A GOVERNMENT ADVISORY group on tax has assessed whether workers on low incomes could be assisted with the implementation of refundable tax credits.

The Department of Finance has published the latest report by the Tax Strategy Group on tax in Ireland, in which it gives opinions on a wide range of tax incentives, changes and improvements.

The TSG is in place since the early 1990s and is chaired by the Department of Finance with a number of senior officials and political advisers from various departments across the Civil Service. It advises the government ahead of the budget each year.

One of the concepts the TSG assesses in its report is whether refundable tax credits could work as a means to alleviate “work poverty”, where those who work on low wages face difficulties as costs continue to rise.

In practice, it would mean those on lower incomes who do not use all their tax credit allowances would be refunded the balance. The TSG estimates that this tax change could cost the exchequer between €1.3 and €2 billion per year.

The group gave a mixed reaction to the idea overall, however, warning that although the idea in theory offered some relief to low-income workers, the tax system is there to collect revenue and it may not be the best vehicle to provide such assistance.

The TSG also argued that refundable tax credits would have no impact on those on the National Minimum Wage.

Property

The group’s report on property found that allowing landlords to deduct their property tax from rental income would not keep landlords in the rental market due to its “relatively small expense”. 

The report says: “The measure would have a deadweight cost in respect of landlords who do not intend to exit the market.”

It also suggests that the change, irrespective of its inability to retain landlords, would only favour the smaller cohort of landlords in the country, instead of owner-occupiers.

The group agreed with a consideration that the measure would “create a different treatment” of the tax between the two cohorts.

Climate Action

The TSG’s Climate Action report notes that just over half (53%) of all road users who bought an Electric Vehicle (EV) were able to avail to for tax-relief schemes on their purchase. The relief scheme was extended until the end of this year.

However, EVs, according to the report, still only make up around 2.7% of the total national car fleet, with purchase trends only beginning to surge in recent times, suggesting it will be a slow climb to increase the rate.

The TSG also note that the average price for a new EV is still much higher, at €51,377, than a new diesel or petrol car, at €43,979 and €29,053 respectively. 

The increases to carbon taxes, which will begin in October of this year for petrol and diesel, will see a a tank of petrol (at a 60 litre fill) increase by €1.28, and diesel (at a 60 litre fill) increase by €1.48.

However, the largest bump in price, which will be introduced in May 2024, is an increase for a kerosene – used to heat homes – with the average tank (900 litres) going up by €19.40.

Additional reporting from Laura Byrne