Dáil Éireann - Volume 567 - 28 May, 2003

Written Answers. - Tax Code.

[1444]  95. Mr. Costello asked the Minister for Finance his plans to ensure that top earners pay a reasonable rate of tax having regard to recently published figures showing that 51 of the top 400 earners paid tax of less than 5% in 2000 and 29 of them did not pay any tax at all; and if he will make a statement on the matter. [14633/03]

  109. Mr. Gilmore asked the Minister for Finance the progress made to date in his review of tax relief schemes for high earners; if officials of his Department advised that some of these tax breaks were worthless to the State and that many of the developments that were supposed to have been fostered and encouraged by these reliefs would have happened anyway; and if he will make a statement on the matter. [14634/03]

  Minister for Finance (Mr. McCreevy): I propose to take Questions Nos. 95 and 109 together.

  The study referred to was carried out by the Revenue Commissioners in 2002. Like an earlier 1997 study, I have placed a copy of this in the Oireachtas Library. Of the top 400 earners' cases examined in the 2002 study, 117 had an effective tax rate of less than 30%; 231 had an effective rate between 30% and 44% and 52 had an effective rate of 45% and higher. It is the case that, of the 117 earners that had an effective rate of less than 30%, 51 had an effective rate of less than 5% and 29 of those 51 top earners had an effective rate of 0%.

  However, this study indicates an increase in the effective tax rate of high earners in 1999-2000 compared with the findings of a similar study carried out by the Revenue Commissioners in 1997 on the effective tax rates of high earners in the tax years 1993-94 and 1994-95. One of the conclusions drawn from the 1997 study was that the use of capital allowances on buildings was one of the main methods of reducing the tax bills of high earners to very low levels. I subsequently capped the amount of capital allowances on buildings that could be set-off against non-rental income. Arising from this latest study I announced in budget 2003 the abolition of capital allowances for investment in registered holiday cottages and the reduction in capital allowances for hotels to the rate applying generally to industrial buildings. I also indicated that a range of reliefs would not be extended beyond their end-2004 termination date.

  While I support properly designed tax reliefs, the unintended use of the tax system by exploiting loopholes to reduce the tax paid by high earners is not my aim. Since taking up office as Minister for Finance, I have acted swiftly to address tax avoidance schemes that serve to narrow the tax base. Indeed, the 2003 Finance Act contains a series of such anti-avoidance measures.

  Tax reliefs have been introduced by all Ministers for Finance including by my immediate predecessor. In some of these the deadweight issues would have been raised, namely whether [1445]the economic activity concerned would have happened anyway. However, a balanced view is required of the overall impact of such reliefs. For this reason all tax incentive schemes are kept under regular review, especially in the context of the annual budget and Finance Bill process, to ensure they continue to meet the purpose or purposes for which they were introduced.