Dáil debates
Wednesday, 9 February 2005
Finance Bill 2005: Second Stage (Resumed).
12:00 pm
Jimmy Devins (Sligo-Leitrim, Fianna Fail)
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I wish to share time with the Minister of State at the Department of Finance, Deputy Parlon, by agreement.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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Is that agreed? Agreed.
Jimmy Devins (Sligo-Leitrim, Fianna Fail)
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I am delighted to have this opportunity to speak on the Bill. I congratulate the Minister on his first budget and on this empowering legislation. Budget day has always been one of the more important days in the life of Dáil Ãireann. In many past instances, debate raged far into the night. However, it was remarkable that the debate on the last budget ended early in the evening because the Opposition had little to complain about and ran out of steam after a few hours. The following day, all commentators agreed that budget 2004 was remarkable. It was remarkable because it continued the policy of the Government of maintaining growth by keeping taxation levels at an all-time low.
The Minister for Finance was in the past Minister for Health and Children. The caring and compassion he showed in that Ministry is evident in this year's budget, in particular in regard to the money he provided to deal with disability, both intellectual and physical.
The Government is rightly committed to maintaining full employment while allowing people to take home increasing levels of money after tax is paid. However, it is also committed to looking after the less well-off in society. There are people who have not benefited from the economic boom and growth of the past six to seven years to the same extent that others have. It is the duty and responsibility of any government to ensure that all citizens benefit from a healthy economy. The Minister has, with this Bill, put in place the steps towards making sure that all, especially the less well-off, are looked after. In that regard, the provision of funding to make available an extra 230,000 new medical cards is welcome. These cards are due to come into force over the next couple of months and a large number of our constituents will welcome them. The huge increase in funding for the disability sector, allied to the coherent and co-ordinated approach across all six Departments that deal with disability, will result in a real and positive improvement to the lives of those who suffer from disability, be it intellectual, sensory or physical.
The contents of the Bill cover nearly 180 pages. In the limited time available to me I would like to refer to its most important aspects. With regard to the stamp duty reductions, I welcome the fact that the exempt threshold for first-time buyers of second-hand residential properties has been raised from â¬190,500 to â¬317,500. First-time buyers are starting out on the property ladder and the raising of the exemption threshold will open up a significant range of housing options to this group. I know of a considerable number of first-time buyers in the Sligo-Leitrim area who will benefit from this progressive move as the range and type of houses available to them without the extra burden of stamp duty will increase significantly.
I welcome the fact that somebody who switches from one credit card to another during the course of a financial year will not have to pay two stamp duties. The option of changing one's credit or laser card due to the availability of better rates in a different financial institution is one which should be available to all. However, up to now many people did not avail of this option because they were penalised by having to pay double stamp duty if they did so. The Minister recognised this anomaly and the change is a welcome one.
With regard to income tax, I welcome the provision that any payments made by the Health Service Executive to foster parents in respect of the care of foster children will in future be exempt from income tax. The provision of foster care is an area the former North Western Health Board promoted energetically. For parents to take on the care of a foster child is a huge responsibility and they are deserving of our respect and as much support as possible. From my former work as a general practitioner in Sligo, I know of many children who speak in glowing terms of the love, affection and support they received from their foster parents. Obviously, in an ideal world children would be with their natural parents but, unfortunately, for a variety of reasons this is not always possible. The option of fostering, either on a short-term or long-term basis, can help maintain the family unit which otherwise might be tipped into crisis.
Parents engage in fostering because of a deep and genuine sense of love and support. The financial aspect is not their main reason for doing so. However, they should not be penalised by added income tax for undertaking this civic duty. The recognition by the Minister of this civic commitment by removing any financial payment that foster parents receive from income tax is a progressive step which will be welcomed by foster parents.
I welcome the proposal whereby tax relief on third level educational establishments or facilities has been changed. Up to now, relief could only be obtained where the Minister had issued a certificate before 31 December 2004. This has now changed and an application made to the Minister before 31 December last will now be eligible for relief. There are third level educational establishments throughout Ireland, including universities and institutes of technology, which have wonderful plans for development. However, they were penalised under the old regime. This welcome change will allow these necessary developments to proceed and it should be a significant addition to any third level institution. In my constituency, the institute of technology in Sligo and St. Angela's College will consider this new regime progressively.
I welcome the decision to exempt from VAT any short-term letting for student accommodation. This is in accordance with the sixth VAT directive of the EU and it should ensure an increased supply of rental accommodation for students attending third level. Every year, students and their parents must go through the long and painstaking process of looking for rental accommodation during the months of September and October. This measure will ensure an increase in the supply of such accommodation and thereby make for a more satisfactory overall solution.
I wish to refer to the removal of all those on the minimum wage from the tax net. This is welcome and again confirms the Government's commitment to those who are less well-off. For the first time ever in the State, a person earning the minimum wage will not have to pay income tax.
The Bill will provide a legislative basis for the dramatic and far-reaching changes announced on budget day. I congratulate the Minister on his first budget and I know my sentiments are shared by the public.
Tom Parlon (Laois-Offaly, Progressive Democrats)
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I am glad to have the opportunity to contribute to this debate and to raise a number of important issues that may assist the debate on taxation matters. The measures contained in the Bill consolidate the budget and are evidence of the continued commitment of the Government to pursue fiscal policies which promote growth in our economy, reward work and alleviate the burden on taxpayers, especially those on lower pay. In 2005 the Government will achieve, ahead of schedule, its target of taking those on the current minimum wage out of the income tax net entirely. The Government will also ensure, through the measures being introduced in the Bill, that all workers obtain a significant reduction in their tax burden.
The Bill confirms the budget day income tax package which concentrated available resources on those at the lower income levels and on the elderly. The personal tax package of â¬682 million is impressive by any standards. The increases in personal credits and the standard rate bands mean that a single person on the average industrial wage will now pay 14% less tax. There are also increases in the band for single and widowed parents. Altogether, 52,000 taxpayers are taken off the higher rate of tax.
As a result of the increases, more than 650,000 of the 1.9 million income earners will be exempt from paying tax on their earnings. It also means that for standard rate taxpayers an additional â¬1,450 per year, or almost â¬28 per week, is exempt from tax in the case of a single person and â¬1,750, or almost â¬34 per week, for married single earners.
The Government's commitment to the elderly is underlined by the income tax measures in the Bill. In particular, under the age exemption limits system, those aged 65 or over are exempt from tax up to specified limits. For 2005 the limits are â¬16.500 for a single or widowed person and â¬33.000 in the case of a married couple where one or both are aged 65 or over. The age exemption limits are being increased for the fourth year in a row. In four years, the limits have increased by almost 53%. Inflation for the same period is expected to be just over 13%. These measures provide ample evidence of the Government's commitment to keep down taxes on wages and protect the real value of incomes for pensioners on low income.
I particularly welcome the steps taken in the Bill to address the difficulties many first-time house buyers face in their efforts to get on to the property ladder. The significant reduction in stamp duty for first-time buyers has been widely welcomed. The thresholds are generous. There will be no stamp duty on first-time purchasers of second-hand houses up to £317,500 in value and reduced rates on such purchases up to £635,000. This new exemption threshold is above the national average price for second-hand houses and is above what the average first-time buyer pays for a second-hand house anywhere in the State.
In regard to budget tax changes which impact positively on particular sectors of the economy, I welcome in particular section 115 of the Bill which confirms, as announced in the budget, stamp duty relief for exchange of farmland for farm consolidation purposes with effect from 1 July of this year.
Section 32 extends capital allowances on tourist accommodation to registered guesthouses and registered holiday hostels. Section 119 provides for a reduction in the rate of companies' capital duty charge from 1% to 0.5%, which will help maintain our attractiveness as a location of choice for the establishment of companies. I applaud the Minister on his introduction of various anti-avoidance measures, as I am sure would all members of the taxpaying public. It is recognised that our tax system depends on each person who is meeting his or her tax obligations having confidence that his or her neighbour or competitor is also complying. The Bill should be commended for seeking to close off a series of abusive tax loopholes in the VAT, income tax, inheritance tax, stamp duty and life assurance areas. Equally important, the Bill gives very important additional legal powers to the Revenue Commissioners to pursue tax evaders.
I welcome in particular the provision which will allow Revenue to access, on a sample basis, information on single premium life assurance polices to detect where these policies may have been used as an investment vehicle for undeclared income. The use of this power will be subject to the authorisation of a Revenue Commissioner where he or she has reasonable grounds for suspecting that such policies may have been used to facilitate tax evasion. An important initiative is the addition of a new offence to the list of revenue offences in section 1078 of the Taxes Consolidation Act to address the issue of persons who knowingly facilitate tax evasion. The increase in the threshold for publication of tax offenders from £12,500 to £30,000 is a sensible move which is broadly in line with the recommendations of the revenue powers group, as well as the recently published report of the Law Reform Commission. Overall these changes go a long way towards striking the correct balance between not over-burdening compliant taxpayers while at the same time being able to take swift and effective enforcement action against those who are not compliant.
In the area of improved tax administration, the Revenue Commissioners' initiative to allow PAYE taxpayers to e-file returns and to electronically avail of a range of self-service options in regard to their tax affairs is welcome. The Bill contains the necessary legislative measures to underpin these changes. I understand that the new system will not change the fact that ultimate responsibility is on PAYE taxpayers to make sure their tax credit certificates are correct or to look for an end-of-year review if they feel they have over-paid. It will give PAYE taxpayers the ability to ascertain their tax position and in particular to access their revenue records over the Internet at any time; amend their tax credit certificate on the web either to claim an allowance or credit not on the certificate or to change the amount involved; request an on-line review or balancing statement based on the revenue records and confirmation that the details are correct and complete; and receive an automatic repayment in certain cases where Revenue is fully satisfied from its records or from recent contacts that a repayment is due.
This Finance Bill will support the progress of our economy and prepares the ground for further growth in living standards. It signals our ongoing commitment to sound budgetary management. In its totality, the Finance Bill reflects the Government's commitment to ensuring that fiscal policy, and the tax system in particular, play a positive role in supporting the country's economic development.
Seymour Crawford (Cavan-Monaghan, Fine Gael)
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I wish to share my time with Deputy Deenihan.
I want to comment on an issue Deputy Devins raised about medical cards. I welcome any increase in the number of medical cards, but one must remember that during the last election campaign 200,000 additional medical cards were promised and there were no restrictions on how they would be allocated. A somewhat different card has now been introduced. This is something Fine Gael proposed as an interim solution to try to ease the pressure on families.
One must remember that 100,000 medical cards have already been taken from people. In the past seven years, more than 8,000 medical cards have been taken from low income earners in my constituency. Cork city and county, which has a population of 500,000, lost a similar number of medical cards. The number of medical cards lost in my constituency is significant, which must be taken into account when announcing good news.
I would be less than honest if I did not welcome a number of aspects in the Finance Bill. Older citizens will receive an increase of â¬14, which is welcome. There is no point being hypocritical. It is an indication of how the country has improved over the past ten or 15 years that we can afford to recognise the problems these people face. We are often reminded across the floor of the House of what the situation was like in 1997. When our former leader was Minister for Finance in the early 1980s, he gave an increase of 25% to old age pensioners because they were so badly looked after at that stage. What these people are receiving is welcome. However, while there are many good aspects in the budget, those who are in need of child care and transport will be asking major questions. I will return to this later.
I want to raise two issues that are very close to the Minister of State's heart and to mine, the first of which is, roll-over tax. Roll-over tax was discontinued two years ago supposedly because of the difficult economic situation that existed at the time. Roll-over tax was available for anyone selling or buying property within a recognised timeframe. I am saying to the Minister of State as a former farm leader â I had a somewhat slighter involvement in a farming organisation â that as we continue to improve our road and rail infrastructure, people are having their property taken from them. Under the CPO, a specific category of people is quantified. If a road is being forced through people's property and their land is being taken from them, I ask that these people be put on a roll-over tax. That may not be possible in this Finance Bill â with sufficient ingenuity it could be done â but surely these people are entitled to be recognised as a special case.
The Minister of State in particular can claim responsibility for the good deal achieved between the IFA and the Government at the time. He will recognise that if it was necessary then, it is more necessary now, since there is a bigger roll-out of these projects. I do not apologise for raising this issue, and I do so because of the bypass around Carrickmacross which was recently opened, with Castleblayney, Monaghan and a couple of towns in Cavan also affected. That serves to highlight the situation throughout the country. I welcome many slight moves in this direction in the Bill.
The legislation provides for stamp duty relief for those who can get agreement to swap land. I am involved in farming long enough to know that the numbers who will be able to come up with such an agreement will be extremely small. I am alarmed at the detailed requirements to be met, as outlined in the Bill, to provide for that. One will have to involve Teagasc and meet all sorts of requirements. Section 115 outlines the requirements in detail. I hope that the requirements outlined can be eased and improved on Committee Stage to give more leeway to provide for practical solutions. I warn the Minister that if the section is left as it is worded, the number of people who will be able to avail of this relief will be extremely small. The ethos of the measure is good but the practicalities of meeting the requirements to avail of the relief are a different matter. I urge that this angle be examined and dealt with in a reasonable and practical way.
There are some changes in the Bill in terms of the manner in which so-called criminals will be dealt with. I refer to those who have not yet paid taxes or who have had money on deposit across the Border. I make no apology for saying that I was annoyed that people who found themselves, through no fault of their own, in this position down through the years, owing to their having a use for investing money across the Border and such like, have had to pay such penalties that applied. Those who are up to â¬30,000 â the figure was previously â¬12,500 â in arrears of tax, or whatever one would like to call it, will not have their names published. The interest charged on the arrears will be lowered from approximately 12% to slightly under 10%. I welcome that reduction, but for the information of the public, will the Minister advise us where they could avail of an interest rate of 10% because many people would like to invest at that rate? It is great. Surely these taxes and penalties should be geared towards the criminals rather than the people to whom I referred. I know people who have gone through mental hell over the past year or so. A few of them have apparently invested money in Northern Ireland or somebody may even have invested it for them. It can be shown clearly that they were not doing so for criminal purposes or for any other such purpose. The rate of tax that applied was insignificant, but such investment cost them a great deal of money. I welcome some easing in that situation but I hope this provision will be reviewed. There is a need for discretion to be exercised by those dealing with it.
I mentioned the positive developments for carers and provision for the elderly, but major negativity surrounds provision for this sector in my area for whatever reason. There is a lack of funds to deal with those who must go into nursing homes or into respite care. That is a serious concern. I had a case the other day â which the Minister of State, who comes from a farming background, will understand â involving a middle aged man who had lived with his mother all his life. The mother happened to be the owner of the family home when she got married and the son's late father had all the land. However, the house, the only home the son has, is being used as a means to stop his mother been granted a nursing home subvention. The rules applying to this measure are naïve and impossible. I have another case where a person suffering from Alzheimer's disease held on to 20 acres of land and his family, who are not rich, have to find ways and means to provide for his care. Those sort of rules need to be reviewed.
Some 257 people were in receipt of nursing home subvention in Cavan-Monaghan at the time of the previous general election. That number was to be reduced to 170, but it now stands at 214. However, the means test to qualify for the subvention is much tighter in our area and I dare say in the west than in other areas. I had a case recently where a person was being put into a home in the west because some family members were living there and the person dealing with the case in the home could not believe that he was dealing with the same health service because he had never come across a situation like this previously.
Many promises were made that child care provision would be adequately dealt with, yet Lattin community centre and several others await receipt of grants that were promised years ago.
A Bill to deal with dormant accounts is to be introduced shortly. However, we have discovered an anomaly recently in the Border areas whereby dormant account moneys handed out through the so-called independent group has not reached, to any great extent, any of the Border counties compared with other counties. We have been informed that the community groups in those areas do not understand how to complete the required forms. These groups have been completing forms for grants under the LEADER programme, the programme for peace and reconciliation and a plethora of schemes down through the years. They are told that their forms are crap, but that answer is crap. This funding needs to be reviewed to ensure that all areas get what they are entitled to, no more and no less. The funds that we get from the programme for peace and reconciliation and others are supposed to be additional, and not replacement, funds. I have major objections to that.
Jimmy Deenihan (Kerry North, Fine Gael)
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I will confine my remarks to art, sport and tourism which are my areas of responsibility. The real and pressing threat to the growth and future development of the tourism industry was not addressed in the budget or in this Bill. Tourism is an exceptionally important industry to our economy and I repeat that it provides more than 140,000 jobs in the country as a whole. However, there is nothing in the budget nor in this Bill that will go any way towards meeting the real challenges faced by those in the industry.
Doing business in Ireland is expensive and those in the tourism industry have already endured years of inflation at double the rate of their competitors. Coupled with this, increases in Government-driven stealth taxes and charges have been dramatic. The increases in the cost of food and drink, insurance, ESB, gas bills, VAT and other goods and services have been dramatic in recent years. For example, Ireland has the second highest VAT rate in the eurozone for hotel accommodation and eating out. Furthermore, wine excise duty is by far the highest in the eurozone while spirits excise duty trails only that of Sweden and Finland in the European Union. These rates and duties have a real impact upon the attractiveness of Ireland as a destination for international tourism.
Ireland is the third most expensive country in the European Union for goods and services. A basket of food costing â¬100 in Ireland costs only â¬82 in the UK. Of the 16,000 small to medium-sized enterprises that make up the bulk of the tourism industry, it is the smallest players in the sector, those involved in family-run bed and breakfasts and small guesthouses, that are being hit hard. The budget for 2005 and this Bill could have made substantial changes that would have underpinned the future growth and development of the sector. This is an issue on which I wish to dwell in the time available.
Ireland is the only country in the EU with a VAT rate in excess of 10% that does not allow for the reclamation of this tax on business expenses incurred on hotel and restaurant charges. I would like the Minister of State's official who is present to take up this matter with the Minister. We will be table an amendment on this matter on Committee Stage. The Irish Hotels Federation said in its budget submission to Government that this anomaly in the Irish VAT regime places Irish hotels and restaurants at a serious disadvantage, even to its nearest neighbour in Northern Ireland, when competing for the high yield and growing travel sector. The non-availability of this VAT allowance in effect means Ireland cannot expect to attract a reasonable proportion of the â¬40 billion worth of global international tourism business involved in conferences, corporate meetings and incentive travel business generally. Allowing VAT on hotel and restaurant charges as an input for business for that purpose would be a major boost to the industry. We will push hard for this on Committee Stage.
Last year I enjoyed one of the few successes I have had in opposition when I pressed hard for an extension of the capital allowances for hotels. In fairness to the Minister, after much pressure, he conceded to my request and, as a result, billions of euro worth of proposals have been made to county councils and there will be a massive return for the economy. That is an example of the influence an Opposition spokesman can have. The cut-off point of June 2006 for this scheme, however, is too early because many of these plans will be sent to An Bord Pleanála and the jobs will not be completed by then. The cut-off point for completion should be extended to 2007.
Last year we voted on tax credits for leading GAA players. Such a facility is available for international sportspersons but not for our GAA members. I tabled an amendment last year that was not accepted despite the goodwill of many on the Government side of the House. The Minister is a keen GAA supporter and I ask him to look at alternatives, maybe through the Sports Council. Each county can now only have a panel of 24, a small number, so any proposal would not involve extending the facility to 50 or more people. Kerry had a panel of 30 players and had to drop six of them. It should be easy to do something for inter-country panels because they are so well defined. We should revisit this on Committee Stage.
Questions were raised about tax exemption for very wealthy artists, particularly singers. We must examine that exemption from the perspective that it only applies to creative artists and not to interpretative artists. Actors must pay tax while writers, who are regarded as creative artists, do not. This is an anomaly that should be addressed. A small number at the top are gaining most from this provision. There should perhaps be a cut-off point of â¬250,000 above which people should have to pay tax.
There was only one Irish performer at the Wexford Opera Festival last year and the festival organisers had to pay VAT on the fees paid to the incoming artists. This is unfair for a voluntary group and I will table an amendment to address this on Committee Stage.
The tourism industry is under pressure and there will be casualties this year. The bed and breakfast and guesthouse sectors were hallmarks of our tourism industry but they are under pressure because hotels, which have increased in number and must maintain cash flow, are discounting. Instead of going to guesthouses, people are going to hotels. By its nature, bed and breakfast accommodation is spread throughout rural areas â it is the only enterprise in some villages. VAT and related issues will cause serious problems for this sector if they are not addressed.
Seán Ardagh (Dublin South Central, Fianna Fail)
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I welcome the opportunity to speak on the Finance Bill 2005 and I congratulate the Minister for Finance on his first budget and Finance Bill.
I would like to examine two areas, approved retirement funds and the recoupment of tax by charities. Retirement relief should exist so that people can avoid an impoverished retirement and so that those on a reasonable salary in employment will have the same standard of living after retirement. The retirement benefits relief is not in place, however, to assist with estate planning for wealthy individuals. At the moment, it is being used in that way. Steps should be taken to ensure the approved retirement funds are not used in a way that was not intended when they were introduced.
Section 45 of the Bill allows for interest on loans which companies take out with banks in EU states other than Ireland. That facilitates the purchase by approved retirement funds of property in countries outside Ireland. Section 25 allows section 60 insurance policies, which can be used without capital acquisitions tax being applied, to pay capital acquisitions tax on the approved retirement fund. That is a method by which the very wealthy will reduce their tax bills.
On Sunday, The Sunday Tribune referred to a number of people with incomes of between â¬5 million and â¬10 million, much of which goes into pension funds and into approved retirement funds that accumulate such wealth that we cannot conceive the income from them being used for normal retirement expenses. Apart from a small number of people with ostentatious lifestyles, the vast majority of even the very wealthy have a normal lifestyle that would not require the return that approved retirement funds bring about.
Joan Burton (Dublin West, Labour)
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That was a Charlie McCreevy special. I spoke about that yesterday.
Seán Ardagh (Dublin South Central, Fianna Fail)
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Over a three year period, people are taking substantial salaries of millions of euro so that a retirement fund, with two thirds of the salaries, index linked and with the applying extras, can be put in place to generate that much on an annuity basis at a time when interest and annuity rates are very low.
I would like the Minister to consider putting an upper limit on the level of income that can be used as a basis for calculating pension contributions for tax relief purposes. I have no problem with people setting up approved retirement funds, but the general public should not subsidise the build-up of them to the extent that is being done at the moment. There is room to do something about it.
The Minister should also consider introducing a claw-back in respect of pension contributions for tax purposes when the value of the fund exceeds the actuarially calculated amount that would be needed to fund a pension of a reasonably generous level of income, together with the two thirds level and all the bells and whistles that are attached to that as well. That should be examined.
We need to encourage philanthropy. The Americans are very good at setting up foundations for this and that. It is time wealthy people were encouraged to put their wealth to charitable use.
On the question of charities, the tsunami last year was a special case. The general public raised more than â¬80 million. If all of the tax that could be recouped was recouped on the basis that the donors were in the 42% tax band, more than â¬56 million would be recouped by the charitable organisations. I ask the Government to arrange with the relevant statistical bodies to obtain the tax profiles of a sample of the donors who made those contributions. Many elderly people who pay no tax and have very little money are among the most generous of the contributors. A stud farmer in County Tipperary made a very substantial and very generous contribution. There is no tax on his income at the moment. That should be taken into account. If the composite rate of tax paid at the marginal rate by the donors was30%, in excess of â¬42 million could flow back to the charitable organisations if all of the administrative problems were sorted out and the â¬250 limit were reduced in this case.
When the tsunami is off the front pages of the world's media and only the bereaved families of those who lost their lives are suffering their grief and their tragedy, the horrors in Africa, in Darfur, the Congo and other areas will continue. The tax rebate on the â¬80 million contribution made by Irish residents would assist in no small way the brilliant NGO aid organisations such as Goal, Trócaire, Concern and the Irish Red Cross. I am sure I have left some out, but I do not mean to diminish in any way the great work they do. I ask the Minister to consider empowering the Revenue, through a Committee Stage amendment, to ensure those organisations get the amount that would be payable if the appropriate forms had been filled out correctly. I also ask that the relevant threshold be reduced from â¬250 to zero in this special case for the three months since Christmas Day, the period when most of the money was contributed, to allow a lump sum payment to be made by Revenue to the relevant organisations to enable them to tackle the problems around the world that, because of world politics, are not at the moment being properly dealt with.
I always start at the back of the Finance Bill because that is where the most interesting parts are. I note the rate of interest on overdue taxes is reduced from 11.75% to 10%. Deputy Crawford does not believe this is low enough. However, the State is not a bank and it must ensure that the interest charged is greater than the overdraft rate of interest. That reduction is a good step forward as far as the Government is concerned and it would be unreasonable to go any lower.
In respect of the published details of certain settlements made by tax defaulters, the figure was previously £10,000 or â¬12,700. The Minister is changing that to â¬30,000. I note that the Revenue Powers Group suggested a figure of â¬50,000, the Law Reform Commission suggested â¬25,000 and that the Minister took the middle course. However, â¬50,000 would be a better figure because what we want is to name and shame those who blatantly flout the law and evade tax. If they are mixed in with a group of people who can reasonably state that they unfortunately did things the wrong way and were caught, the higher level should be considered.
The question of facilitating tax and duty evasion is a most important matter. There is a fear among people who work in banks and insurance companies, among tax advisers and accountants, that this is draconian. However, the Minister stated on Second Stage that this was intended to target serious offences. Serious offences can be taken in the light of what I have already mentioned regarding the published details of settlements by tax defaulters. He also said that the people prosecuted under this facilitation of tax evasion section would be deeply involved and would have facilitated tax evasion. In business, people talk anecdotally about these matters, but the real intent of this measure is to target those who facilitate tax evasion, who open the bank accounts in question or who make false statements. It is not a general trawl to get everybody who gives professional financial advice to clients.
I am delighted the question of the single premium life assurance policy is being tackled. It has been boiling away in the background since 1998 when the DIRT inquiry started. Together with other Members of the House I was privileged to be a member of that inquiry. It appears there was abuse in regard to single premium life assurance policies. Section 31 empowers the Revenue to test a sample within an insurance company to see if it was complicit in its customers' tax evasion. That would be used to bring a High Court case to ensure that an insurance company where a single premium insurance policy was involved would be made to account for the figures relating to every single account in the company.
I am delighted by the reduction in stamp duty for first-time buyers of second-hand houses. In the area I represent â mainly Crumlin, Drimnagh, Walkinstown, Ballyfermot, Inchicore, Kilmainham â there are many houses at around â¬250,000 to â¬300,000. Young people are needed in these areas to start families and rejuvenate all of those areas. This is a great opportunity to regenerate the inner city area. I am delighted this is in the Bill.
1:00 pm
Jim Glennon (Dublin North, Fianna Fail)
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I thank my colleague, Deputy Ardagh, for sharing time. Like my colleagues I congratulate the Minister for Finance, Deputy Cowen, not only on his first Finance Bill but on his first budget which, presumably, is the first of three. The manner in which the budget was greeted by the community at large and most sides of the House is an indication of the efficiency with which he has commenced his new portfolio. I wish him and his Minister of State well over the next few years in their efforts and I hope we will be standing here for the next few years in a similar disposition to the legislation before the House.
I welcome, as my colleague Deputy Ardagh has done, a provision in the Bill which addresses the difficulties of first-time buyers in the housing sector. Like Deputy Ardagh's constituency, my constituency of Dublin North is one in which a significant level of house building is taking place. Unfortunately, most of the houses being built are outside the budgets of a double earning partnership and natives sometimes must travel up to 50 miles away. Any step that can be taken to make it easier for members of the community to remain in the community in which they were reared and to take their first steps towards rearing a family in the area are welcome. I welcome particularly the measures being introduced for first-time buyers of second-hand houses and the reduction in stamp duty.
In a similar vein, and it may come as a surprise given I am a Dublin Deputy, I welcome section 115 which confirms stamp duty relief for exchange of farmland for farm consolidation purposes, particularly in the horticultural area. As the Minister of State is aware, times are changing rapidly. What was a viable holding five years ago is one no longer. There was an anomaly under the stamp duty legislation which, in effect, penalised families for consolidating their holdings. I had lengthy discussions with the IFA when preparing its submission. I am pleased the Minister has taken note of its representations and acted on them.
Given that I come from a large PAYE constituency, it is not an understatement to say that the PAYE worker is the backbone of our tax system. Unfortunately, PAYE workers have historically also been a soft touch in the tax system in that they are the most easily targeted. There is considerable frustration among that sector when it sees the preference certain traders have for cash payments as distinct from other types in so many areas of activity in the economy. I applaud the Minister on the introduction of anti-avoidance measures and his announcement of an audit of many of the exemption schemes in place.
I refer to an issue on which I have had an interest in recent years, namely, the old chestnut of the stallion tax. Considerable debate has taken place on this issue. Deputy Deenihan referred to the arts and the exemptions for same, which are welcome. However, neither the arts exemptions nor the stallion tax exemptions were designed for either the superstars, in the context of the arts, or the battery hen type operation in stud farms. When introduced, they were pitched at the middle of the road, medium earning operator in each category. I am in favour of their continuation for the middle of the road earner in both categories. However, they are worthy of consideration in terms of the battery hen type operation at the stud farm and also at international superstars level in the arts. It is inequitable that some in the arts, who earn massive amounts of money by anybody's standards, do not pay tax.
I refer to Deputy Deenihan's comments on the exemptions on which he and I worked last year and are still working for elite sports people. He inadvertently mentioned them specifically in the GAA context but they were not designed to be specifically in that context. At present, professional sports people have a beneficial tax regime. There are some who give huge amounts to amateur sports who deserve a break. We have not been able to devise a way of doing it yet. However, it is imminent and I look forward to its introduction in the near future.
John Perry (Sligo-Leitrim, Fine Gael)
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I wish to share time with Deputy Neville.
John Perry (Sligo-Leitrim, Fine Gael)
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I am pleased to have an opportunity to contribute to the debate. The Finance Bill is about the raising and collection of taxes imposed as part of the annual budgetary process. The State fills its coffers through a myriad of taxes and charges on individual taxpayers and corporate entities in the State. This year is no different. While the Minister for Finance has tinkered around the edges of the tax code in the Finance Bill, he has ignored the major issues within the system that need fundamental reform. It is, as always, vital that taxes imposed are consistent with other policy objectives and, in particular, the tax regime should be such as to encourage investment, reward entrepreneurs and not militate against consumers availing of competition for goods and services. There are some important aspects in which the measures proposed in the Finance Bill 2005 are neutral as regards these three categories. It should be consistently and permanently embedded in the minds of officials preparing the budget and the Finance Bill to scrutinise measures that have a potential impact on employment initiatives, enterprise and the role of small companies. It is important to note that the backbone of the economy has been small companies and the creation of jobs.
While much has been said about taking people out of the minimum wage net, many pay large amounts of tax on low incomes. Those on a basic salary of â¬35,000 to â¬40,000 who are educating their family and sending children to college or university find they are not entitled to any grant. They are the new poor who are beginning to emerge. Even with joint incomes there is the heavy indebtedness of a mortgage, car payments and other demands.
If we do not continue to reward those who take risks to develop business and give employment, our long-term survival as a dynamic and competitive economy will be in jeopardy. The Minister of State, Deputy Gallagher, is well aware of those in Killybegs along the western coast who have invested heavily in job creation. He will be aware also of the significant investment made in the development of aquaculture. Many take the risk. When one borrows extensively from the bank it is a joint venture. It is important that at all times there is due recognition by the State of the investment by small companies. In any Government initiative the partnership approach should ensure people are not isolated with a heavy loan, under huge pressure and unable to make the returns. Let us be honest: banks are devoid of sentiment and when they invest in a company, they want their dollar back regardless. This can have a major impact on the continuation of family businesses. The Minister of State will be aware that the continuity of family businesses in Killybegs is in jeopardy as the second generation is not getting involved. It is important to encourage enterprise. Some measures enacted in recent budgets have not been remedied in this Finance Bill. They certainly had a negative impact on employment creation and the generation of sustainable employment. For example, the provision requiring businesses to pay advance corporation tax is unfair. One can imagine the uproar if PAYE employees were obliged to pay tax in advance of earning an income. The reduction of corporation tax is to be welcomed and has resulted in cash being reinvested. The requirement to pay corporation tax in advance is dulling the impact of this reduction in terms of cash flow for businesses. It seriously undermines the benefits accruing to the companies paying lower tax.
Some of the changes to the capital gains tax in recent budgets have negative implications for business. Most small businesses hope to be larger businesses some day and many wish to sell off existing premises, plant and equipment, in the hope of purchasing new replacements. I understand from industrial groups that the changes in capital gains tax introduced in the budget 2003 have acted to suppress new investment because they shortened the time period allowed for reinvestment in new or replacement assets. This provision should be re-examined.
PAYE workers have been left in the cold by budget 2005 following the failure of the Minister for Finance, Deputy Cowen, to make good the tax hikes imposed on this group over the past two years. This was a cunning budget in which the Minister attempted to present the Government as a new caring and sharing administration but when the dust settles, the first group to feel the reality will be the PAYE workers. These people have borne the brunt of huge increases in stealth taxes over the past two years. They were entitled to expect more in pay-back from this budget.
As a result of this budget, a person on the average industrial wage will still be paying the top rate of tax and handing over in excess of 40% of their salary in taxes. Meanwhile, there was no move to close off the loopholes that allow some millionaires to pay no tax at all. This is an injustice. Many highly-placed business people can afford to employ accountants and tax experts to ensure they pay no tax at all. I suggest that everyone should pay a minimum amount of tax regardless of income. Millionaires should pay a minimum tax. The situation of multi-millionaires who are tax exiles should be examined and they should pay a minimum rate of tax regardless. They should pay tax in excess of hundreds of thousands if they are multi-millionaires.
This is hardly the sign of a caring and sharing Government. More than half of taxpayers will still pay at the top rate of tax next year. The welcome removal of the minimum wage earners from the tax net will be reversed for many next year when the national minimum wage hourly rate is increased. This is an important improvement but it will bring people back into the tax net. The increase of the tax bands for the PAYE worker by 5% failed miserably to redress the failure of the indexation of the tax bands over the past two years.
I welcome the change in the position on stamp duty and changes to credit card charges. In my constituency, MBNA credit card company is a significant employer and has brought much-needed competition to the credit card market and charges. I raised this issue two years ago. The rule introduced in budget 2003 had a negative impact on consumers and suppressed competition and choice in services. I am pleased the Minister changed this. I have expressed this opinion for the past two years and I am delighted the Minister has taken the logic on board.
In the area of housing, the Minister has adopted in part a Fine Gael policy proposal. From June the new threshold of â¬370,000 will do little for house buyers in Dublin as the average price of a second-hand home bought by a first-time buyer has already exceeded this limit. This package would have been more radical had the Minister adopted the Fine Gael proposal in full and I am disappointed this was not the case.
Minor increases have been granted in the area of social welfare. However, giving someone a little extra does not make up for taking a great deal more back. This is the case with stealth taxes. Any increase awarded will be eaten away by increased charges for electricity, gas, health, refuse and other services that people on low or no incomes cannot avoid. We need realistic changes in all areas. Changes must be seen at ground level so that those on social welfare, PAYE employees and first-time buyers, feel a difference in their pockets.
It was identified that the caring and sharing Government of which the Minister is a member illegally charged the most vulnerable in society, those in State care. I was pleased to note that last week in my constituency of Sligo-Leitrim, â¬1.2 million was paid as an initial payment to patients and those in contract beds who received â¬2,000 each. This payment had to be dragged out of the Government and it demonstrates the element of caring and sharing. This hyped-up budget was forgotten about within weeks, particularly with regard to the issue of disability, which Deputy Stanton deals with in a very caring way. There is a great deal of spin but little or no action.
Dan Neville (Limerick West, Fine Gael)
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I welcome the opportunity to speak in this debate on the Finance Bill. I wish to raise a specific point about what I regard as discrimination against psychiatric institutions in respect of tax relief. This is a reflection of the marginalisation of people with mental illness. The Finance Act 2001 extended tax concessions for investment in private hospitals but psychiatric hospitals were excluded from this concession. It may be the case that at the time, people just did not think of psychiatric hospitals. This would serve to highlight yet again the discriminatory approach taken over decades, if not centuries, to the treatment of people with psychiatric illness. The Finance Act 2001 extended the industrial buildings writing-down allowance to capital expenditure incurred on a building or structure in use for a trade or consisting of the operation or management of a "qualifying hospital". The allowance consists of writing-down allowances at the rate of 15% of the qualifying expenditure for each of the first six years and 10% of the expenditure for the seventh year in respect of the construction of private hospitals.
When the owner of the hospital building is an individual and the hospital is leased to an operator, the legislation imposes limits on the manner in which the allowance can be offset against an individual's tax income. Section 49A of the Taxes Consolidation Act 1997, limits the amount that may be set off against an individual's other income, subject to a maximum of â¬31,750 in any one year of assessment. Any excess may only be offset against the individual's Irish rental income. There is no corresponding restriction, however, where the investor is a company chargeable to corporation tax. As a consequence of these restrictions, the reliefs are likely to be of interest mainly to those with substantial Irish rental income per shelter.
The qualifying conditions impose limits on the availability of the facility to psychiatric hospitals. Under the Finance Act 2001, the qualifying hospital must meet a range of conditions. It must be a private hospital and have the capacity to normally provide medical and surgical services to persons every day of the year. Apart from lobotomies, few surgical interventions are undertaken in the psychiatric area, which limits the extent to which individuals are able to invest in psychiatric hospitals.
In addition, the qualifying hospital must have a capacity to provide outpatient services and accommodation on an overnight basis of not less than 100 inpatient beds. This requirement does not create a problem. The hospital must also house an operating theatre or theatres and related on-site diagnostic and therapeutic facilities. Psychiatric institutions do not have such facilities. The hospital must contain facilities to provide not less than five of the following services: accident and emergency; cardiology and vascular; eye, ear, nose and throat; gastroenterology; geriatrics; haematology; maternity; medical; neurology; oncology; orthopaedic; respiratory; rheumatology; and paediatric. As psychiatric hospitals will not be able to provide five of these services, they are precluded from meeting the qualifying criteria.
The Bill also provides that the hospital must undertake to the health board in whose functional area it is situated to make available annually, for the treatment of persons who have been awaiting inpatient or outpatient hospital services as public patients, not less than 20% of its capacity, subject to service requirements to be specified by the health board in advance. In addition, the fees charged for the treatment afforded to any public patient shall not be more than 90% of the fees which would be charged in respect of similar treatment afforded to a person who has private medical insurance. I do not dispute that hospitals should have this concession â there is good reason for it â but it discriminates against the 25% of the population who will suffer from psychiatric illness at some point in their lives.
I am setting out principles rather than making a case for any individual or group. An individual has, however, made a proposal in this regard so my concerns amount to more than speculation.
Recent media coverage and discussion in the House have highlighted the shortfalls in a range of facilities and services for treating child and adolescent psychiatric conditions, such as attention deficit hyperactivity disorder and eating disorders, which the House discussed recently, suicide, personality disorders and mood disorders. Amnesty International has referred to our mental health services and championed the urgent need for facilities for children and adolescents with psychiatric health problems. This group requires separate inpatient and outpatient facilities and services. We send our children and adolescents to specialist facilities and services in other countries.
To source the funding required to establish a hospital service, a company needs to avail of tax incentives for investment in the establishment of private hospitals. Under the 2001 Finance Bill, however, psychiatric hospitals do not qualify for such incentives. I ask the Minister to examine this matter.
I regularly raise the lack of investment in psychiatric services with the Minister of State at the Department of Health and Children, Deputy Tim O'Malley. He informed me that â¬15 million will be spent this year on the development of psychiatric services. Of this, â¬5 million is required in Limerick alone for a special safe unit, with the balance to be allocated to meet the cost of changes in the Central Mental Hospital. As a result, general psychiatric services will receive no investment. At the same time, however, private individuals do not have the same incentives to invest in psychiatric institutions as those available for general hospitals.
The Government is morally obliged to provide services for psychiatric patients. Due to a lack of investment over generations, substantial capital is required to bring psychiatric services up to an acceptable level. The benefits of providing some services through private providers are significant and should be considered. The Government would be spared capital costs, day-to-day running costs and long-term financial liability and a wide range of specialist services would be provided. I ask that those who wish to invest in the provision of psychiatric hospitals be offered the same incentives as those who avail of incentives to invest in the general hospital sector.
Charlie O'Connor (Dublin South West, Fianna Fail)
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Reading the Finance Bill at breakfast this morning, I was reminded of Karl Marx's observation that all history is based on economics. Regardless of the truth or otherwise of that statement, anyone reading the Minister for Finance, Deputy Cowen's first Finance Bill must conclude that our recent economic history has placed him in an enviable position. The Bill contains much good news and I am happy to support it. What finance Minister in Europe or any developed country can come before a national Parliament with such a positive package for endorsement?
I listened to the debate with interest and had to pinch myself several times. I will not pick on a particular Deputy but when the budget was announced 70 days ago the House completed its business by 8 p.m. because there was little debate and everybody was happy with the Minister's many pronouncements. Suddenly, a short ten weeks later, our colleagues in opposition have resurrected themselves and are trying to tell us what is wrong with the Bill.
Dan Neville (Limerick West, Fine Gael)
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That is the role of the Opposition.
Charlie O'Connor (Dublin South West, Fianna Fail)
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There was nothing wrong on 1 December. It amuses me that many of my good colleagues on the Opposition benches have distributed glossy information leaflets to their constituents informing them of all the positive announcements in the Fianna Fáil Party's budget. Take home pay, pensions and benefits were increased. I have seen many leaflets produced by other parties, and fair play to them because it is good to promote what is good. The Minister for Finance did a good job and introduced a budget about which everybody was happy. As Deputies will recall, the House adjourned at 8 p.m. on the day of the budget because everybody was so happy with it.
Dan Neville (Limerick West, Fine Gael)
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The Deputy has been speaking for two minutes and still has not mentioned Tallaght.
Charlie O'Connor (Dublin South West, Fianna Fail)
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The changes include an increase of â¬230 in employee PAYE tax credit to â¬1,270 per annum. In 2005, workers on the average industrial wage will earn â¬11,300 more and pay â¬200 less tax than in 1997. The minimum wage was removed from the tax net. A worker on the minimum wage will be far better off this year than previously. Exemption limits for those aged over 65 years increased to â¬16,500 for single and married persons. The health levy threshold increased from â¬356 per week to â¬400 per week. The Fianna Fáil-led Administration has staked its reputation on making such changes and I am glad we are making significant progress in that regard.
Tax relief on rent paid by private tenants increased by 18%. Tax relief on third level fees also increased and the fees limit rose from â¬3,175 to â¬5,000. The list goes on.