On September 20th, 2023, the Committee on Budgetary Oversight published their examination of the Commission on Taxation and Welfare Report, which was published over a year ago. In the INOU e-bulletin Issue 54 we wrote about our presentation to this Committee which focused on four chapters in the Commission on Taxation and Welfare (COTW) report including:
- Chapter 9: Promoting Enterprise
- Chapter 10: Labour Markets and Social Protection Systems
- Chapter 11: Promoting Employment
- Chapter 12: Inclusive and Integrated Social Protection
Chapter 9: Promoting Enterprise
As we noted in the earlier article, the focus of this chapter was very much on the tax system, and this remains the case with Committee on Budgetary Oversight’s recommendations and observations. On page 28 of the report, in observation 15, “The Committee notes the concerns raised with the proposed use of tax expenditures to promote enterprise and recommends that these should only be considered in line with overall reform and reduction of the use of tax expenditures.”
In their Budget 2023 report on Tax Expenditures 2022, the Department of Finance noted that “Tax expenditures may take a number of forms such as exemptions, allowances, credits, preferential rates, deferral rules etc. They are general government policy instruments used to promote specific social or economic policies and are closely related to direct spending programmes.” (p5)
Chapter 10: Labour Markets and Social Protection Systems
There are four recommendations/observations in this section of the report of the Committee on Budgetary Oversight examination of the COTW report including:
16. The Committee recommends that when considering the Commission’s recommendation that those over the State Pension age pay PRSI on all income other than social welfare payments (10.4) and to remove the PRSI exemption on supplementary pension income (10.5), that consideration be given to the effect this may have on older people’s financial situations and that a detailed analysis of income replacement rates from all sources of older person’s income be carried out. The Committee wishes to highlight the importance that older persons are not adversely affected by these recommendations.
17. The Committee recommends that when considering the Commission’s recommendation that those over the State Pension age pay PRSI on all income other than social welfare payments (10.4) and to remove the PRSI exemption on supplementary pension income (10.5), that consideration be given to the effect these would have on work incentives for older people and the impact on those are not entitled the State pension. The Committee wishes to again highlight the importance that older persons are not adversely affected by these recommendations.
Chapter 11: Promoting Employment
Under this chapter heading the Committee makes three recommendations including:
21. The Committee recognises the need to coordinate and manage the phased introduction of any taxation and welfare reforms and as such supports the Commission’s recommendation for the establishment of appropriate coordination mechanisms to monitor the cumulative effect of policy-related labour cost changes on enterprise and the self-employed (11.2).
22. The Committee welcomes the Commission’s recommendation that secondary benefits for people of working-age should be designed on a cross-departmental basis to ensure coherence, with negative work incentives minimised, and benefits targeted appropriately and effectively (11.1). This should also apply to benefits for older persons.
Chapter 12: Inclusive and Integrated Social Protection
There are four recommendations/observations in this chapter including:
24. The Committee recommends that when considering the Commission’s recommendation to undertake a regular benchmarking exercise in respect of all working age income supports, that consideration should also be given to the establishment of a standalone body to carry out periodic, regular evaluations of working age income supports and could be expanded to cover the adequacy of the State Pension also.
25. The Committee welcomes the government’s intention to introduce a greater element of pay-related benefits withing the Social Insurance system and notes the public consultation on the issues held earlier in 2023. The Committee looks forward to further engagement upon the outcome of this consultation. The Committee also wishes to highlight the possible risks that the “incentive to work” aspects of pay-related benefits may have in excluding those unable to work due to illness, disability, caring duties, migration status and other reasons.
26. The Committee welcomes the Commission’s recommendation to progress the individualisation of payments to qualified adults and notes that this system will better reflect the changing nature of families and the equal division of paid work and care.
With regard to recommendation 24 above, it would be important to acknowledge the excellent work of the Vincentian MESL Research Centre, which is building on the work of the Vincentian Partnership for Social Justice. MESL stands for Minimum Essential Standard of Living and this research has been ongoing since 2004, seeking to provide an evidence-based benchmark of what is required for a life with dignity, while informing the discussions and work on income adequacy, poverty and social inclusion.
The full report of the Committee on Budgetary Oversight Examination of the Commission on Taxation and Welfare Report September 2023 is linked here.