Removing tax reliefs designed to avoid tax

I’ve been following The Pin for a long time now and one thing that I haven’t noticed a lot of, or maybe I’ve just missed it, but there hasn’t been a lot of discussion here, and definitely not in the media, about the large number of tax reliefs that appear to be designed purely to facilitate tax evasion.

Fianna Fail seemed to specialise in this. The introduced a lot of tax reliefs with no purpose other than enabling their rich friends and themselves to reduce their tax liabilities.

As far as I can recall, back in 2004, Joan Burton stated that the Exchequer was losing over EUR8bn per year, to about 30 legal tax avoidance loopholes.
And on top of that, Revenue were unable to give any estimate of the cost of 30 other reliefs, which are generally available only to the well-off, e.g. countless property reliefs, stallion fees, donations to third level institutions and income from foreign trusts. The property tax reliefs for the Shannon corridor were particularly damaging, in every sense.

I know those figures are from the height of the bubble, but as recently as 2009 TASC estimated that tax breaks cost the State approximately €7.4 billion.
tascnet.ie/upload/file/TASC% … 0FINAL.pdf

There was a lot of talk from governments about ending tax breaks, but as far as I could make out, most were extended rather than being ceased. And I know that the government introduced a “minimum” tax rate of 20% for all individuals, but people have been able to avoid this using other loopholes. I don’t believe for one minute that these loopholes are accidents.

During the bubble, we must have foregone tens of billions in tax reliefs, some worthwhile but the vast majority of that money would have benefitted specific individuals.

Maybe I’m over-simplifying, but amidst all the talk of reducing the pubic pay bill, reducing spending, increasing taxes, introducing new levys & charges, etc., the spurious tax reliefs remain untouched.

Research carried out by Nick Webb for Sunday Independent, in March this year, established that the Net assets of the top 300 Irish citizens had increased by 4.9 Billion Euro in the year 2011 and by 12 billion in the past two years, to a new high level of 62 Billion! I think he even identified the 300 individuals concerned. Those who have gone “bust” or have much reduced wealth have been replaced by 44 new entrants. Wealth has not disappeared but some has moved between asset holders.
independent.ie/business/iris … 46429.html
How much/little tax did these individuals pay.

Maybe I’m just a little naïve?

(Apologies for the lack of links, just ranting here)

Absolutely. How all tax breaks have not been removed already, I don’t know. Oh wait, is that the sound of Nero’s violin?

Thought for a minute this was a resurrected thread from 2008,most of those reliefs have been so severely capped as to be next to useless for sheltering earnings for high earners…the big hitters wiped out their relief within 2-4 years with sec 23 anyway,horse bolted,stable door,hinges,door in flitters,horses 2 counties over etc (place in correct order)

Hardly breaking news ffs.

Yep most are totally useless now.

And wealth has been destroyed, it is not zero sum.

I presume you mean tax avoidance. Tax evaders don’t use tax reliefs.

There are only a handful of tax reliefs available on PAYE income. The primary ones are on pensions. This would be where most of the billions TASC found would reside.

The easiest pension relief to trim would be to reduce the tax relief on lump sums – but it’s not going to happen. The ceiling for the relief is chosen to allow most state employees lump sums to be untaxed. Since we had a spike in retirement this year it’s entirely possible that if TASC were to check the numbers again they’d find that 2012’s tax relief was higher than in 2011.

Then there’s relief on growth within pension funds – this can seem large in a good year but it is the main ingredient that makes a pension fund what it is – not much point in investing in a pension fund if you get better tax treatment outside of one. At the moment the 0.6% pension levy is seen as a more effective and predictable tool in stripping value from retirement funds than a tax on growth – and is counteracting this relief.

Then they can reduce pension relief on contributions, this has been reduced, and will be reduced further. However there’s a limit to how much they can reduce this relief without collapsing private sector retirement planning. This retirement planning is important as future governments need a large chunk of retirees to be able fund their own retirements.

Both the relief on growth and contributions is considered deferred taxation, as the tax is (in theory) eventually paid as the money is drawn from the pension.

In the early days of the crisis trade unionists kept pointing at getting rid of pension tax reliefs as being the main solution to our budget problems, however they went a little quiet when the public sector pension levy arrived and when it became clear just how much money was being spent on untaxed state lump sums.