ICAI Warns Against ‘One-Sided’ View Of Tax Relief Debate

by Jason Gorringe, Tax-News.com, London

06 April 2005

The Institute of Chartered Accountants in Ireland has warned against a one sided presentation of the tax relief issue in a submission to the Department of Finance in the Review of Tax Reliefs and Exemption for higher earners.

ICAI made its remarks following delivery of its submission to the Minister for Finance in advance of the March 31st deadline. The ICAI submission was made via the Consultative Committee of Accountancy Bodies Ireland.

“Unfortunately this is already a one sided review,” remarked ICAI President, Terence O’Rourke.

He went on to state that:

“While we have some idea of the cost foregone to the taxpayer in respect of some of these relief schemes, we do not have a measurement of the corresponding economic benefits that accrue. We hope therefore that the consultants engaged by the Minister to study the schemes can provide us with sufficient information for a proper assessment of the value of this policy tool.

“As things stand, we are concerned that the Minister’s call for public comment is specifically directed at restricting the extent to which high earners can avail of the schemes to limit their tax liability. This, we believe, amounts to an attack on the principle of public policy makers encouraging capital investment into particular areas by way of reliefs.

“It is clear from the recent high earners report that decisions taken by the Oireachtas in recent years to curtail some reliefs are already impacting on the relative position of high earners.

“What is also interesting is the extent to which ‘solutions’ being advocated by some to this problem have already been considered and dismissed by the Tax Strategy Group. For example, the TSG points out that the elimination of a tax relief encouraging economic activity could result in revenues losses because high taxable profits elsewhere are not generated.

“It should be noted also that another widely canvassed solution – 'the minimum tax rate’ is not supported in the TSG papers and has not been effective in the US.

“We have urged the Minister to be cautious. We do not know the full benefit these reliefs have accrued to our economy. Obviously the Oireachtas should make serious decisions on the provisions of reliefs in certain areas on a case be case basis, but to throw out this policy tool, we believe, would be a serious mistake.”

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