Tax relief cuts key to savings

THE ending or tightening of tax reliefs on pension contributions and mortgage interest could be key to saving the Government €13.5bn over four years, an expert has suggested.

Dr Michael Collins, an economist at Trinity College Dublin and a former member of the Commission on Taxation, highlighted these areas as among the main reforms of tax breaks needed to help reduce the loss of an estimated €11 billion from more than 130 existing tax reliefs. He co-presented a paper on the issue at the Dublin Economic Workshop in Kenmare, Co Kerry.

“We pointed towards reform of pension tax reliefs, that they should be brought to a single rate, a reduction in the employee tax credit, and a phasing out over four years of mortgage interest relief,” Dr Collins said.

He told RTÉ News that the proposals had the potential to increase tax income by around €2.5bn in the first year of operation and around €13.5bn over four years.

The Government has already been reported to be considering introducing a standard rate of relief for workers making additional contributions to private pensions. But the December 2009 budget saw Brian Lenihan reverse an earlier policy to end some categories of mortgage interest relief at the end of this year, when he extended the period after the purchase of a home in which relief could be claimed.