Commission on Taxation and Welfare Report 2022

Paschal Comerford
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Key proposals

The Commission on Taxation and Welfare (the Commission), a group of members with backgrounds in tax, social policy, economics, public administration, business, enterprise, law and broader civil society, was established in 2021.

Essentially the group was tasked with reviewing the current tax and welfare systems and recommend changes to achieve sustainable and fit for purpose systems in the medium to long term. No easy feat!

The Commission’s Report published on 14 September, runs to 547 pages. The Report is about the medium and longer-term needs of the Irish economy, and the Commission ‘has sought to look through the present inflationary difficulties and to take a longer-term perspective’. The proposals are not binding, are long-term focused and contain some emotive and controversial proposals especially in the area of capital taxes. 

The key proposals are summarised and grouped under five categories; Capital taxes, Companies, Personal, VAT, and Addministration. Starting with the most controversial capital taxes proposals.

* The proposals per the Report are in bullet and bold format and our reactions follow in standard font. *


Capital taxes

The Commission’s overarching stance that the tax yield from capital taxes should increase and thereby seeking to identify which changes can be implemented with the least pain, is questionable.

  • The transfer of assets on a death should be treated as a disposal for Capital Gains Tax (CGT) purposes. The CGT treatment of assets transferred during a lifetime, in terms of tax payable, exemptions and reliefs available, should equally apply to assets transferred on a death.

This is probably amongst the most emotive of the proposals in the 547 pages. Such a change raises many concerns; for example, it brings into question whether a disposer’s wishes could be carried out in many circumstances, as it would inevitably mean that assets would need to be sold to cover the charge to tax, thereby leaving a smaller amount to bequeath

  • Principal Private Residence Relief should be restricted over time.

Another sensitive proposal in our view, taxing the family home when owners are downsizing or passing on to their children. Where a PPR is sold, full proceeds are required to re-purchase a property of similar value. Restricting the relief would be tantamount to restricting individual's financial freedom of movement. Given the decentralisation proposals from the Department of Rural and Community Development, this proposal is a disincentive for relocation. It further discourages downsizing of mature families, as the anticipated discretionary spend on sale is diminished with tax charges.

  • A lifetime limit on all disposals of businesses and farms to children that qualify for Retirement Relief.

Currently there is no limit on disposals to a child by an individual aged 55 – 65 years where retirement relief is claimed. Disposals by an individual to a child aged 66 years or older are subject to a €3 million threshold.

Limits on retirement relief on transfers to a child would be detrimental to indigenous businesses in Ireland. There has been extensive policy introduced by successive Governments encouraging the growth of family businesses in order to preserve our indigenous economy, and a cap on retirement relief would in essence restrict growth, or would see the end of generational businesses, due to the tax burden of succession. This limitation, in addition to the tax incentives being afforded to FDI, would speed the demise of Irish indigenous businesses, which in many cases form part of our heritage and culture, particularly in rural communities.

  • Entrepreneur Relief should be extended in order to provide a greater incentive for third party investment in early-stage enterprises.

Enhancements to Entrepreneur Relief are welcome. But what is needed is a broader definition of “working time” to reflect modern working practices; this would go a long way to enhance the effectiveness of the relief in encouraging entrepreneurship in Ireland.

  • Reducing the Capital Acquisitions Tax (CAT) Group A threshold, essentially the lifetime limit on transfers from parents to children, bringing it closer to the Group B and Group C thresholds. Furthermore, the reporting requirements relating to the utilisation of group thresholds should be strengthened.

The current Group A threshold is €335,000. At its highest in early 2009 the threshold was €542,544 and has been reducing each year since then to the current level. The threshold started out, in 1984, at €190,461, most likely reflecting asset value and property prices at that time. The Commission’s proposals seem to be based on narrowing the gap between the three thresholds, taking into account OECD guidance which suggests that the difference between direct descendants and relatives should not be excessive. The Group B threshold is €32,500 and Group C is €16,250.

  • The current level of relief from CAT provided by way of Agricultural and Business Relief should be reduced and that the qualifying conditions for both reliefs be amended to incentivise and ensure active participation in the farm or business by the recipient.

Both reliefs effectively provide a reduction of 90% to the value of a qualifying gift or inheritance that is subject to CAT, which according to the Commission is excessive. The Commission suggests that the appropriate level at which these reliefs should be set in the future, should be determined having regard to their interaction with the CAT group thresholds, and the availability of deferral options.

  • A modest charge should be applied to gifts and inheritances generally.

The view here is that some capital tax should be paid on all gifts, either through replacement of the CAT Group Thresholds with a modest-rate group threshold, or with a lower rate applying before the standard 33% rate applies.



  • Long-term over-dependence on Corporation Tax receipts poses significant sustainability risks and should be avoided.

The Government’s Annual Taxation Report highlights the vulnerabilities in the tax base due to the heavy reliance on two revenue streams; corporation tax and income tax, and the serious repercussions for public finances should there be shock to either of these taxes. As part of his comments on the Annual Taxation Report, the Minister for Finance noted that the Report will complement the work of the Commission on Taxation and Welfare.

  • Research and Development (R&D) tax credit offered to businesses in Ireland should be enhanced to target small and micro-sized enterprises. Furthermore, more guidance and supports should be introduced to facilitate greater uptake by Small and Medium Enterprises more generally. Consideration should be given to an acceleration of the refundable element of the R&D tax credit from three years to one in order to support early-stage and research and development intensive businesses.

Foreign Direct Investment (FDI) is a key driver of growth in Ireland and the R&D tax credit is a vital tool for attracting investment of global capital. Therefore, an acceleration of the refundable tax credit should be encouraged so as not to disadvantage Ireland when competing for FDI.

SMEs continue to ask for simplified documentary requirements as part of a broader simplification of the complex R&D regime. In particular, the requirements set by Revenue both in terms of scientific merit and documentation are not appropriate for SMEs who often do not have the resources to maintain the required level of documentation.

  • Share-based remuneration should be enhanced to support SMEs and indigenous enterprises in attracting and retaining talent. However, the Key Employee Engagement Programme (KEEP) is not achieving its objectives in its current form and therefore the KEEP should be reformed to broaden its use.

Ireland’s lack of a fit-for-purpose share scheme that can be used to attract and retain talent tax efficiently is a gap in our system. KEEP was introduced some years ago, but the uptake has been very low due to onerous terms and conditions. The report refers to KEEP being broadened - this would be a very attractive enhancement and an incentive for Irish businesses to use it more.

  • Certain conditions of the Employment and Investment Incentive Scheme (EIIS) are linked to important policy objectives, for example, requiring the funds raised to be reinvested in the trade, used for carrying out research, development and innovation or increasing employment. Other conditions are requirements under State Aid rules. However, the combination of all these conditions and documentation requirements can act as deterrents for many potential claimants. The EII could be substantially enhanced through improved accessibility and reduced complexity.

In order for the EII scheme to become more accessible to start‐ups, administration of the scheme must be simpler for early‐stage companies. This could be achieved by introducing a streamlined administrative process, including templates and appropriate support from Revenue, prior to raising funds.

The current revised process, since 2019, where the clawback risk now principally lies with the company itself, rather than the investor, puts a lot of responsibility on the company to ensure all conditions are met, throughout the process, i.e. 4-year investment period.

The current EIIS investment period of 4 years, is also not aligned with tech companies, and other scaling entities, who are often seeking to divest within an earlier timeframe, given the current M&A market.

  • A working group should be established to review and propose changes to the taxation of funds, life assurance policies and other investment products with the goals of simplification and harmonisation where possible.

The simplification and harmonisation of how such investment products are taxed will generate a lot of interest among taxpayers and tax advisors.  This is a notoriously complex and difficult area to navigate and any simplification of rules and approach would be very welcome.

  • Government should undertake a review of the Real Estate Investment Trust framework, the Irish Real Estate Fund regime and the use of section 110 vehicles in this area. Consideration should also be given to a wider review of the section 110 regime generally.

We understand a review of the IREF regime is already scheduled by government bodies and is expected to conclude in 2023. This is a very lengthy period which adds great uncertainty for market players, when such a review is being undertaken. Ideally, this should be expedited with a focus on key risk areas, as uncertainty in this area is negative for the wider FS and property industries.

  • Ireland's current corporate tax strategy, including Ireland’s ongoing participation in international efforts to tackle aggressive and/or harmful corporate tax practices is endorsed.

Ireland’s approach to such international tax initiatives has been very open with extensive consultation with stakeholders, before changes are implemented.  This is welcome but there remains uncertainty around the move to a minimum 15% tax rate and the introduction of Pillar II changes.  A commitment to bringing certainty around the future changes that must be agreed at an international level, is welcome.



The Report raises a number of interesting medium and long term proposals. The main focus appears to be the encouragement of a broader tax base to limit future increases in tax rates and in turn securing the sustainability of the tax system going forward by removing the dependence of the tax system on labour and focusing instead on wealth.

  • Remove age as a factor in determining who is liable to the charge to Income Tax and the Universal Social Charge. In particular, the rates of USC should be determined by income level and not by reference to any other eligibility criteria, e.g. age or medical card eligibility.
  • The priority for reform in respect of PRSI to broaden the base and enhance the income of the social insurance fund.
  • A surprising recommendation is the reference to the remittance basis of tax and the limitation of same to a lifetime limit of three years. This could have a large impact on any non-domicile individual resident in Ireland, who to date are liable to Irish Taxes on income earned in Ireland and that remitted from abroad during the tax year only.

In light of the current cost of living and energy crisis, the proposals, if they were to be adopted in the short term, will do little to assist with alleviating this burden on the tax payer. 



  • The key points emerging from a VAT perspective is the Commission’s vision to overhaul the temporary VAT rates and to highlight the vast opportunities to be gained through modernisation of the administration of VAT.

VAT is the primary tax on consumption followed by excise duties (VAT receipts increased by circa 7% per year from 2013 to 2019). Increases in VAT and other consumption taxes can be regressive due to the relatively higher proportion of disposable income that low-income households tend to spend relative to their income. While Ireland has the joint fourth-highest standard rate of VAT in the EU (23%), Ireland is the only EU country that applies a zero rate of VAT on a very extensive range of goods e.g. food, water, books and children’s clothes.

Ireland also continues to apply reduced rates to an extensive range of activities relative to other EU Member States. As a result, Ireland has a relatively low VAT-to-revenue ratio i.e. the ratio between actual VAT collected and the revenue that would otherwise be raised if VAT were applied at the standard rate, when compared to other OECD countries.

  • The zero and reduced rates significantly erode the VAT base. Furthermore, the Commission does not support the use of temporary VAT reductions as a short-term stimulus measure. As an alternative, widening the VAT base and limiting the use of zero and two reduced rates of VAT (currently 9% and 13.5%) is proposed.
  • The rate of VAT on those goods and services currently at 9% VAT should be increased over time to 13.5%.

Due to the relatively large share of goods and services attracting zero and reduced rates of VAT in Ireland, any increase in the reduced rate of 13.5% should be gradually increased over time to alleviate hardship arising from the increased costs.

The categorisation of some goods and services from the zero and reduced rate classes may need to change - in particular, where such treatment conflicts with other policy objectives such as the decarbonisation of the economy e.g. fertilisers currently fall within the zero rate category. In the short term, fuel and electricity, could potentially be maintained at a lower second reduced rate in order to limit the impact of these changes on lower income households.



  • Modernisation of tax administration can reap significant benefits for taxpayers, Revenue and the Exchequer as a whole.

A phased programme of modernising VAT is welcome, especially given the success of the Making Tax Digital initiative in the UK which requires all VAT-registered businesses to keep records digitally and file their VAT Returns using appropriate software.

  • The Commission has concerns that the extensive records required, the cost of hiring a tax advisor (or scientific expert in the case of the R&D tax credit), the risk of an extended audit on claims and the cost of incorrectly claiming a relief can act as barriers to take up reliefs.

A common request from SMEs is the introduction of a pre-approval process for first time tax relief claims, or some other form of advanced support from government, to help companies establish quickly and at a minimal cost whether proposed activities would qualify for a relief. This advanced assurance could bring certainty to businesses and minimise the cost of engaging advisors and/or the cost associated with incorrect claims. The Commission supports this position.

  • Consolidation of the Taxes Consolidation Act 1997 (TCA) should be carried out periodically as a matter of principle. Consideration should be given to how greater simplification of existing tax codes can be achieved as part of this exercise.

Since the consolidation of the direct taxes in 1997 over 25 Finance Acts have passed and numerous pieces of legislation providing for substantive international tax reform. The language used in many sections/parts of the TCA is outdated. It is timely to re-consolidate and simplify the TCA and set out a path for future periodic consolidations.



The last of these reports from the then Commission on Taxation was in 2009. Experience from previous reports was that few of the measures suggested were found to be politically palatable.  Time will tell whether these proposals are any different, or whether finally, our current and future Governments will bite the bullet and take on the enormous and politically sensitive task of implementing some of these long overdue updates to our taxation regime.