TASC pre-budget submission on tax breaks

TASC have published their pre-budget statement which makes for a very interesting read. It identifies €7.4 bn in revenue foregone in tax breaks for 2009. You can read the document here.

Given that the current hole in our public finances is the result of lost tax revenue this issue has become all the more salient. Even if one accepts that raising taxes in a recession is a dis-incentive to investment and ought not be pursued in the budget it does not preclude closing tax expenditure gaps. Many of these may make sense in a time of plenty but I cannot think of any logical argument to keep many of them open given the gravity of the crisis in our public finances.

According to TASC, tax breaks and expenditures in Ireland are higher than anywhere else in the EU and dis-proportionality benefit the most well off. Many are regressive in nature such as relief on health insurance and lump sum pension payments. But, even without recourse to such equity arguments there is a very strong cost-benefit case to close off these expenditures. It is a relatively simple way to raise up to €5.2 bn according to TASC.  But, excluding many of these (particularly those that generate employment) one could expect to raise at least €3 bn. It is not taking disposable cash away from people so it is not equivalent to raising income tax.

It is not a functional equivalent to €4bn in cuts. But, surely it provides a more sustainable basis to forecast incoming revenue over the next few years? and makes many of draconian cuts (in social welfare) less inevitable.

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