Minister’s Brief

development financing model; industry and skills constraints; construction costs and
on site and off site infrastructural constraints.
Detail:
Taxation Policy Analysis
While part of the Economic Division, this Unit works closely with Tax Policy Division
providing economic analysis of tax policy issues and evaluation of tax expenditures. It
is also responsible for analysis of the distributional impacts of tax policy changes.
Tax expenditures – that is spending conducted through the tax system rather than
directly through public expenditure programmes – have come under increased
scrutiny in recent years. In the period preceding the economic crisis, tax expenditures
led to a narrowing of the tax base and contributed to the over-heating of the property
market.
The Department published guidelines for tax expenditure evaluation in 2014 to
promote higher standards in this area. These are now being applied to proposals for
new tax reliefs (ex ante evaluation) and to existing tax expenditures (ex post
evaluation). In 2016, the intention is that the R&D tax credit will be evaluated given its
importance and increasing fiscal cost (an estimated €421 million in foregone
corporation tax revenue in 2013). The evaluation will be completed by Budget day and
may feed into a broader cross-departmental evaluation of the State’s R&D support
system led by the Department of Public Expenditure and Reform.
Over recent years there has been an increased focus on of the distributional impact of
fiscal policy and the effects of tax and welfare measures on household incomes. This
distributional analysis is carried out using the ESRI Simulating Welfare & Income Tax
Changes (SWITCH) model. As taxation options for Budget 2017 are developed, these
will be subject to analysis using SWITCH and the results will be provided for your
review.
The intention would be to again work with the Department of Social Protection on the
publication of a “Social Impact Assessment” report – that would look at the combined
effect of tax, social welfare and other changes - after the Budget.
Collaborative research with ESRI
The Department has sought to improve the evidence base available to it on
macroeconomic and tax policy changes with a view to improving the quality of its
policy advice. To this end, a joint research programme on The Macroeconomy and
Taxation was agreed with the ESRI in early 2015. The main outputs under the
programme in 2015 were an economic analysis of the implications for Ireland of
“Brexit” (which was subsequently published) and work on the OECD BEPS project.
2016 research topics include analysis of the relationship between corporation taxation
and foreign direct investment, tax volatility (i.e. how responsive tax receipts are to
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