The Government would need to think very carefully before levying a minimum rate of tax on high earners, the chairman of the Revenue Commissioners, Mr Frank Daly, has warned.
Such a measure could have the effect of dragging down the number of high earners who pay tax at the moment, Mr Daly said yesterday.
Another problem with a move towards a minimum tax rate would be that it could create a "target" low rate of tax for the general population, he said.
"It would be an attractive quick solution but I would be very loath to go down that road without a lot of study."
Mr Daly, who made it clear that he did not wish to stray into the public policy arena, was appearing before the Joint Committee on Finance and the Public Service.
Members of the committee were concerned about recent data showing that a proportion of the Republic's highest earners use capital allowance schemes to avoid paying any tax. In 2001, this group included 11 people who had an income of more than €1 million.
"Most people would feel that high-income taxpayers should pay a level of tax," said the committee chairman, Mr Seán Fleming.
"This is not fair," he said.
Fine Gael's finance spokesman, Mr Richard Bruton, asked whether this apparent unfairness could be addressed by applying a strict minimum rate at which tax must be paid.
One technical issue with a minimum tax rate, according to Mr Daly, would be in defining "income" after excluding factors such as normal business reliefs and expenses.
He suggested that this would require very complex legislation and could reverse progress made by the Revenue in simplifying the tax code.
The Revenue has an "aversion to complex legislation", Mr Daly said.
New complications would be "manna from heaven" for accountants, he added.
Mr Daly went on to point to the US tax system, where a minimum rate is applied with apparently random and not entirely successful results.
New figures from the Revenue Commissioners show that the annual cost of the major tax reliefs to the Exchequer climbed to almost €8.4 billion in 2001.
Mr Daly pointed out that these reliefs, which were applied to 269,300 taxpayers, included measures such as non-taxation of child benefit and mortgage interest relief.
Close to 80 per cent of the total was awarded for "ordinary business relief and losses," according to the Revenue analysis.
Mr Daly estimated that the annual cost of the measures perceived by some as tax shelters for the wealthy - usually property-based incentives - is probably less than €200 million.
He acknowledged, however, that this relief could be shared among "a relatively small number of people".
He said it was "past time" for detailed information on this to be available.
The Revenue Commissioners will begin collecting data on a range of capital allowances including property-based reliefs in 2004 tax returns, with analysis of these to be available in early 2006.
