October 2005 Archives

Accounting for Tax Breaks

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The announcement (12th October) that €315 million of tax has been forfeited as a result of the holiday homes scheme raises basic questions. Given that this scheme has been operating for almost ten years, why has the tax loss been calculated only now and why was no monitoring done to routinely confirm its relevance and benefits?

The foregoing loss relates to just one scheme. There are dozens of others costing billions every year. For example, tax relief on pensions is one of the few that are assessed and cost €1.9 billion for the short tax year of 2001. In contrast, PAYE allowances, about which there is so much fuss at budget time and which require enormous resources to apply, were just €478 million for the same period.

Are all these tax schemes equitable and necessary and, more to the point, why is their cost largely unknown?  In the absence of this basic information, how can they be sustained? Surely, this "black hole" must rank alongside benchmarking, decentralisation and infrastructural cost overruns as clear evidence of imprudent, or incompetent, management of the State's finances. Aside from the Controller and Auditor General, is anyone counting and does anyone care ?

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