Dáil Éireann Debate, Thursday - 18 December 2025
359. Deputy Richard Boyd Barrett asked the Tánaiste and Minister for Finance the assessments he has made in relation to the costs of tax expenditure comparing the way in which the same funds for direct investment will be more effective in achieving social and economic goals; and if he will make a statement on the matter. [70408/25]
Amharc ar fhreagraI thank the Deputy for his question on the assessment and analysis of tax expenditures, and comparisons between tax expenditure and direct investment. There is an important distinction as tax expenditures are spending conducted through the tax system rather than directly through public expenditure programmes and this distinction in approach continues to receive deserved and detailed scrutiny adding to our efforts to increase awareness and transparency relating to the costs of tax expenditures.
The Deputy may be aware that the recently updated Tax Expenditure Evaluation Guidelines, which are produced by my department, outline the Government’s approach to (i) when tax expenditures are best used, noting that these narrow the tax base, and (ii) how they should be evaluated. Information from the guidelines and the outcomes of past evaluations to ascertain value for money and effectiveness relating to policy objectives, can be used to determine the most effective intervention approach.
These Guidelines explain that Government policy is based on the principle that tax expenditures should be used in limited circumstances where a) a demonstrable market failure exists and, b) the measure is more efficient than a direct expenditure intervention.
To achieve this, the Guidelines provide a recommended pre-determined set of questions to be addressed in every ex-ante tax expenditure evaluation, culminating to whether a tax expenditure is the best approach to address the relevant market failure.
It will also be of interest to the Deputy that, in line with the same Guidelines, my Department has published numerous evaluations and reviews of existing tax expenditures. For example, this year, reviews of the Foreign Earnings Deduction, the Reduced Rate of USC for Medical Card Holders, the Special Assignee Relief Programme, and the Rent Tax Credit were carried out and published on Budget Day.
My Department also publishes an annual report on tax expenditures. Tax Expenditures in Ireland – 2025 Report was published in July of this year and provides analysis of tax expenditures. The annex of the report provides a master list of each measure identified by my Department of meeting the definition of a tax expenditure provided for in Irish law.
As per the report, tax expenditures amounted to €8 billion in 2024, equivalent to 2 per cent of national income or, alternatively, to 8 per cent of total tax revenue.
As noted by the report, financing the level of revenue forgone associated with tax expenditures would be the equivalent of financing the expenditure of the fifth largest line of (voted) public expenditure in 2024, only spending by the Departments of Social Protection, Health, Education, and Housing, Local Government and Heritage were higher.
It may be of interest to the Deputy that a recent initiative of my Department – the Tax Expenditure Passports, were also published for the first time over the summer. These passports provide an easily accessible one-page summary of each tax expenditure currently in operation.
The Deputy may be interested in a paper prepared by my Department as part of this year's Tax Strategy Group process, which outlines the developments and improvements made in the area of tax expenditure reporting in recent years. This paper is available on the Department's website here: www.gov.ie/en/department-of-finance/publications/tax-expenditures-publications-and-guidelines/
My Department remains committed to improving the transparency and reporting of tax expenditures and their evaluation, and, I am satisfied with the current analysis and reporting.
