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The New Openness Back  
The website of the Department of Finance contains documents that reveal the manner in which the 1999 Finance Act was created, commencing in the Summer of 1998. This is a unique insight into a process as old as the State.
I exaggerate a little when I say that the Department of Finance site provides an insight into the creation of the 1999 Finance Act. It would be more true to say that it will provide such an insight. The drawback is that at the date of writing, only 30 of the 62 Finance Act 1999 documents listed on the site are actually available on the site. These documents include the minutes of meetings of Civil Servants which considered proposals for the drafting of the budget statement and Finance Act. The documents listed also indicate the topics that were discussed in that process.

Among documents already released are minutes of the "tax strategy group" meetings. The tax strategy group includes senior officials from the Department of Finance, the Revenue Commissioners, the Department of An Taoiseach, the Department of Trade & Employment, and the Department of Social, Community & Family Affairs.

Among the topics which the minutes identify as being under consideration were:

* "Clawbacks in tandem with the reduction in the CT rate - - the Government has expressed the determination to review the options in detail." Unfortunately, any documents revealing what these options were have not yet been released.

* "Stamp duty on stock exchange transactions". This was later relegated to an item of lesser importance and did not make its appearance in the current Finance Act. No doubt what is in mind is the need to provide some help for the Irish stock exchange. The introduction of the Euro has not helped its competitive position vis a vis other European stock exchanges. Hopefully this will be revisited in the December 1999 budget.

* "The impact of tax changes on inflation". Inflation may be the ghost at the feast, but the Department has its eye on it!

* "The impact on labour market incentives of the combined tax and social welfare packages and the interaction between the schemes aimed at assisting the unemployed". This is a critical area if the hard core of long term unemployment is to be tackled.

Elsewhere on the list of documents still to be released are the following interesting topics, some of which can be seen to have impacted on the Finance Act 1999, while others can be seen to be, perhaps, still in reserve!

* Employee share schemes and profit sharing. Changes to the employee share ownership trusts and the save as you earn scheme no doubt emerged from this discussion paper.

* Cultural/heritage tax reliefs. It is hard to identify anything in the Finance Act that resulted from this paper. Was it proposing to extend them, or curtail them?

* Withholding tax on dividends. Most regrettably, this did result in 35 pages of the Finance Act. It will be intriguing to see what thinking lay behind this unfortunate decision. Certainly, the paper should throw more light on it than the meagre debate in Dail Eireann did.

* Corporation tax - issues arising from the agreement with the EU Commission. This is a paper I look forward to reading. Unfortunately only parts of this paper will be released. I suspect it is the parts not to be released I would most like to see!

* Electronic commerce. There was nothing in the Finance Act on this topic and that is in line with the advice being given to most governments ie no action is required, just let it develop.

* Corporation tax - financial sector clawbacks. The Finance Act did not contain such clawbacks. The Minister, in Dail debates, explained that any effort at a new bank levy would draw the wrath of the EU Commission. Despite this, banking transaction levies were considered at one meeting. Disappointment was expressed at another meeting at the failure to produce a paper on retail trade clawbacks!

* Trading versus non trading income. The outcome of this paper is clearly seen in the Finance Act, where land dealing and mineral exploration were subjected to the 25% rate rather than the 12.5% rate, notwithstanding that they represent trading income. It will be interesting to see the justifications offered for this discrimination.

* Revenue powers. This should prove a fascinating paper! The extension of Revenue powers, without a report having been received from the Moriarty tribunal which was asked to examine them, was remarkable in its disregard of constitutional issues, past judicial comment, and any notion of restraint or balance. It was also without any discussion as to whether any problems that might exist (and that is not demonstrated yet) lay in lack of powers, or lack of use of powers.

* Surcharge on undistributed profits. This will be the hot topic for the 1999 Budget. The Government is publicly committed to a surcharge on undistributed trading profits. At present such a surcharge already exists on unearned income and on certain professional income. This paper (discussed at a meeting as long ago as October 1998) may throw some light on how the Government proposed to reconcile this policy with the needs of industry to generate working capital. Are Civil Servants to dictate the capital needs of trading companies over the heads of the mangers of those companies?

* EU state aid rules as applied to business taxation. This no doubt will throw light on the ongoing negotiations over double rent allowance etc.

* Farmers taxation. What could this be about? One would have thought there is little scope remaining for further reliefs and little political enthusiasm for curtailing the existing ones.

It is interesting to note that the Civil Service meetings to prepare for a Finance Act had commenced as early as 30 June 1998. There is surely a lesson in this for those who wish to lobby for tax changes. Many do nothing until January or February, after the Budget. The timetable revealed by the documents would suggest that they should begin their efforts in the Summer.

The Department of Finance, and the Government, are to be congratulated on this new openness and for facing up to their obligations under the Freedom of Information Act.

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