Dáil Éireann - Volume 486 - 28 January, 1998
Written Answers. - Tax Avoidance.
Mr. Gilmore Mr. Gilmore
74. Mr. Gilmore asked the Minister for Finance if he will confirm that research undertaken by the Revenue Commissioners indicates that a sizeable number of people earning over £250,000 per year are using substantial income tax avoidance measures and that nearly one in five of these earners pay tax at an effective rate of 20 per cent; his views on whether this is acceptable given the tax burden on ordinary workers; if he will publish the results of the research; the action, if any, he intends to take to ensure that high earners pay a fair tax; and if he will make a statement on the matter. [1864/98]
Minister for Finance (Mr. McCreevy) Charlie McCreevy
Minister for Finance (Mr. McCreevy): The Revenue Commissioners monitor the use of various tax incentives on an ongoing basis, both as regards the cost of such incentives and the categories of persons, including high earners, who use them. As might be expected, high earners tend to make fairly wide use of available incentives to reduce their tax bills. In general, I have no difficulty with this — tax incentives are there to be used and to encourage investment which would not otherwise be made in areas such as films, urban renewal and high-risk business expansion. However, I do have a difficulty if tax incentives are used in a way that reduce effective tax rates on very high incomess to very low levels. That would be unfair and would work completely against the progressivity of the tax system.
Following a recent review by the Revenue Commissioners of the use of incentives by high earners, it was evident that, while the vast majority of high earners do pay very substantial amounts of income tax, about one-fifth were able to reduce their effective tax rates (that is their final tax bill as a percentage of gross income) below 20 per cent. It was clear from the review that the open-ended availability of capital allowances for passive investment in certain tax-favoured buildings, such as hotels and buildings located in tax designated areas, was a prime factor in contributing to the very low effective rates in these cases. Accordingly, I moved in the  budget to close off these shelters for passive individual investors in the case of certain hotels and to cap them at £25,000 in the case of buildings entitled to capital allowances. I also limited the amount which can be raised under the BES scheme in order to better target the relief at smaller companies. As is normal, these changes are subject to transitional measures to cater for certain cases or projects in the pipeline which it is reasonable to allow proceed in all the circumstances. I am confident that these measures will contribute to greater equity and progressivity in the income tax system, and will help to ensure that all high earners pay their fair share of tax.
I have no plans to publish the results of the review carried out by the Revenue Commissioners.
Dáil Éireann 486 Written Answers. Tax Avoidance.