AT A time when social solidarity and a fair sharing of the financial burden is urgently needed, a report that 400 of the State’s highest earners secured an average tax relief of more than €500,000 euros each in 2007 will seriously antagonise hard-pressed PAYE workers. Revenue would have been much lower had a minimum tax of 20 per cent not been imposed on incomes in excess of €500,000. The disclosure will increase pressure for a critical review of the effectiveness of tax shelters.
Tax relief can serve a useful purpose in encouraging innovation and investment in particular projects. But it may also be abused. As far back as 1998 the Department of Finance warned that specific property-based schemes were contributing to price inflation and provided a bonus for property owners and investors. We are living with the consequences. Incremental reforms have been introduced. But more needs to be done.
In recent months, there has been much talk about reducing social-welfare payments and the minimum wage. Very little attention has been devoted to the efficiency of the tax system. That will change when Minister for Finance Brian Lenihan publishes a report by the Commission on Taxation in the autumn. A property tax is expected to figure in proposals to improve the structure and appropriateness of the system. But before that happens, we should consider the level of ambivalence that exists at all levels towards taxation. The latest report by Comptroller and Auditor General John Buckley is instructive in that regard.
Twelve people were imprisoned for social welfare fraud in 2007. None of the wealthy tax evaders found guilty by the courts went to jail. Mr Buckley observed that a culture of non-compliance and non-payment of tax continued. And he wondered why the number of audits and re-audits conducted by the Revenue Commissioners was so low. In spite of raising €2.4 billion from special investigations involving Ansbacher, DIRT, off-shore assets and life assurance products in recent years, Revenue resources remain inadequate. The 14,000 audits conducted in 2007 returned €687million, about the same amount as in 2006. But re-audits have not been conducted since 2002, even though half of the earlier offenders are likely to be non-compliant.
Now that the State is strapped for cash, that situation may change. Tax shelters attract wealthy individuals and it is up to Government to limit and direct such incentives. Tax evasion is another matter. That crime should be treated more seriously by the courts.