The total annual cost of tax allowances and reliefs to the Exchequer is in the region of €8.5 billion, according to figures contained in the latest report from the National Economic and Social Council (NESC). This is a significant cost when compared with total tax revenue of around €30 billion.
The Government is understood to be closely examining a range of these reliefs in the context of raising money on Budget day and will be encouraged by the NESC view that it should either abolish a number of reliefs or restrict them so that they are available only at the standard rate of income tax.
A number of the more expensive reliefs are likely to be left untouched. For example, the manufacturing tax relief is due to be phased out under an existing agreement by 2005 for IFSC companies and 2010 for manufacturing companies. However, the Government may point to the cost of this relief - and of the further reduction of the main corporation tax rate on Budget day to 12.5 per cent - as a reason to restrict other tax allowances and loopholes to business.
Among the business reliefs likely to be examined are aspects of the capital allowance schemes, which allow businesses to claim relief in a range of areas. The Government may also examine specific reliefs, such as for stallion stud fees or those applying to the film industry, although the latter is due to run until 2005.
The Government will also examine the range of reliefs applying to property investment in designated areas, although it is not clear how any change would sit, with an existing commitment to run many of these urban and rural renewal schemes until 2004.
Resort relief is another property-related scheme - the cost figure included for this relief is approximate and "covers several years", according to the NESC report.
The costs for the other reliefs are all annual costs. The calculation does not include the standard PAYE tax credits.
Reliefs for contribution to pension schemes for employers and employees are likely to remain untouched.
The Government is also likely to examine the reliefs and exemptions under the PRSI system. The Tax Strategy Group of senior civil servants last year examined abolishing the employee PRSI ceiling, currently €38,740. The introduction of PRSI on benefits-in-kind to employees from their employers was also examined by the group and is likely to be on the pre-Budget agenda again this year.
The strategy group argued last year that the extension of PRSI was required in this area to combat employers trying to avoid social insurance payments by making payments in non-cash terms.
