintaining the net benefit of the credit for large corporates in scope of Pillar Two and providing a real increase in support for SME companies. It also provided for a new capital gains tax relief for angel investors.
The current policy approach to carbon tax involves a long term multi annual trajectory of increases leading to a rate of €100 per tonne of carbon dioxide emitted in 2030. Budgetary publications clearly signpost the carbon tax rate changes and related impacts such as estimated yields and the specific allocation of funds arising from the increase for expenditure measures.
My Department is focused on and committed to improving how Tax Expenditures are reported and evaluated. Officials have been working closely with Revenue to implement recommendations in this area. Progress is being made in my Department on evaluating and reviewing tax expenditures and updated Guidelines on Tax Expenditures will be published by my Department in the coming months.
Both the Commission’s report and the committee’s report stress the need to plan for the future challenges facing Ireland. It is important to note that in addition to the annual budgetary cycle that going forward, EU Member States will be required to prepare and submit medium-term structural-fiscal plans to the European Commission under a new economic governance framework. Ireland will publish its first medium-term structural-fiscal plan in the autumn.
