Wednesday, December 09, 2009

The cost of tax breaks in Ireland

The Irish independent think tank Tasc has issued a pre-budget report which estimates that:

"Tax breaks will cost the State approximately €7.4 billion in 2009. If tax breaks on personal income tax and corporation tax were reduced to EU average levels, they would only cost €2.2 billion in 2009, a difference of €5.2 billion. Hence, the Government should cut tax breaks, not social welfare payments."

Ireland's economy is in as bad a mess as almost anyone's, and it has an unusually high share of tax breaks nested into its tax system: as it notes:

"In 2005, Ireland spent three times as much through tax breaks on personal income tax as the average of 22 EU countries, and seven times as much through tax breaks on corporation tax."

And it notes a 2009 OECD report which states that

“While personal allowances take the lower earners out of income tax system, the distributional nature of the other reliefs goes against progressivity as they only affect those who pay tax and benefit the highest earners the most."

It also causes sunset clauses and equality and efficiency audits on tax breaks, which are not reported in budgets, so the government has to justify their continuation.


Anonymous Sheila Killian said...

I think it's important to distinguish between the vast bulk of tax breaks which, as tasc rightly point out, serve little social good and disproportionately benefit the rich, and those measures categorised as tax breaks which serve the cause of social justice. In the latter category are CAT threshholds for inheritances from parents and partners or to incapacitated individuals, Income tax exemptions for very low incomes etc.

Yesterday's budget was not particularly fair, and left an awful lot of work undone, but it did get mark the end of some of the tax breaks highlighted in the TASC report

1:33 am  

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