Analysis of tax schemes may have averted crisis, says Burton

A COST-BENEFIT analysis of all tax expenditure schemes, particularly in the 1990s, might have prevented the State’s economic crash, Labour finance spokeswoman Joan Burton told the Dáil.

“If we are to learn any lessons from what went wrong, and try to avoid them being repeated in the future, we need a simple explanation of tax reliefs and schemes setting out their costs, benefits and duration and indicating who is likely to utilise them,’’ she said.

“We specifically want information indicating whether a scheme will enable someone with an income in excess of €1 million to avoid paying tax when ordinary taxpayers are contributing at such a heavy rate, as they will have discovered when they opened their wage packets this month.’’

Urging Minister for Finance Brian Lenihan to accept her amendment, and include such a provision in the Finance Bill, Ms Burton said amendments to the legislation relating to changes in the business expansion scheme ran to several pages.

Only professional tax consultants and lawyers were able to fully understand it, she added.

For that reason, said Ms Burton, parliamentarians and members of the public required a summary explanation of the costs, benefits, employment creation and innovation support that changed in a scheme.

“Such information would enable us to make rational decisions on whether a scheme is worthwhile or targeted to benefit a select few,’’ Ms Burton added.

Mr Lenihan said while he would not accept Ms Burton’s amendment, he wanted to point out that there would be economic impact assessments of two measures in the Bill. The completion of cost-benefit analysis was warranted in the majority of tax expenditures before they were introduced.

His officials, he said, had prepared an economic impact assessment for the employment and investment incentive scheme, which would be completed shortly and published. A similar advance assessment would be prepared before the section relating to the new relief for energy-efficient measures was commenced.

“A cost-benefit analysis of tax expenditures before their introduction is more appropriate than an analysis after the event,’’ he added.

Mr Lenihan said he agreed it was desirable to provide for ongoing monitoring and evaluation to ensure tax expenditures remained fit for the purposes they were designed for and that they remained economically efficient.

“It could be argued it is reasonable and proportionate that where taxpayers are availing of tax expenditures, they should supply such information to the Revenue Commissioners,’’ he added. “However, I trust the House will understand that given the current economic position, I do not consider this an appropriate time to introduce additional complexity and cost for hard-pressed taxpayers.’’

Mr Lenihan said members of the House would be aware that another Finance Bill would need to be passed before April 1st to give effect to the Civil Partnership Act, and possibly, to other measures that were postponed due to the truncated timescale for the Bill. It would not be a good use of the department’s time to produce a cost-benefit analysis of measures in the Bill, he said.

Fine Gael finance spokesman Michael Noonan said there were examples where tax breaks were quite beneficial.

“For example, tax breaks have stimulated inner-city regeneration projects all over the world, starting in some American cities and then in Europe,’’ he added.