Emphasis on social welfare fraud ignoring issue of tax evasion

JIMMY CARR, the comedian who made his career out of politically incorrect one-liners, found himself the butt of jokes last week after his “morally wrong” tax avoidance was splashed all over the papers.

He was torn to pieces by the panel of his own Channel 4 show, has been relentlessly heckled at gigs by fans, and an appalled David Cameron was even moved to denounce his creative off-shore accounting — until he was reminded of all of the Tory donors who availed of the same scheme.

Carr was laughing all the way to the bank after he channelled £3.3m through the Jersey tax avoidance scheme, paying just 1% tax by the time the money found its way back to him. His only decent joke, it seems, was on the British public.

According to research published by the Tax Justice Network last year, tax evasion costs the global economy €3.1 trillion annually. In Ireland, revenue lost to the shadow economy is €7.6bn — equivalent to the total amount of cutbacks and tax increases that the Government is planning to inflict on the country over the next three years.

While the Tax Justice Network was able to compile data for 145 countries, our own Government has persistently said it is unable to estimate the amount of money that is lost via tax evasion and avoidance each year.

Strangely, they have no such qualms about guesstimating, in the most creative ways, notional levels of welfare fraud each year and using the resultant pie-in-the-sky figures to stoke up prejudice and justify arbitrary cutbacks.

Speaking in the Dáil in May, Finance Minister Michael Noonan said; “it is not possible to accurately estimate the cost to the Irish economy of tax evasion or tax avoidance. There is no one internationally recognised and agreed measure.”

While Mr Noonan seems worryingly nonplussed about his admittance that he hasn’t the foggiest notion about the level of tax evasion in this country, Joan Burton, speaking in 2004, was adamant that the Exchequer was losing €8.4bn per year — and that was just to 28 legal tax avoidance loopholes.

Odd, isn’t it, that an opposition Finance spokesperson is able to lay their hands on the figures while the country’s minister throws up his hands and pleads ignorance in an era when the books have never been subject to such scrutiny? The lack of clarity is especially disconcerting at a time when the Government is threatening to rip up the Croke Park agreement, and renege on its last remaining unbroken pre-election promises, in a desperate bid to come up with ways to gouge a further €3.5bn out of the economy in December.

Way back in 2004, when Ms Burton was decrying the €8bn lost to tax avoidance each year, she also found time to lambast the Government because it was unable to cost 33 of its 131 tax allowances, including exemptions for stallion fees, donations to third level institutions and income from foreign trusts.

“Many are taking advantage of generous tax allowances that are generally options only wealthy people can avail of. It is also shocking to learn that the Revenue Commissioners are unable to give any estimate of the cost of 33 separate reliefs — again, which are generally available only to the well-off,” she said.

Guess what? Eight years later and there is still no figure for those 33 tax breaks, amounting to one-third of all of the tax reliefs in the State, so there’s absolutely no way to determine if they provide value for money or not.

Questioned most recently by Sinn Féin’s Pearce Doherty on the mysterious allowances, Mr Noonan said they were all so triflingly small that they really didn’t matter. “The cost of the tax reliefs is nugatory and if they were abolished the yield would be insignificant,” he sniffed.

Meanwhile, the State’s only children’s hospice faces imminent closure because a funding gap of just over €1m cannot be closed — a figure that Mr Noonan would also, likely, call “nugatory”.

While no one in Government can be bothered to do a cost-benefit analysis of fully one-third of the State’s tax allowances, the Commission on Taxation did manage to cost the remaining 89 tax allowances at €11.5bn — including six housing reliefs costing €3.3bn, eight related to savings and investment amounting to €3bn and 20 associated with property investment at €435m.

Basic tax credits, like those for single and married people and the PAYE tax credit, were not even examined by the Commission, which deemed them to be an integral part of the system, despite the fact that they cost nearly €8bn in 2010.

Overall there is little ongoing monitoring. There are not enough questions from the outset over whether or not we should introduce these tax breaks. There is little consideration as to whether we should extend tax breaks despite there invariably being a cost to the Exchequer in terms of revenue foregone.

“There was also an amazing lack of objectives for quite a number of tax breaks. I would describe many of them as being a result of “beneficiary induced demand”. The lobbying stages of the Finance Bill negotiating the introductions of tax breaks,” said Commission member, and Trinity College economics professor, Dr Micheál Collins, in a speech last year.

Essentially, many of the tax breaks that do exist are there simply because lobbyists managed to twist ministers’ arms. Any obvious fiscal rationale was sometimes hard, if not impossible, to detect.

Dr Collins estimated that between 1995 and 2009, the second highest area of expenditure by the State, at €100bn, was the money forgone in generous tax breaks — many, of course, very worthwhile but many, like the huge number of reliefs that inflated the property bubble, incredibly harmful.

Despite all the scaremongering from bad cop Brendan Howlin at the weekend, there’s more chance of Michael Noonan standing up in the Dáil during his budget speech and announcing that he’s joined the Socialist Workers Party then of any changes to income tax rates.

There will be a lot of bluster over the next six months, but Fine Gael will not countenance changes to basic rates of income tax while Labour will need the fig leaf provided by untouched basic social welfare rates.

Instead of going along with this charade, perhaps we should instead have an honest debate about our taxation system, the fact that effective rates of tax are actually low by European standards, and examine the billions of euro of tax reliefs that have been introduced without any subsequent analysis of their respective merits.

While we’re at it, perhaps we could insist on Mr Noonan making some effort to ascertain levels of tax avoidance and evasion. After all, if you don’t know the extent of a problem, then how can you credibly claim to be tackling it? It’s an area that’s worth some attention. In the ten-year period to 2009, there were 3,183 prosecutions for welfare fraud which resulted in fines of €43m — a sum which was rather dwarfed by the €2.25bn secured by Revenue investigations into tax evasion during the same period.

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