Seanad debates

Wednesday, 21 March 2012

Question proposed: "That the Bill be now read a Second Time."

1:00 pm

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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I am grateful for the opportunity to set out the measures in this year's Finance Bill. When the Minister opened the Second Stage debate in the Dáil on 14 February, he noted that the Chamber was somewhat sparsely populated. As he remarked to Deputy Michael McGrath at the time, this must be a sign that the crisis is over with almost no one present to hear the beginning of the debate. The idea that the passage of the Finance Bill through the Oireachtas should not attract attention beyond the average is to be welcomed. This is important and complex legislation but it should be considered as just the routine annual implementation of budget and associated measures; it should not be associated with an air of high drama or crisis.

Photo of Thomas ByrneThomas Byrne (Fianna Fail)
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What did Fine Gael Members do last year?

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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Economic life in this country is slowly beginning to return to normal. It will take time and there is a long way to go but the process has begun. Many members of the Cabinet have just returned from representing us at St. Patrick's Day celebrations in various parts of the world. They all brought with them the important message that Ireland is open for business. It is expected that the Central Statistics Office, CSO, figures to be released later this week will show that the economy has returned to full year growth. The figures currently available show that GDP increased by an average of 0.7% in the first three quarters of 2011. This is despite the considerable uncertainty that existed in the global economy, particularly in the euro area, last year. In this regard, the Minister is confident the concerted policy action agreed at European level will help stabilise and restore confidence in the euro area as we go through this year.

It has been well documented that our economic recovery is being export-led. Exports of goods and services are well in excess of pre-crisis levels. This shows that the improvement in competitiveness, which has been evident in recent years, is standing to us. This demonstrates the inherent flexibility of the economy. Prices and costs in Ireland have fallen dramatically and further improvements are in the pipeline. The strong export performance also means that our balance of payments with the rest of the world moved into surplus in 2010 for the first time in more than a decade and is expected to remain in surplus over the coming years. This is encouraging and means that the nation as a whole is paying its way. Obviously, as a small open economy whose recovery is being driven by exports, we will be affected by any weakness in the global economy. However, the composition of our exports and competitiveness improvements will provide support. Figures released by the CSO last week showed that the trade surplus in 2011, at €44.7 billion, was at a record high. Moreover, I emphasise that the general consensus amongst forecasters, both institutional and private, is that Ireland will record positive GDP growth again in 2012.

The labour market has borne the brunt of the adjustment in the economy with unemployment at more than 14%. Even though it is expected to reduce a little this year, it is clear that structural unemployment, a legacy of the construction boom, will remain a problem for some time to come. To combat this, the Government has prioritised job creation and retention, introducing a number of measures, which include the jobs initiative, the action plan on jobs and the pathways to work scheme. We have also successfully negotiated with the troika that some of the receipts from the sale of State assets will be directed towards job creation. While unemployment remains unacceptably high, signs of stabilisation are becoming evident. Employment figures showed the first quarterly increase in four years in Q4 2011.

There are many uncertainties and considerable risks. Obviously, the weakness of the euro area is a major factor. However, recent economic data – domestically and internationally – have not been as poor as was first assumed. For example, high frequency survey data have shown strong levels of global economic activity in both January and February, while in Germany, the ZEW indicator of economic sentiment has increased for the fourth consecutive month and is at its highest level since June 2010. At home, goods exports rose by 10% year-on-year in January, while consumer confidence levels have also shown improvement.

As the Minister said on Second Stage in the Lower House, the Bill contains a number of measures designed to support investment, stimulate research and, ultimately, create jobs. It must be viewed as one element of a wider strategy to support economic activity. We have limited resources and we must take these and apply them to areas with the best employment potential and returns.

I draw the attention of the House to a number of the key measures to which the Bill will give legal effect, most of which were announced in the budget. We have introduced the special assignee relief programme or SARP. This incentive is about reducing the costs to businesses of attracting key individuals from abroad to work in the Irish-based operations of their employer. The foreign earnings deduction for employees temporarily assigned from Ireland as part of their employment to Brazil, Russia, India, China and South Africa is designed to incentivise employees to undertake marketing trips to the countries involved, with a view to increasing Irish exports to the large populations of those countries.

The Bill includes a number of significant enhancements to the research and development tax credit scheme, as we need to encourage the productive, high value-added sectors of our economy to work our way out of the current downturn. It introduces a package of measures to support the financial services industry. This welcome industry employs more than 30,000 people and contributes more than €1 billion in tax to the Exchequer. The industry represents a bright spot in terms of recent employment growth in the economy with the funds industry alone creating more than 1,200 net new jobs in 2011.

Turning to property reliefs, the legislation imposes limits on the use of legacy property reliefs. These are in line with the programme for Government commitment to restrict property tax reliefs and other tax shelters that benefit high income earners. As regards mortgage interest relief, the Bill gives effect to the commitment in the programme for Government to increase the rate of mortgage interest relief to 30% for first-time buyers who took out their first mortgage in the period 2004 to 2008.

All these measures were explained in detail in the Minister's Second Stage speech in the Dáil. I would like to refer to other important measures not previously highlighted. Perhaps of particular interest to Senators, during the debate of Finance (No. 3) Act 2011 in this House, on foot of recommendations by Senator Zappone, the Minister undertook to have his officials re-examine the position on tax relief for maintenance payment arrangements where civil partners live separately. As a result of that examination, he decided to make two changes to the taxing provisions in this area. The Bill provides that in cases where differences arise between civil partners and a legally binding agreement between the parties is drawn up, for example, a trust or covenant agreement or any other act giving rise to a legally enforceable obligation, this agreement will be recognised under new tax law. The Bill also places civil partnerships on the same footing as married relationships where it is accepted that following the break-up of a relationship, often for economic reasons, persons may continue to live under the same roof.

The Bill gives effect to the Minister's budget announcement to increase the exemption threshold for the universal social charge from €4,004 to €10,036 for the tax year 2012 and subsequent years. It also introduces an enhanced scheme of stock relief for registered farm partnerships, which is part of a range of measures relating to farming, which reflect the Government's commitment to supporting and facilitating growth and expansion in the key agri-food economic sector.

I will now go through the Bill but will not cover each individual measure or section. This is one of the largest Finance Bills in recent years, running to 141 sections, six Schedules and 324 pages. It is the output of a major exercise, an effort not confined solely to officials or legislators. Measures are not simply devised in Merrion Street but represent the product of much discussion and dialogue across all Departments and with industries, including a broad spectrum of representative organisations, including the Institute of Chartered Accountants and individual citizens.

Part 1 deals with the income levy, universal social charge and income, corporation and capital gains taxes. Section 2 deals with the universal social charge, about which I have already spoken. The section also includes technical amendments on the application of the universal social charge. It should be noted that as a result of this measure more than 300,000 people will be removed from the USC net. These are, broadly speaking, people engaged in temporary and seasonal employment and people in receipt of low wages. A key group of people, in terms of the workforce and the amounts of money they are earning, will directly benefit of this change, as per the commitment of both parties in the programme for Government.

Section 2 introduces an additional amount of USC to be paid by investors in Section 23 and accelerated capital allowance schemes who have gross incomes of more than €100,000. This property relief surcharge, which is effective from 1 January 2012, will apply at a rate of 5% on the amount of income sheltered by such relief in a given year. In addition, section 17 provides that investors in accelerated capital allowance schemes will no longer be able to use any capital allowance beyond the tax life of the particular scheme, where that tax life ends on 1 January 2015.

Section 4 provides for a number of changes to income tax and USC as they apply to shared based remuneration. Section 6, with section 105, provides for changes to the interim tax based health insurance scheme. Section 6 makes changes to the age related income tax credit for 2012. The credit will be in five year bands for individuals aged between 60 and 84 years with a final band for individuals aged over 85 years. Section 7 gives effect to the budget day announcement that the tax exemption for the first 36 days of illness benefit and occupational injury benefit will be removed. For example, in some circumstances an employee who is absent from work owing to illness and continues to be paid by his or her employer is often better off on sick leave than when working. This change seeks to avoid such a situation.

Sections 8 and 9, together with section 27, provide for the changes to the research and development, R&D, tax credit scheme and mortgage interest relief, both of which I have already referred to, and certain other changes. Section 10 provides that those signing for PRSI credits can now qualify for the Revenue job assist scheme. Section 11 increases the amount of fees disregarded in respect of claims for tax relief on third level fees. The disregard for claims in respect of students who are in full time education has been increased from €2,000 to €2,250. Where all of the fees paid relate to part time education, the disregard is increased from €1,000 to €1,125.

Sections 12, 13 and 14 relate to the introduction of the special assignee relief programme and the foreign earnings deductions, which I mentioned earlier. Section 15 was inserted on Committee Stage of the Bill in the Dáil. It introduces a number of changes to the provisions relating to the operation of the PAYE system. These changes are largely technical and regulatory in nature. Section 16 addresses anomalies created by undesired interactions between the high earners restriction and the claw-back provisions under the section 23-type reliefs, as well as the balancing charge-allowance provisions under the property based accelerated capital allowance schemes. Provision is also made to remove the proposals relating to Section 23-type reliefs provided for in section 24 of the Finance Act 2011, which were subject to a commencement order.

Section 18 gives effect to a number of changes in the broad pension tax area as announced in the budget. The Bill provides for the increase from 5% to 6% in the annual imputed distribution which applies to the value of assets in the approved retirement funds, ARFs where such funds have assets valued in excess of €2 million. The imputed distribution arrangements are also being extended to vested PRSAs on the same basis. Section 18 also includes provisions to mitigate the harsher impacts at retirement for certain individuals resulting from the significant reduction to €2.3 million in the annual allowable pension fund at retirement for tax purposes.

Section 20 makes a number of amendments to the tax treatment of farmers. These relate to carbon tax computation, young trained farmers courses and enhanced stock relief in certain circumstances. Section 24 gives effect to amendments to the relief for investment in films. These changes are aimed at encouraging compliance by qualifying companies with the reporting requirements of the scheme. Section 28 increases the tax rates for life assurance policies and investment funds by 3%. The increased rates apply to payments and deemed payments on or after 1 January 2012. The section also deals with anomalies in the taxation of such income in the hands of companies.

Section 29 exempts pension funds from life assurance exit tax. This is in keeping with the current exemption from investment fund exit tax and overall exemption for pension funds from income tax and capital gains tax. Section 30 aligns the rate of exit tax on collective investment undertakings with the rate applying to entities which are subject to gross roll-up regime at 30%. Section 31 amends the equivalent measures regime in relation to the exit tax for investment funds.

Sections 33, 34 and 35 will accommodate cross-Border mergers of investment funds and new master feeder structures envisaged under the recently implemented UCITS directive. Section 36 gives effect to the increase in the standard deposit interest retention tax, DIRT, rate by 3% to 30%. The rate for certain longer-term saving products will also be increased by 3% to 33%.

Section 41 amends section 113 of the Taxes Consolidation Act in three ways. First, it extends the range of carbon offsets which a section 110 company can acquire to include forest carbon credits. Second, it amends the definition of a qualifying company to acquire notification to Revenue within a specific timeframe. Third, it ensures that the Finance Act 2011 amendments do not apply to a company operating in a State through a branch or agency.

Section 47 introduces a new section 452A of Taxes Consolidation Act to amend the interest deductibility rules to facilitate cash pooling businesses in the corporate treasury sector. Section 45 extends the scheme which provides relief from corporation tax on the trading income and certain gains of new start-up companies in the first 3 years of trading so as to include start-up companies which commence a new trading year in 2012, 2013 or 2014.

Section 47 extends the current group relief rules in section 411 of the Taxes Consolidation Act so that losses can be transferred between two Irish resident companies where those companies are part of a 75% group involving companies which are either resident in a jurisdiction with which Ireland has a treaty or quoted on a recognised stock exchange.

Section 51 amends Irish tax legislation to reflect recent changes in company law. Section 52 extends the existing unilateral credit relief, which currently applies to royalty payments, to include equipment lease rental payments. This measure will be of particular benefit to the aircraft leasing industry.

Section 53 provides for the taxation at 12.5% instead of 25% in the hands of an Irish resident company of foreign-sourced dividends paid out of the trading profits of privately held companies in countries with which Ireland does not have a tax treaty but which have joined the OECD Convention on Mutual Administrative Assistance in Tax Matters.

Section 55 provides for the capital gains tax, CGT, rate increase from 25% to 30% as announced on budget day. Sections 56 to 58, inclusive, and 66 contain various anti-avoidance and Revenue protection measures. Sections 59 and 60 modify CGT retirement relief to encourage timely transfers of farms and businesses.

Sections 61 and 63 of the Bill provide for CGT exemptions for State bodies, namely, Teagasc, local government corporate service bodies, the Grangegorman Development Agency, and disposals by the Dublin Institute of Technology to the Grangegorman Development Agency. Section 62 provides that compensation for giving up the right to cut turf in special areas of conservation will be exempt from CGT.

Section 64 gives effect to the property incentive announced in the budget, under which property purchased up to the end of 2013 and retained for at least seven years will be relieved from capital gains tax on the part of the gain attributable to the initial seven year holding period.

Section 65 was inserted on Committee Stage in the Dáil and is intended to facilitate the development of Ireland's holding company regime by providing that gains on foreign currency by holding companies will not be treated as capital gains but as investment income. Section 67 was also inserted on Committee Stage in the Dáil and provides that where a sporting body makes a gain on a disposal any portion of the gain donated to a charity will be exempt from CGT.

Part 2 of the Bill deals with excise. Sections 68, 78, 81 and 82 give effect to the increases from €15 to €20 per tonne in the carbon tax announced in the budget.

Section 69 gives effect to the increases in tobacco products tax announced in the budget. In addition, the opportunity is being taken to make changes to the structure of the excise on tobacco by increasing the specific element of the excise in line with the greater scope offered by the relevant EU directive. A minimum level of excise on tobacco is also being introduced, which will protect the Exchequer in the event of any downward pressure on prices. This is the approach that has been adopted by the vast majority of member states.

Sections 70 to 77 were inserted on Committee Stage in the Dáil and deal mainly with changes required to existing excise law, many of which are editing and re-structuring changes in preparation for an excise consolidation Bill. Section 78 introduces measures to support enforcement work by facilitating monitoring and supervision of the oils supply chain.

Section 83 contains provisions for the introduction of an export refund scheme, whereby vehicles exported from the State will be able to claim a refund of the residual VRT in a vehicle. The section also includes a number of definitional and other changes consequent on the introduction of the scheme, as well as a revised definition of "new".

Part 3 of the Bill deals with VAT. Section 85 provides for the strengthening of VAT ministerial orders following advice from the Office of the Attorney General. In conjunction with sections 91 to 93, inclusive, it also provides a mechanism to recover VAT and impose interest and penalties where VAT has been improperly claimed and refunded under any VAT refund order. This is an anti-avoidance measure.

Section 87 gives effect to the budget increase in the standard rate of VAT from 21% to 23% from 1 January 2012. Section 94 revises the definition of bread for the purposes of the application of the zero rate of VAT, to reflect the breads currently available on the market, taking account of the development of bread for health, ethnic and other reasons.

Section 95 reduces the VAT rate applicable to district heating to 13.5% with effect from 1 March 2012. It also reduces the rate of VAT on admissions to open farms and built and natural heritage, such as waterfalls, to the 9% reduced rate consistent with the application of this rate to the tourist industry last year.

Part 4 of the Bill deals with stamp duties. Section 97 provides for the introduction of a single stamp duty rate of 2% on transfers of non-residential property, including commercial and industrial property and farm land. The section also provides for the abolition of consanguinity relief with effect from 1 January 2015.

Sections 98 to 104 relate to exemptions and reliefs from stamp duty. The provisions include an exemption for the Grangegorman Development Agency; relief from stamp duty for mergers of Irish public limited companies and for cross-Border company mergers; relief from stamp duty on ATM and debit cards to provide for a pilot scheme of basic payment accounts to encourage and facilitate participation in the mainstream financial sector among members of the public who are, or consider themselves to be, excluded from it; and a number of other technical changes. In particular,,, section 100 contains nine separate technical stamp duty amendments which extend the range and scope of stamp duty exemptions applying to certain financial transactions and confirm the stamp duty treatment of options over shares.

Section 105 gives effect to the new rates of the health insurance levy for 2012 of €285 for individuals aged 18 years or over and €95 for individuals aged under 18 years.

Part 5 of the Bill deals with capital acquisitions tax, CAT. Section 109 provides for the CAT changes announced in the budget, namely, the increase in the rate from 25% to 30% and the reduction in the Group A tax-free threshold for gifts and inheritances between parents and children to €250,000. The section also provides for the breaking of the link between the tax-free thresholds and the consumer price index.

Sections 111, 112 and 114 contain various anti-avoidance provisions. Section 116 moves the pay and file date for CAT from 30 September to 31 October, in response to concerns about the payment of CAT for individuals receiving an inheritance close to the filing date.

Part 6 deals with miscellaneous provisions. Section 119 was inserted on Committee Stage in the Dáil and addresses some issues pertaining to Ireland's international obligations on the exchange of information with tax authorities in other countries. Section 122 will require merchant acquirers and third party payment processors to make regular automatic returns to Revenue of all amounts credited to traders. This is in response to emerging evidence that some businesses may be under-reporting card payment transactions.

Section 126 will enable Revenue to require a taxpayer who has had a significant previous tax default to provide Revenue with a bond covering fiduciary taxes. This measure is specifically aimed at delinquent businesses that have a track record of non-compliance and of walking away from tax debts. Section 127 will provide Revenue with powers similar to those contained in the Criminal Justice Act 2011 regarding the provision of documents or information and in relation to privileged legal material. These powers will only be available when Revenue is investigating serious tax offences.

Sections 128 and 130 were introduced on Committee Stage in the Dáil. Section 128 changes the legislation governing the time limits that apply to the repayment of taxes and the related question of when a repayment of tax may be set off against other tax liabilities. Section 130 updates the part of the Taxes Consolidation Act 1997 that deals with abusive tax avoidance schemes. The amendment removes an element of doubt over Revenue's entitlement to make or amend the necessary assessment beyond the usual four-year period in order to collect the tax after a transaction has been judged to be abusive.

Section 136 provides that the Irish citizenship condition for the payment of the domicile levy will be abolished for tax years from 2012 onwards. This means it will not be possible for an individual who would otherwise be subject to the levy to avoid it by renouncing Irish citizenship.

Section 137 sets out additions to the list of double taxation agreements and tax information exchange agreements between Ireland and other jurisdictions. Following the enactment of this Bill, Ireland will have concluded double taxation agreements with 65 countries and tax information exchange agreements with 19 countries. Negotiations to conclude a number of other agreements are ongoing.

I hope the Seanad has found this explanation of the measures in the Finance Bill useful. I reiterate that we all aware that our country is slowly emerging from the most severe downturn in the history of the State. The Finance Bill 2012 is another important step on the road to economic and fiscal recovery. I commend the Bill to the House.

Photo of Darragh O'BrienDarragh O'Brien (Fianna Fail)
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I welcome the Minister of State. There is a lot to be said on Second Stage. We will have an opportunity to go through the sections of the Bill in more detail on Committee Stage tomorrow. The Finance Bill 2012 will bring into effect many of the measures that were voted on in the budget. The ESRI has confirmed that it was probably the most unfair budget that was ever passed. When the Minister of State replies at the end of this debate, perhaps he will set out the Government's response to the ESRI report, which states clearly that the poorest 40% of households will suffer the highest fall in income as a result of the measures in the budget.

There has been a great deal of discussion about the growth forecast on which the budget was predicated. A growth rate of 1.6% was forecast late last year. I will give the Government credit by mentioning that we appreciate it is operating in a volatile international environment and a difficult economic environment. I wish to focus on the budget measures and the targets that require to be hit, for example, in relation to our current budget deficit. Is the Government still working on the basis of a projected growth rate of 1.3% for this year? The median growth rate that is being forecast by independent groups and domestic and international interests is 0.5%. That would leave us way off the mark. I would like the Minister of State to give the House some clarification in that regard during today's discussion on the Finance Bill 2012. What is the Government actually setting its measures against? Growth is important. Obviously, it will make everyone's job a lot easier if we can see growth coming into the economy. There is a difference between the 1.3% growth rate that the Government is basing its figures on and the 0.5% rate that is being forecast by independent outside agencies.

Where does the Minister of State think growth will come from? He has mentioned a couple of items. The Bill gives formal approval and legal basis to the increase in VAT. The Government has decided to increase the VAT rate by 2% from 2012, rather than taking the staggered approach that was recommended under the agreement with the troika. The VAT take was down in the last quarter of 2011 and the first quarter of 2012. Does the Minister of State envisage that our VAT situation will improve or disimprove? His colleague, the Minister, Deputy Varadkar, has failed to give a commitment that the reduced rates of PRSI for the hospitality sector will apply after December of this year. The Minister was probably right to question whether 6,000 jobs have been created in that sector. I would be interested to hear the Minister of State's view on that.

I would like to speak about a couple of the specific sections. I gave a guarded welcome to the proposal to increase the level of mortgage interest relief provided to those who purchased property for the first time between 2004 and 2008. I would like to hear an update on that in the context of the Keane report. I know the Minister of State gave this House an update on it in good faith prior to the budget. He suggested that the Government would produce a mortgage arrears implementation strategy in advance of the budget. He referred to that as a "bold statement" to make in this House. Although it was a bold statement, it has not come to fruition. What is the Government's position on the publication of such a strategy? The Minister for Finance gave a commitment in the other House that it would be published before the end of December. When the Taoiseach met the former US President, Bill Clinton, before Christmas, he said it would be published within a matter of weeks. He said on 8 October 2011 that the Government would make a decision in the next couple of weeks.

Leaving politics aside, all of us will agree that the ongoing mortgage crisis is getting worse as people find themselves in growing arrears. Some people say that a minimum of 8% and up to 10% of residential mortgages on principal private residences are in some level of distress. The personal insolvency Bill will go some way towards alleviating those difficulties. It will not go the full way. The Minister of State has mentioned previously that the banks have been given money to write down debt. It is a matter for them to decide how best to deal with it. The measure the Government has introduced to increase mortgage interest relief will apply to everyone, regardless of income or mortgage situation. Everyone will benefit from that. The Keane report suggested that it would be better to increase the mortgage interest supplement payments that are made to people who are in difficulty. When does the Government propose to publish the mortgage arrears implementation strategy? Can the Minister of State give me a date for that? This cannot continue further. Members on all sides of the House have been raising this issue on a weekly basis in a non-partisan way. I notice that Senator Gilroy is laughing. I might have been a bit partisan. All of share a genuine concern in this regard. We really need to move on and do something in this regard. That is covered in sections 8 and 9 of the Bill.

I would like to ask a couple of questions about section 64 of the Bill, which relates to other property reliefs. An overlooked aspect of the budget was the introduction by the Government of many new property reliefs. In previous times, that would have been seen as a way of trying to fuel the property market. I put it to the Minister of State that some of the exemptions that have been proposed in section 64 are designed to benefit speculators. For example, those who retain a property for seven years or more will be exempt from capital gains tax. Most of those properties would be investment properties. Similarly, the reduction in stamp duty on commercial property will assist speculators. The Minister, Deputy Noonan, made broad-ranging changes to future property reliefs in the budget. We all hope and pray that things will improve in the property market. I wonder whether seven years after this Bill has been passed, we will compare these reliefs to those that were given for the valid reason of facilitating further hotel expansion. They were badly needed at a certain time but should have been stopped within a given period.

Photo of Fidelma Healy EamesFidelma Healy Eames (Fine Gael)
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That was the fault of the Senator's party.

Photo of Darragh O'BrienDarragh O'Brien (Fianna Fail)
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Would the Senator listen? I am not even-----

Photo of Fidelma Healy EamesFidelma Healy Eames (Fine Gael)
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It is true.

Photo of Darragh O'BrienDarragh O'Brien (Fianna Fail)
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Would the Senator stop? Come on, for God's sake. Listen to what I am saying. I assure Senator Healy Eames that I accept those reliefs were allowed to last far too long.

Photo of Darragh O'BrienDarragh O'Brien (Fianna Fail)
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I said that in the first instance. How will we monitor the reliefs being provided for in section 64 of this Bill? At some stage or another the position will improve. I am concerned that we have given a speculator's charter on property in section 64. The only people who are buying property are those with cash and investors. I have no doubt we will revert to that issue tomorrow when we are not as constrained timewise.

Section 105 provides for new rates for the health insurance levy. There has been a 40% increase in the levy on private health insurance. Is the Government concerned that more than 140,000 people have given up private health insurance as the cost has become prohibitive and that the public health system cannot handle that. I am particularly interested in two items, the Minister's growth forecast and mortgage arrears. I will deal with other matters in greater detail on Committee Stage and provide more clarification for Senator Fidelma Healy Eames tomorrow.

Photo of Tom ShehanTom Shehan (Fine Gael)
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I welcome the Minister of State to the House. It is easier to ask him to come to the House than any other Minister because he spent some time here and appreciates the work we do.

To put things in perspective, as stated, last year €13.4 billion was spent on health while the income tax take was €13.397 billion. There are measures in the Finance Bill that are tough on ordinary people. It is not with any great pleasure that the Government has to introduce these measures. However, one must look at the simple facts of the budgetary process whereby every cent and euro taken in through income tax was spent on the health service. My view is that while there are people who knock the health service, it is not as bad as it is made out to be. As a budget must be balanced, all one can expect from any government is that it does it in a fair and considered fashion.

Photo of Thomas ByrneThomas Byrne (Fianna Fail)
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In light of the Minister of State's comments at the start of his contribution and the fact that the Bill is being rammed through in two days I call a quorum.

Notice taken that 12 Members were not present; House counted and 12 Members being present,

Photo of Tom ShehanTom Shehan (Fine Gael)
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I ask my colleague, Senator Byrne, to please refrain from interrupting when one is in mid-flow.

Photo of Thomas ByrneThomas Byrne (Fianna Fail)
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When we are on Committee Stage and a reasonable distance from centre stage, as proposed in the programme for Government and in its manifesto, we will cease to call quorums.

Photo of Tom ShehanTom Shehan (Fine Gael)
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There is not a great deal of interest from the Senator's side of the House.

Photo of Thomas ByrneThomas Byrne (Fianna Fail)
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It is up to the Government side to provide a quorum.

Photo of Tom ShehanTom Shehan (Fine Gael)
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There are positive aspects to the budget and the Finance Bill, particularly in regard to the universal social charge where the exemption threshold increased from €4,000 to €10,000. That exemption was most helpful to those on the lower pay scales.

I compliment the members of Cabinet on the work they did last week on behalf of the country in selling Ireland abroad and conveying the message that we are open for business. In one week, two or three weeks ago, there were 1,000 jobs announcements for Drogheda and 500 for Kinsale. That was a week in which one could be proud to be a member of the Government. What those jobs will mean to Haggardstown and Kinsale, west Cork, and the whole area is never considered but it was a proud day. A priority of the Government is job creation, which is what will get us out of the financial burden. Getting people back to work and paying their taxes supports investment and stimulates research. That is a concept that is easy to grasp. All Members should support that initiative.

Sections 33 to 35, inclusive, deal with the important initiative of cross-Border mergers. Section 20 which deals with farm taxation will enable the agricultural community to reach and possibly exceed the goals set by Harvest 2020. Exports in the agricultural sector as a whole are proceeding well. It is right and correct that the Government would support the initiative to reach the commitments outlined for Harvest 2020.

Section 52 deals with royalty payments. I am disappointed - I may be wrongly informed - there is no mention of natural resources in the section. I wish a royalty payment would come back to the Government from recent and future fines. Section 67 deals with tax relief on bodies that may donate to charity. Will it lead to a Ladbroke's All-Ireland football final or a Paddy Power hurling final? It would not matter to Kerry because we would win the all-Ireland no matter who sponsored it.

Section 85 deals with an anti-avoidance tax measure. It is quite worrying. Of late business people have told me that banks are not giving credit to businesses and are closing them. On the other hand, Revenue will close as many businesses, if not more, than the banks because it has become heavy-handed. I will not ask the Minister of State to direct Revenue but I plead with him to ask Revenue in as nice a way as possible to do its best to thrash out deals with people in business rather than being heavy-handed because people are under pressure cannot get finance to pay off Revenue direct. I ask the Minister of State to also ask Revenue to be more lenient and to draw up agreements with businesses thus affording them an opportunity to pay. Every business wants to pay and are willing to do so but if the rug is pulled from under them they will not have an opportunity to pay and turn around their business.

My last question is on section 126 which follows my previous point. It will enable Revenue to require a taxpayer who has had a significant previous tax default to provide Revenue with a bond covering fiduciary taxes. That will be another hard pill for people struggling in business to swallow when they see a fella down the road that has closed three or four businesses yet sets up the following week, continues to do business for a year and a half and does a runner again. Section 85 is recorded as an anti-avoidance measure of VAT but that Revenue should, as far as possible, reach an agreement with the genuine people that I talked about. Many of whom run family businesses that have existed for generations. I ask Revenue to do the best it can to reach an agreement with them on repayments.

Photo of Michael MullinsMichael Mullins (Fine Gael)
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I call Senator Zappone and she has eight minutes.

3:00 pm

Photo of Katherine ZapponeKatherine Zappone (Independent)
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I welcome the Minister of State and I especially welcome his opening comments on the expectation that the economy will return to full year growth. I also acknowledge Senator Darragh O'Brien's comment on the ESRI's troubling analysis. Is growth dependent on increasing the inequality gap? The Government needs to pay attention to that.

This afternoon I will focus my analysis of the Bill on the wider taxation code and the primary issue, the achievement of equivalence of treatment for civil partners with that of spouses in a civil marriage in the taxation code. Can the Minister of State confirm that the Government is committed to achieving the equivalence of treatment? If so, I argue that much more work is required on our taxation code for it to happen and for the Government to demonstrate its commitment.

I will start with the Bill. I welcome a number of its provisions that seek to achieve the parity of treatment for civil partners with that of spouses within a civil marriage. The Minister of State referred to a couple of those in his speech and I am grateful for that. I am particularly grateful for his willingness to re-examine the tax relief for maintenance payment arrangements where civil partners live separately. As he indicated, there have been a couple of changes in the Bill and that is terrific. Sections 134(1)(g) and (h) have taken on board those changes and there has been a movement towards parity on those issues and I appreciate that.

I acknowledge that there have been other changes in the Bill and the State will now recognise the children of civil partners and the non-biological children of civil partners in some taxation matters. For example, section 134(1)(a) and (e) have included children of a civil partner of an individual and I thank the Minister of State for these changes.

I also wish to note that the Bill does not include tax relief on maintenance payments for children of civil partners. As everyone will know, when a marriage breaks down the payment of maintenance for children, from one spouse to the other, attracts tax relief for the payer. Last July I recommended that tax relief be included on maintenance payments for children of civil partners when we debated the finance (No. 3) Bill 2011. I was told then that relief could not be given because under the civil partnership Act 2010 a maintenance order cannot be made against a civil partner who is not the biological parent for the support of a dependant child. I was also told that tax law follows the general law and that is why the change could not be made. That dictum makes perfectly logical sense but I do not understand three things. Why are some sections of the taxation code changed to recognise the children while others are not? What is the rationale for not placing an obligation on a civil partner to make maintenance payments to support a dependant child? Are we thinking about the children here? Perhaps the Minister of State and the Minister for Finance, Deputy Noonan, might consider my first question. I also ask the Minister for Justice and Equality, Deputy Shatter, to consider my second question.

I will return to the primary issue and that is the achievement of equivalence of treatment for civil partners with that of spouses in a civil marriage in taxation matters. The Bill offers some changes but one can argue that there has been a patchwork quilt approach to changing our tax laws to achieve it. I can tell the Minister of State that a lot of patches are missing. It would have been considerably less complex if the State had taken the decision to open the institution of civil marriage to same-sex couples rather than establish the second class institution of partnership. We have civil partnership but there is a lot more work to be done to achieve equivalence in the tax laws and I shall mention a couple of examples. First, the definition of relative and family are used throughout the tax code. These words take their ordinary meaning except when they are supplemented for the purposes of the tax code. The ordinary meaning of these words usually turns on blood relationship or marriage. Therefore, relatives and family of civil partners require an express reference in the tax code and a number of sections fail to do it or do it adequately. For example, consanguinity relief has been extended to include transfers made to an individual's civil partner, the civil partner of a parent or the civil partner of a lineal descendent but fails to include all of the equivalent degrees of relationship that apply in marriage. It does not refer to the civil partner of a grandparent, the brother or a sister of a civil partner of a parent.

The current Bill has similar omissions and I will give an example. I referred to section 134(1)(d) that seeks to include civil partners in the principal private residence relief but only includes them as parents of the individual and fails to include parents or relatives of a civil partner of the individual when parents or relatives of a spouse are included. In another example, in section 134(1) the payment of an annuity to a widow or widower is extended to a surviving civil partner but a tax credit available to a widowed parent has not been extended to a surviving civilly partnered parent. Gentlemen and my fellow women colleagues can see that it gets a bit complex and technical.

There were recommendations accepted and noted in the Minister of State's speech such as tax relief on civil partner maintenance payments. As they were accepted I would have thought that other sections of the Taxes Consolidation Act might have been amended in the Bill too. Other sections of the Act, that relate to tax relief on dissolution, are sections on capital gains tax for the transfer of assets on dissolution, capital acquisitions tax and stamp duty on transfers and the deferral of tax on share options.

Prior to the introduction of civil unions in the UK in 2004, the Labour Government there conducted an audit of every Bill to ensure civil partners were included where necessary. If parity of treatment is the stated goal of this Government, then I call for a similar exercise to be conducted here. I have a legal opinion from a tax expert which I am happy to make available to the Department to assist in this process. I have highlighted several gaps in the legislation on the advice I have received. However, will civil partnership ever be fully equivalent to civil marriage in the tax code if omission after omission persists in successive Finance Bills? Will the Minister look at my concerns from the Government's perspective and consider amending the Bill on the basis of a comprehensive audit?

Photo of Aideen HaydenAideen Hayden (Labour)
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I welcome the Minister of the State, Deputy Brian Hayes, to the House.

Ireland has experienced the most severe recession in the history of the State. Some of this is as a result of international difficulties but some of our difficulties are the result of domestic mistakes made in the past. I am not going to dwell on what other Governments did or did not do or whether the neo-liberal economic model has failed us, although I note our Sinn Féin colleagues are not here. Rather I am going to talk about some aspects of the Bill which will improve Ireland's economic future and its measures designed to provide relief for some of the worst hit in our society. I will also make several suggestions for changes.

The most significant change in this budget is the removal of 330,000 workers from the payment of the universal social charge. Most of these will be in part-time and low-paid employment. It is an important measure not just because it benefits many who most need this relief but it makes the return to part time work more economically beneficial and helps economic recovery.

The Government has also honoured its promise to ensure when it comes to the base rate of tax that no one is worse off than on 31 November 2011. The VAT rate has increased but not on the price of basic food, domestic fuels, children's clothes and shoes while the Government has protected basic welfare payment rates.

The Minister outlined some of the positive indicators of an improved outlook for the economy and the restored confidence in us as a country in which to do business. However, the international uncertainty over the future of the euro and the sluggishness of the international economy is a factor which is holding this country back. The resolution of the euro crisis is critical for Ireland which is a small, open and export-driven economy and stands to gain most from a return to some form of normality. This Finance Bill, therefore, must not only deal with the current crisis and challenges but must also place us in a position to capture the recovery which will inevitably come. Whether the measures in this Finance Bill achieve this is the ultimate measure of its success or otherwise.

There are several provisions in this Bill which will help with Ireland's economic recovery. The special assignee relief programme, SARP, has been broadly welcomed in industry. It is essential we attract key individuals in large organisations to locate in the Irish branch of their parent operation. Significant international research shows that as much competition happens within large multinational organisations as happens between them. Branches compete with each other for functions, particularly the location of research and development. Making it easier and more attractive to locate key staff in Ireland is a critical factor in helping foreign direct investment to flow in Ireland's direction.

I note the Minister has put in place measures to ensure Irish nationals who previously emigrated are not excluded from this scheme and he will be keeping it under review. It is also important we review similar schemes such as those in the Netherlands and ensure we are at the races so to speak, although Cheltenham is not on this week.

I also welcome the foreign earnings deduction for employees assigned from Ireland as part of their employment to the BRIC countries. This measure will help Irish indigenous export-led companies to get a foothold in these significant emerging markets, many of which have not suffered from the international recession to the same extent as our traditional trading partners. The encouragement of indigenous export companies is critical to job creation particularly when the return on jobs created is six times what it is for a foreign company located here.

I also welcome the changes to the capital gains tax, CGT, and capital acquisitions tax, CAT, rates from 25% to 30% as a move in the right direction. I particularly welcome the change to the CGT rate. The low rate of CGT contributed significantly to the culture of easy money in this country during the Celtic tiger years and was a significant driver in the speculation on the property market which, as we know, drove up prices to almost ten times the average industrial wage. It is well known that well-placed individuals invested sums as low as €10,000 as booking fees on developments and turned over contracts as house prices rose, making returns as high as ten times their investment. These properties were ultimately bought by some of the people worst hit by the mortgage crisis in Ireland today. While I accept we must reward risk, particularly the type of risk that leads to job creation, we cannot tax a fair day's work at higher rates than we reward speculators. Taxing a man or a woman who works an extra day at a higher rate than what is charged on unearned income does not contribute to an enterprise culture.

I welcome the measures in the Bill to help those who purchased their homes between 2004 and 2008 by giving them greater mortgage interest tax relief. I would have preferred a more targeted measure and to have included those who had bought not just their first homes in this period. Many people upgraded from apartments to moderate family homes by necessity during these years and are indeed the worst hit.

Will the Minister give serious consideration to the position of those who are in rent-to-rent situation? This group include those who bought during the boom but for various reasons have been forced to move for employment reasons or because they bought small apartments initially and now require a family home. We now have the ludicrous situation where such a family pays tax on any rental income received that exceeds the allowable deductions, also pays the non-principal private residence charge, is no longer entitled to mortgage interest relief and, depending on their lending institution, loses the benefit of a tracker mortgage. Moreover, this family also pays rent but gets little or no relief on rent paid. I am confident the tax code never intended such a situation.

Will the Minister, as a matter of urgency, address this inequity? The matter could be resolved by changing the mortgage interest relief rules and the definition of principal private residence. Pressure should be brought to bear on those banks in State control to ensure the terms of mortgages on what are in reality principal homes cannot be open to change in situations such as I have outlined.

We all accept that banks should not be allowed to use any excuse possible to get borrowers off tracker mortgages. People trapped in rent-to-rent situations cannot move on until we deal with the wider mortgage crisis, a fact we must recognise. The Bill contains measures to stabilise the property market. It is now beginning to be accepted that the market has overcorrected. For all of those homeowners both in negative equity and arrears, a real line can never be drawn in the sand until the property market stabilises.

The reduction in stamp duty on commercial property transactions from 6% to 2% will stimulate demand for commercial property and, perhaps, the construction sector. The availability of good quality commercial property is important in the context of an expanding economy. The capital gains tax incentive available on purchases to 31 December 2013 will perhaps stimulate demand for investment property. The requirement to hold the property for seven years to benefit from the allowance will discourage the type of speculation which I referred to earlier. It is ironic that many of those who suggest measures to stabilise the market are preventing it from reaching its natural bottom are the same people who claimed, when it was spiralling out of control, that we should not interfere in it on the way up.

The real difficulty in generating demand in the housing market is the lack of available finance. Recent figures show that mortgage lending is down to 1971 figures. The Minister for Finance has taken action with the pillar banks but the fact remains that we may have to consider more innovative action in this area. We need new forms of lending institutions specifically geared to middle income earners and small businesses to bridge the very obvious gap in available finance. There is every reason to be concerned at current trends in which we have almost 100,000 households on the housing waiting lists, rents in urban areas beginning to rise again and the construction sector fallen to a level where we risk losing the capacity we require when we experience recovery. Let us hope history does not repeat itself.

I also want to see an urgent change to the VAT laws relating to charities and that carbon taxes will be ring-fenced. This country has a sad history of creating levies that last forever. I look forward to the wider debate on Committee and Report Stages.

Photo of Sean BarrettSean Barrett (Independent)
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I welcome the Minister of State and thank him for the material he sent me this morning in his role over the Office of Public Works, OPW, on how to appraise capital projects.

I agree with section 1's removal of people earning between €4,000 and €10,000 per annum from the scope of the universal social charge, USC, but most of sections 2 to 141, inclusive, are debatable. For instance, will section 64 restart the property problem? Section 52 benefits the aircraft leasing industry. Why was that judged to be particularly meritorious?

The problem is that our tax system grew. The Minister of State has brought us 324 pages. If we continue in this vein, there will be thousands of pages in the Government's lifetime. When the Minister for Public Expenditure and Reform, Deputy Howlin, was present, we made the point that these tax expenditures - interest groups negotiated tax deals for themselves with the Department of Finance - should have been appraised fully in the comprehensive public expenditure review. They are taking a considerable amount of money out of the Exchequer. People make the case that making movies or leasing aircraft will be meritorious and so on. They get a tax break while the rest of society suffers and the tax system becomes so full of holes that it is like a colander. We should ask the IMF to review our system. It is a major obstacle to the country's growth, given that it is full of fiscal privileges and loopholes. A large tax lawyer and tax accountant industry produces nothing and transfers money out of the Exchequer and into the pockets of clients. The system is highly inequitable because the average citizen cannot afford the services of these tax lawyers and accountants. It is a complete mess. We must reform it. As is stated on page 10 of the IMF agreement of April 2011, we will raise the tax burden by €10 billion by 2015. It would be a good idea to reform the tax system and remove the inequities, anomalies and so on.

What should a good tax system be like? When the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, was in the House last week, he referred to Adam Smith in terms of competition. According to Smith, a tax system should possess horizontal and vertical equity, neutrality and certainty and be evidence-based and administratively efficient. Large chunks of the Finance Bill infringe on all of these desiderata. There is a widespread belief among economists that a tax system should have low rates without deductions and waivers, should not distort resource allocation and should not involve large administrative burdens, for example, the many pages in the Bill before us. Let us try to simplify matters. This should be the last of the old-style Finance Bills.

We confer significant tax breaks on those who can afford tax lawyers and accountants. This is inequitable and cumbersome and distorts the economy. Deputy Broughan asked the then Minister for Finance, the late Brian Lenihan, about the fiscal privilege to the construction industry, which amounted to approximately €2 billion over two years. Do we not regret every penny that we invested in the construction industry through tax breaks when the money was needed in the Exchequer? Is research and development the new bubble? We do not know what the results of our investment therein will be.

It was reported today that the UK Government will introduce a general anti-avoidance rule, GAAR, in the tax code, as recommended in a recent report by Graham Aaronson, QC, to crack down on abusive tax avoidance schemes. One of last weekend's Sunday newspapers told of rock stars in a €1.2 billion tax dodge by putting properties in the UK into offshore companies.

Sections 122 to 130, inclusive, relate to compliance. We must crack down on this industry. Dr. Micheál Collins, a member of the income tax commission, writing in Professor John O'Hagan's book on the Irish economy, stated:

In 2010 a minimum effective tax rate of 30 per cent of income was set for earners with incomes of more than €250,000 in an attempt to minimise their use of tax breaks to reduce their tax bills.- a 30 per cent rate is equivalent to the tax level faced by a PAYE worker earning €55,000 ... While there is merit in the provision by government of certain tax breaks, the evidence for many is limited and in some cases it is clear that they lead to unnecessary and arbitrary market distortions.

I regret that the Bill contains more such breaks. The Tax Commission stated:

We recommend that for all future tax expenditures, and reforms of tax expenditures, there should be an ex ante evaluation process in advance of decisions to implement or extend any tax expenditure. As part of this process, the costs and benefits of the proposal should be assessed and the alternative of a direct expenditure approach should be considered.

If a proposal is so good, why does the Minister for X not put money from his or her budget into it? Why must it go to the Department of Finance to get a tax break when, in many cases, we do not know the cost?

According to another paper that Dr. Collins wrote, 28 tax expenditures relate to enterprise, but only in the case of 12 do we publish the cost. In the case of 20 of 28 expenditures, we do not know the number of beneficiaries. Twenty-eight tax expenditures relate to employment, but we have no costings for ten and no published numbers of beneficiaries for nine.

Our tax system must be taken apart during the Government's term of office. It is the fruit of lobbying. The accountancy profession is resisting being brought within the terms of the new anti-lobbying legislation. The system is the fruit of clientelism in politics, where people go up the back stairs at the Department of Finance to negotiate. We never quantify these expenditures, the result of which is a tax system in which average workers pay more than higher earners. This is a problem that we must address. A candidate in the US presidential election, Mr. Romney, is very rich and could not get into the average worker's tax rate even if he wanted to. We must tackle our tax shelters and fiscal privileges. They are significant. In Dr. Collins's estimate, 131 reliefs cost €11.5 billion in tax revenue forgone each year.

Each individual group will claim it is wonderful because, for example, it leases aircraft. After a group receives support in the Department of Finance, the burden falls elsewhere and we get into trouble in terms of special needs assistants, SNAs, carer's allowance, DEIS schools and so on. We must end this dreadful form of fiscal privilege, which is embodied in all of the sections of this legislation without any of the analysis that the Minister of State promotes. We should have put these tax expenditures and the way we organise our tax system firmly under IMF review.

The people who make films believe their movies are wonderful. The commission stated that they were not, given that they cost a great deal of money with little benefit. This separate Exchequer is damaging our country, but I will comment on that matter later. This should be the day when we say that never gain will we have such a Finance Bill. We want a system that is simple and equitable and does not have tax lawyers or accountants. The way in which rich people in Ireland do not pay taxes is not equitable.

Photo of Fidelma Healy EamesFidelma Healy Eames (Fine Gael)
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I welcome the Minister of State to the House. I have noted Senators' comments and will refer to them as I proceed. Given the point at which we are in our economic cycle and the state of our finances, I compliment the Government on a number of the Bill's elements, but we should consider other measures to ensure greater equity and fairness in society so that people can stay afloat.

I compliment the Government on its focus on budget cuts rather than job-destroying tax increases. The Finance Bill confirms that budget 2012 focused on spending measures, not tax. While there are spending cuts to services that every citizen will feel, at least people with incomes know that they will be able to take those incomes home. It was a difficult achievement. Similarly, the social welfare recipient was guaranteed that he or she would take home the same income. That the Bill does not contain further income tax impositions is welcome.

Senator Darragh O'Brien asked the Minister of State to comment on where the growth could be found in the Bill. I read it to identify the measures that will promote growth and capture the recovery. The first measures I would point to are those aimed at supporting small and medium enterprises. Key supports for this sector include foreign earning deductions to support companies which promote Irish exports to Brazil, Russia, India and China - the BRIC countries. If we do not export, we will be in trouble. We are a small open economy on the western fringe of Europe. We are totally reliant on alliances and trade. This is good news. The three year period of tax relief for start-up companies is being extended to 2014, which should help to boost the population of entrepreneurs in this country. This is a critical measure because SMEs are the backbone of this country. The amendment and commencement of the employment and investment incentive will help SMEs to raise investments over and above the limits that applied under the previous business expansion scheme. This will give companies an incentive to find capital.

Three new measures are aimed at boosting research and development activities. I was surprised to hear Senator Barrett ask for proof that research and development is going anywhere. When we look at some of our top technology companies -----

Photo of Mary WhiteMary White (Fianna Fail)
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And food companies.

Photo of Sean BarrettSean Barrett (Independent)
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Are they paying their taxes?

Photo of Fidelma Healy EamesFidelma Healy Eames (Fine Gael)
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That is a fair point.

Photo of Paul CoghlanPaul Coghlan (Fine Gael)
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Senator Healy Eames without interruption.

Photo of Fidelma Healy EamesFidelma Healy Eames (Fine Gael)
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Senator Barrett spoke about the aircraft leasing sector, which is very important to our trade links with China. Nine of the top ten aircraft leasing companies in the world have bases in Ireland, more than 3,000 aircraft valued at €83 billion are leased out of Dublin and the sector contributes €300 million in corporation tax annually and supports 2,000 jobs. It is worth a bit of an incentive.

I commend the Government on its seven key supports for farmers and the agrifood sector. It is great to see agriculture coming into its own as the new, sexy industry. The world needs food and Ireland can feed 36 million people. We need to ensure people are educated and up to date in that area and tax incentives are worthwhile in this regard.

Before I conclude, I draw attention to areas in which we need to make progress. The price of diesel is creating a burden on consumers and the transport sector. In regard to salary caps, it is pathetic to see Richie Boucher walk away with a package of more than €800,000. We should introduce legislation to prevent that from happening.

Finally, we should implement the split mortgages proposed in the Keane report. That measure alone offers the means to help people hold onto their homes. Nothing is more dignified than having a home. Why would we put these people on the street so that they become a burden on the State? Let us do something just. It is the one matter on which this Government will be judged and I want to be part of a Government that helped people to stay in their homes.

Photo of Thomas ByrneThomas Byrne (Fianna Fail)
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Senator Barrett noted that the Finance Bill 2012 comprises 324 pages. It will cost each household in this country €2.50 per page, or €800 per year. That has not been mentioned in the succession of praise for all the great things we are doing for job creation. Let us compare the cost of these measures to the €1.3 billion bill for Irish households. The special assignee relief programme is a tax break costing €5 million. The foreign earning deduction is worth €1.5 million. The renewable energy deduction is worth €1 million. New start-up companies will get corporation tax breaks worth €5 million. The research and development tax credit is worth €5 million, as is the stock relief. While I agree with Senator Barrett that many of these credits are probably unnecessary, even a supporter of them should question their value in the overall scheme of things if, as the Senator noted, they only serve to complicate the tax code.

I welcome the €52 million that families will be allowed in mortgage interest relief but the €570 million bill for VAT has not been mentioned. Only Senators Darragh O'Brien and Zappone referred to the ESRI study which found that the greatest reduction in income is a fall of 2% and 2.5% for the poorest 40% of households. This compares with a fall of close to 1% for the next 40% and only 0.8% for the top 20%. I hope the Labour Party is proud. We were constantly accused of pandering to the wealthy and looking after our so-called friends but our budgets have been shown to be progressive. Those who could afford it paid the most but the opposite is now the case. Every household will be paying €800 per year. I include the household charge in this figure but that tax is only a sideshow compared to the increases in VAT, petrol and diesel prices and inheritance tax for ordinary families.

The ESRI has stated this is a regressive budget. VAT is the most regressive tax one can levy. People will pay larger bills for ordinary purchases. Last year, the Government reduced VAT on a small range of services as part of its jobs initiative. It paid in part for a VAT reduction in newspapers. The fact that on the anniversary of the Moriarty report no reporter drew attention to the Taoiseach appearing in the company of Denis O'Brien on numerous occasions during his visit to America suggests that the Government got a good deal on its VAT reduction. Let us call a spade a spade. Ordinary families are facing a 2% increase instead of a break.

Some families may benefit from the mortgage reliefs. Other speakers referred to the Keane report but progress has not even been made on the proposals on spilt mortgages contained in a report released three months before the previous Government left office. Senator Barrett is correct that various sectors are getting something small out of the budget so that the Government and lobbyists can pretend it is great for the economy. It is only good for the lobbyists and advisers who can claim they achieved something big, but it is peanuts in the overall scheme of things.

There was a great deal of boasting about the universal service charge but what was given to part-time workers was taken away in social welfare. It is all spin and the families of Ireland are seeing the effect on their pockets, if not in their pay packets. I accept that the Government has to increase taxes but why does it not do so on a fair basis? We cannot continue to allow the rich to get away with it. The only breaks in this Bill are for businesses, aircraft leasing and the sale of commercial property. Why not give the ordinary family a bit of a break? Come up with something that benefits families rather than the vested interests that seem to have more control over this country than they had before.

We will be opposing this Bill and we will examine it section by section to find out why certain measures were included, what effect they will have and why the ordinary family is not getting a break.

Photo of John GilroyJohn Gilroy (Labour)
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I will depart briefly from my prepared script to comment on the thorough negativity expressed by Senator Byrne. I never heard the like of it.

Photo of Thomas ByrneThomas Byrne (Fianna Fail)
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The Senators opposite are the ones who tax the poor.

Photo of John GilroyJohn Gilroy (Labour)
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Senator Byrne needs to refresh his memory. The cutbacks he outlined were required because of the mismanagement of the economy by his own party. Perhaps if previous Governments had been more careful we would not be in this position.

I welcome the Finance Bill 2012 and look forward to a healthy and robust debate on its contents. It is widely accepted by most reasonable commentators that the legislative content of the Bill will go a long way towards implementing the pro growth measures the country requires. I am sure Senator O'Brien and myself will find plenty to agree on in the Bill. However, I am afraid both the Minister of State and I will be a great disappointment to Senator Barrett. I welcome his mention of the general anti-abuse rules of the United Kingdom. This is something in which I have a great interest and I hope we can have a fuller debate on that at a later date. It would be worthwhile and the Government would look favourably on such a debate.

The Bill increases the exemption threshold from €4,000 to €10,000 for over 30,000 people and they are now no longer required to pay the universal social charge. This must be welcome, even to the most negative among us. We also note the new rate of mortgage interest relief of 30% in respect of qualifying interest paid by those who took out their loans between 2004 and 2008, at the height of the housing bubble. I seem to remember a Minister of State with responsibility for housing exhorting people in February 2008 in a press release to buy a house, saying it was a great time to do so. A few months later, the housing market collapsed.

To support businesses, we have put in place mechanisms whereby new companies may be exempt from corporation tax for the first three years of their trading income. This is welcome. We welcome the fact that key employees engaged in research and development activities can avail of a reduction in their income tax liabilities also, thereby supporting and extending a vibrant research and development sector in the country. This is an area in which we have made changes with regard to copyright, patents and trademarks and we are putting in place an infrastructure whereby Ireland can become and remain an attractive place for such investment. Over half of the world's leading financial services companies have an Irish base, creating over 30,000 jobs and contributing approximately €2 billion to the Exchequer every year. This Bill puts in place a range of incentives that will ensure that Ireland remains an attractive place for this important sector.

An important part of Ireland's recovery is investment in a strong and vibrant green economy. The Bill provides numerous incentives to ensure that the green economy is supported and expanded. In a move to ensure that the tax base is more evenly distributed and that the tax burden does not fall disproportionately on labour, the Government has decided to increase the standard rate of VAT to 23%. This is in line with moves by other countries throughout Europe. KPMG has pointed out that the average standard rate of VAT across the European Union was 25% until recently. We see this in the context of a reduction in the standard rate of VAT to 9% across certain sectors of our economy that has helped to drive growth, especially in the area of tourism. We see the evidence of this in the increased tourist figures from last year. An increase in capital gains tax and capital acquisitions tax goes some way towards ensuring that those in society who have the most will contribute most in terms of our economic recovery. Everyone here would agree that is right.

I have a lot more to add to this debate at a later stage, but I will finish for now. Suffice to say, the Bill gives effect to measures that will ensure our economy will recover. All fair minded people in the House will agree that the Government strategy for economic recovery is working, albeit slowly and painfully. The measure of the recovery must be seen in the progress we are making towards regaining our decision making power over our economic processes. When we came into Government last year, our international reputation was poor, we lacked political stability and it seemed we were at the bottom of an abyss. Now 12 months later, confidence has returned, our reputation has been re-established and our political system is stable. We see evidence of this when we look at the interest rates being charged on our debt. Ten-year money is now reduced to 7% from close to double that last year. The measure of our independence is an ability to return to the financial markets, to borrow at sustainable rates and to control our economic destiny.

Photo of Darragh O'BrienDarragh O'Brien (Fianna Fail)
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The same as it was in February 2011.

Photo of John GilroyJohn Gilroy (Labour)
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This Bill forms one part of a suite of measures. Other areas that will aid recovery are an emphasis on job creation, on closing the deficit in our public finances and a renegotiation of the terms of our bailout. While we are on the road to recovery, it will be a long and hard road. At least we have started and this Bill will keep us firmly on that road.

Photo of Feargal QuinnFeargal Quinn (Independent)
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I welcome the Minister of State to the House and I welcome the Bill. My daughter, Gillian, studied under Senator Barrett in Trinity College and graduated in 1988, one of a group of 38. The day after her graduation, 37 of the group emigrated. Those who talk about how difficult times are now - I agree times are difficult - should be reminded that we have gone through difficult times in the past. What happened after 1988 was that we got it right in the following years and by 1992, we employed far more people. I believe we can do the same now. The reason we got it right then was that we decided to take the tough decisions. We must take tough decisions now too.

It is interesting to see that others around Europe are beginning to recognise we are taking tough decisions. I am involved in an organisation in Brussels and go there regularly. It was clear five, six or seven years ago that there was great regard for Ireland, but we lost respect in the past few years. We are now beginning to get that respect back because of the tough decisions we are taking. Recently, the intelligence unit of The Economist suggested that Ireland will create 20,000 jobs in the next three years and that 50% of those jobs will be in the financial services sector and another 25% in the IT sector. The intelligence unit suggests the reason for this is that we are taking the tough decisions. It is very easy for us to criticise a finance Bill that lists what we must do, but back in the 1980s we took those tough decisions. Some of the credit must be given to the Fianna Fáil-Progressive Democrat Government. At the time, the leader of Fine Gael, Alan Dukes, said that if the Government took the tough decisions, he would support them. We need the Opposition to do the same now.

I would like to focus on some proposals of the Bill. The Irish Credit Bureau gives information to lenders to help financial institutions decide whether to give credit to a business or individuals. One positive aspect of this is that the credit bureau also compiles positive information, such as the fact that loan repayments have been made on time. However, along with the compilation of information from financial institutions, it does not compile information from retailers, trade creditors or utility companies. Some, including the World Bank, have highlighted this as a deficiency in our system. We need to include this further picture when a business or individual applies for credit and should consider doing something about this.

I also wish to mention the special assignee relief programme. This programme aims to cut employers' costs in hiring skilled workers from overseas to work in their Irish-based operations. Employees signed up for at least one year and a maximum of five years will be exempt from income tax on 30% of their salary, between €75,000 and €500,000. As an employer, I am concerned that this will create some resentment in the workplace. We have already seen some resentment at the high salaries being paid to some people. I am also concerned that we will still find it hard to compete with other countries such as Holland and Malta, which have much more competitive schemes in place. For example, Malta offers a personal tax rate of 15% in certain skilled areas of the financial services sector. Should we not be looking to attract such talent in order to build up our financial services sector, which is of such importance? Can the Minister of State be more specific with regard to the types of workers he wants to introduce through this programme?

Is it possible we can do something about providing more research and development tax credits for food and marine research? We have significant potential in the food, agriculture and marine research area. The number of agricultural colleges and the number of students in them are increasing. We supply baby formula world wide. Did the Minister of State see the figures recently which indicate that one in five Chinese children receive Irish baby formula? However, we need more investment in new agricultural techniques. We also need to consider areas such as food research. Can we attract more foreign direct investment to make Ireland a centre of excellence in food research? I am involved in the institute of food and health in UCD where there is significant work going on behind the scenes. There are great links between the institute and the agricultural university in China. The Swiss food giant, Nestlé, employs 5,000 people directly on research and development around the world. Can we establish similar centres or even attract them here with incentives? It would be worthwhile because the investment is very good. I know the Government is doing something about it.

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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Senator Barrett might disagree with Senator Quinn.

Photo of Feargal QuinnFeargal Quinn (Independent)
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We do not always agree on everything, even though he educated my daughter very well.

Surely with agriculture, we should not outsource.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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The Senator has less than half a minute left.

Photo of Feargal QuinnFeargal Quinn (Independent)
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There are approximately 44 other things I wanted to say but I will touch on one thing I brought up before, namely, crowd-funding whereby people pledge investments online to new start-ups. That has a great future. It is now worth $2 billion per year in the United States. I called on the Government to set up a new national network which could tap into the great finances available from the Irish diaspora, especially in the United States. I know the Government is doing something about it but we need to look at regulation in this area should we let it grow. Currently, websites are mainly used as fund raising vehicles for small projects, such as a simple invention or an exhibit. Investors can donate as little as €10 and, typically, receive a small thank you. Can we do something more? I believe it is possible to do so.

In October in the United States, a North Carolina Republican Congressman with a lovely name, Patrick McHenry, introduced a Bill aimed at helping small businesses to raise capital in a challenging economy. One measure in that Bill was that one could sell securities through crowd-funding websites. It is worthwhile looking at that. They are some suggestions to ensure this Bill, which I support, is capable of being improved.

Photo of Paul BradfordPaul Bradford (Fine Gael)
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I welcome the Minister of State and the debate on the Finance Bill 2012. It is always one of the interesting set-piece debates in the Oireachtas. A five minute contribution does not allow Members to go into any great detail on the Bill but the Minister of State will hear ideas and suggestions which may not end up in the Bill but which can be reflected on and planned for future inclusion.

We said previously in this House that every Bill which comes before us should be jobs-proofed. In other words, we should ask ourselves if the passage of the Bill results in more people going to work or more people going on to the dole queues. We hope that as a result of the budgetary measures taken by the Minister of State and his Government colleagues, the incentive for people to go to work will be enhanced and the opportunities for employers to create work will be increased. However, the jury is still out on this legislation and it is only with time that we will be able to look back and know what the jobs result is. I certainly hope it will be positive.

Notwithstanding my strong support for the Bill and, in particular, the Government's general economic management policies since its assumption of office last March, I am a little concerned about the VAT increases. It is not rocket science to suggest history clearly shows that from an economic perspective, increased taxation might bring short term gains but in the long-term, it does not create jobs and economic activity. When the Minister, Deputy Noonan, reduced the VAT rate for the tourism sector in what I suppose was called a "mini-budget" last year, it worked and it put people back to work. I appreciate as much as anyone in the House the dreadful economic figures with which the Government must deal. One must balance one's books as best one can and one must then borrow all these billions to achieve the bottom line. Extra taxation was required but the VAT option should always be the last one. It is simple to think up and simple to collect but it does not provide a great incentive for the consumer to spend and when the consumer does not spend, everyone suffers and the dole queues are lengthened. I hope the Minister of State and his officials will revisit the VAT issue at the earliest possible opportunity.

Some of my colleagues mentioned the price of petrol and diesel on the Order of Business today and its impact on agriculture, in particular. It is, of course, as a result of the excise changes which, unfortunately, were necessary in the budget. On budget night, we have the political and legal capacity to introduce a change to the price of petrol and diesel the following morning. It might be a long shot but will the Minister of State consider a reduction in the excise rate on fuel to deliberately try to reduce the price of petrol and diesel for those three or four important summer months for agriculture and for tourism months when we hope people will holiday in Ireland, use their cars to travel around the country and spend whatever few euros they have at home rather than abroad?

Motoring costs are now a huge financial burden on every family. We must move beyond this idea of motoring being a luxury and that it is somehow so damaging to the environment that we must penalise every motorist in the country. Motoring and motorists are necessary to keep our economy moving, if one will excuse the pun. Will the Minister of State consider the idea of a short term reduction in the excise rate on fuel in the three or four summer months to give people an incentive to use their cars to drive to a local restaurant, a local hotel or a local shop to spend whatever few euro they have and to send a message to tourists from abroad who are coming to Ireland with their cars that it is relatively cheaper to drive in Ireland than in the rest of the European Union?

Not surprisingly the House is again debating the household charge, as I am sure is the Minister of State's House. I refer to his political House rather than domestic house as I am sure his domestic household charge bill has already been paid. Over the years, various Government set up commissions on taxation to look at our taxation system. We must all accept that we have to broaden the tax base. I accept that what I said about VAT perhaps negates this argument but we need to broaden the tax base and to have a mature debate on taxation. My colleague, Senator Noone, made a very interesting suggestion on the Order of Business today that every taxpayer should receive a certificate at the end of the year indicating how much tax he or she paid, although we get that by way of our P60 or P21, and where his or her tax moneys were spent, including what percentage was spent on health, education and so on. By educating the public more on how much it costs to run the country, how much taxes come in, how much money goes out and how much we are borrowing, it would help us to have a mature debate on taxation.

I am not sure what the Government is planning in regard to a commission on taxation scenario but it would be healthy and helpful to the democratic process to have a debate on taxation, including on property tax, capital tax, wealth tax, income tax and on every possible tax so that the pros and cons of all those taxation methods could be looked at. We did not need the IMF or the EU but we were too cowardly to recognise that our tax base was not broad enough and that new revenue raising measures would have to be taken on board.

My final point in this inadequate contribution is that we have interesting debates on the budget and on the Finance Bill but then the whole issue disappears for 12 months. For 20 years, the Minister of State's colleague, the Minister for Jobs, Enterprise and Innovation, Deputy Bruton, said that we needed a lengthy budgetary debate. It would be great if, even before the summer, we started the debate on next year's budget and on the choices, options and the range of possibilities in regard to taxation and expenditure. It should be more than a one day, a one week or a fortnight debate because it is of such fundamental importance to everybody in this country.

We had a different type of budget this year with the two-day budget with the two Ministers. That was a small step forward but we need a much more expanded budgetary debating process in the Houses, in Government and in the Department, so that all the choices are put on the table and we can see the colour of everybody's money.

Photo of Darragh O'BrienDarragh O'Brien (Fianna Fail)
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Given what Senator Bradford said, it is unfortunate there are only four Government Members here for this debate, so I call a quorum.

Notice taken that 12 Members were not present; House counted and 12 Members being present,

Photo of Kathryn ReillyKathryn Reilly (Sinn Fein)
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It is good to have such an audience for my contribution. I am sure everybody will listen intently to what I have to say.

It is now over a year since the Government was sworn in, elected on a promise that things would change and improve. Earlier speakers spoke of the road to recovery but I am not sure I share their enthusiasm. Are we are not still on the road to some sort of ruin? To a large extent we have seen some of the same failed policies of the past being implemented. This Finance Bill has been cited as incontrovertible proof that there is not a great deal of interest in, or much intention of, bringing about change in how we manage our economy, create sustainable economic growth and distribute the wealth of the State to bring about genuine economic equality.

As we all know, this Bill is about implementing last year's budget. Economic Thatcherism is being perceived as a choice, not as arising from necessity. This Government is perfectly happy to impose austerity because that will see us signing up to the austerity treaty and making austerity part of our national law. In recent days, my party has shown how the blackmail argument is merely a convenient choice of the Government in order to link to the treaty when it could actually veto the link between the austerity treaty and access to the ESM. I call on the Government to do so.

For many people, what is disappointing is not the bowing down to international capital in terms of the Anglo Irish Bank incident or the austerity treaty but the complete lack of change in political culture. The Government can argue it has had no choice on the big economic issues and some people will believe that. Undeniably, however, there are things that could have been changed but were not. I refer, for example, to the continued practice by the Government of breaking its own rules on pay to special advisers. Party hacks earn enormous money from the public purse and there are additional allowances for junior Ministers.

There are aspects of this Bill I welcome, for example, the increase in capital gains and acquisition taxes. We support these moves and regret they do not go further. One area of particular concern, however, is the VAT hike, from 21% to 23%. I find the short-sightedness of this policy extremely frustrating. Coming from a Border county I know the effect this will have on already struggling Border towns and businesses. Partition is a significant cause of economic displacement and inefficiencies and Border counties already bear the brunt of this. Raising VAT by 2% will take a further toll on businesses in counties such as Cavan. That is why in my amendments I will try to remove that hike in VAT from the Finance Bill and I call on all representatives from the Border area to support me in this attempt. VAT is a regressive tax. Crucially, it hits the spending power and disposable income of ordinary people which will result in a further drop in retail sales. It will detrimentally affect domestic demand. The rhetoric about progressive taxes and making those who can pay most pay, trumpeted by Government parties when they were in opposition, has long since gone out the window. This Bill does not do anything to create the fair tax system we need. Regressive flat taxes have once again been championed over progressive taxes.

The removal of 300,000 people from the universal social charge net is also welcome. However, the USC remains a crippling rock around the necks of most working families. Again, it is an unfair, blanket flat tax that was imposed in a panic by the last Government and again the present Government continues a policy of Fianna Fáil in supporting its retention. The social effects of this conservative economic dogma will be brutal. Likewise, the increase in the carbon tax charge will be another burden on struggling families and the reduction in tax credits for third-level fees will copperfasten inequality into the next generation. At the same time there is the use of the old Fianna Fáil magic trick of the tax break. The special assignee relief programme will see high-earning individuals from outside the State benefit from enormous tax breaks; they could earn €635,000 tax free over five years. Nobody should be allowed to earn that type of money without contributing. There is nothing in the legislation about job creation. It is a free ride and it is unjust.

Sinn Féin has argued and will continue to argue for an alternative to austerity programmes. We argue for a fair tax system in which those who can afford to pay more pay more and those who are least able to bear the cost are relieved to some extent. We would remove all the 500,000 affected by the USC from the income tax net and have effective tax rates of 45.4% on income between €100,000 and €175,000, with 51% on income in excess of €175,000. Critically, we would move away from flat regressive taxes such as VAT.

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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It does not add up.

Photo of Kathryn ReillyKathryn Reilly (Sinn Fein)
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Our pre-budget submission showed exactly what the alternative is. The Minister of State does not agree. He is shaking his head.

Photo of Brian HayesBrian Hayes (Dublin South West, Fine Gael)
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It is fundamentally dishonest.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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Senator Reilly, you have half a minute left.

Photo of Kathryn ReillyKathryn Reilly (Sinn Fein)
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I will finish within time. My party will oppose the Finance Bill in this House as it did in the Dáil. We do not believe it is going in the right direction and we believe a new approach is needed - the one people voted for last year which they have yet to see delivered.

4:00 pm

Photo of Catherine NooneCatherine Noone (Fine Gael)
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I welcome the Minister of State. As a Government we must ensure we explain clearly to taxpayers where their taxes are actually going. This move has recently been introduced in Britain; no doubt the Minister of State has heard of it. In the UK people will be issued with personal statements detailing exactly how their taxes are being spent. This is a simple idea although it may be complex to implement it. We need to ensure we are communicating clearly with the public at all times. The Irish public has shouldered much of the burden of the economic crisis in the recent past and it is important that we explain how people's hard-earned taxes are being spent.

There is a common misconception that were if not for the banking crisis we would not have a deficit but this is simply not the case. Aside from the cost of the bailout of the banks we are spending more than we are earning. Some clear information about the tax take and where it is being spent could help to counteract this impression. For example, I do not believe most people are aware that about a third of all Government spending in 2010 went on social welfare.

A recent Edelman trust barometer indicated that while 77% of people want the Government to communicate honestly and frequently only 11% believe this is happening. The British Government has decided to publish personal tax statements in order to make the tax system more transparent and easier to understand. I am interested in hearing the Minister of State's views on the idea of the Irish Government publishing personal tax statements.

Photo of Mary WhiteMary White (Fianna Fail)
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I welcome the Minister of State, Deputy O'Dowd, to the House. I have spoken many times in the company of the Minister for Jobs, Innovation and Enterprise, Deputy Richard Bruton. I am perplexed that he is not listening to the Governor of the Central Bank, Professor Honohan, or the representatives of small and medium businesses. The Governor of the Central Bank, Professor Honohan, recently drew our attention to the fact that this State has provided unlimited liquidity to the banks at low interest rates. He also acknowledged that the SME sector is the main driver of job growth in the economy.

The Irish banks were bailed out to the tune of €63 billion of Irish taxpayers money, a move which effectively bankrupted our State. While during the height of the Celtic tiger era the Central Bank and Department of Finance commented that the economy was overheating as a result of the property boom, they did not adequately alert Government to this. I call on the Governor of the Central Bank to alert the Government to the fact that there is no more liquidity available. Irish small and medium sized companies are finding it hard to access credit because banks are seeking collateral for loans and are applying much tougher conditions, interest rates and charges on loans. Approximately 800,000 people, 45%, of all those in employment are employed by SMEs yet many SMEs are unable to borrow money to improve and develop their businesses. Does anyone in this Government understand business? It is not just an academic exercise, which is what I believe many people believe.

The Minister for Jobs, Innovation and Enterprise, Deputy Bruton, and Minister for Finance, Deputy Noonan, are not listening to the people who need access to credit in order for their businesses to thrive and grow, thus creating employment. Senator Quinn frequently says that governments do not create employment. I disagree with him. If the Government cannot ensure the banks, whom we have bailed out, make money available to businesses who then is in charge of the country? Businesses cannot grow or expand without access to finance. The issue of access to credit has been raised with the Minister, Deputy Bruton, on many occasions during the past two months but no money has yet been made available. The micro-finance scheme has not been put in place. Nothing is happening.

It was stated last week by ISME that inflation is low because consumers are not spending. We all know that as a result of this nothing much is happening in the economy. The Government is responsible for our uncompetitiveness. It is responsible for the imposition on companies of waste, rate and rent charges and transport and energy costs as a result of which we are once again losing our competitiveness. Our competitiveness was improved by private businesses cutting back to the bone and people who work therein making sacrifices. I call on the Governor of the Central Bank to use his authority in the bank, which is an institution of our State which has loaned €63 billion to Irish owned banks, to do something other than comment on the unavailability of credit. There is no liquidity and the situation is dire.

I apologise for being so pessimistic but I do not see anything happening. The Ministers, Deputies Bruton and Noonan, are not listening to the people in business rather they are listening to the banks and the Irish Bankers Federation. I do not understand it. I will continue to watch this brief closely in terms of delivery.

Photo of Michael MullinsMichael Mullins (Fine Gael)
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I welcome the Minister of State, Deputy O'Dowd, to the House. I am happy to support this Finance Bill on the basis that it delivers on a number of commitments made by the Government on taking up office, one of which was to increase mortgage interest relief to 30% for first time buyers who purchased during the period 2004-08. Some 270,000 people have benefitted from this change. I also welcome the increase in mortgage interest relief to 25% for first time buyers in 2012. Previous speakers referred to the universal social charge, USC, exemption, the threshold for which has been increased from €4,004 to €10,036 and benefits 330,000 workers. They are significant changes.

I welcome that income tax rates remain unchanged as an increase in income tax would have meant an increase on work. This Government is pro work and pro jobs and wants to ensure everyone is encouraged to remain in the workforce and to seek new employment opportunities.

Senator Mary White spoke about job creation. This Government is committed to job creation. I believe Senator White is being a little harsh on the Minister, Deputy Bruton. Rome was not built in a day. While there are issues that remain to be resolved with the banks, the Minister has made significant progress. There have been many positive changes as a result of budget 2012 which need to be highlighted, including the special assignee relief programme which targets the assignment of foreign based individuals to the Irish based operations of their employers. This will enable Irish operations to attract key specialised personnel around which teams and processes can be built. The modification to the research and development, R&D, tax credit is also significant, as is the introduction of the foreign earnings deduction which seeks to support companies that are promoting Irish exports to Brazil, Russian, India, China and South Africa and the extension to 2014 of tax relief for corporate investment in renewable energy. These are all significant initiatives.

The recent jobs initiative ensures all Departments are working closely on the 270 actions identified. Investor confidence is returning to Ireland. As stated earlier, significant job announcements have been made in recent times. It is hoped that following the visits of various Ministers to different parts of the world we will see further significant investment in our country in the future. Ireland is now a much more desirable place in which to invest. Investor confidence is returning. In addition, with regard to excise duty on petrol and diesel we are getting to the stage where the price of fuel is causing difficulty for many businesses and consumers. Prices have rocketed in recent times and the Government needs to examine the level of taxation. It is causing great hardship and difficulty.

I welcome the fact that 25 cent was put on tobacco in the budget. As the Minister of State, Deputy O'Dowd, comes from a Border county he is aware of the large amount of revenue we lose because of cigarette smuggling and diesel and fuel laundering across the Border. I do not have the figures to hand but I saw them recently and I know we lose significant amounts of revenue through illegal activity with regard to cigarettes and fuel laundering. I welcome the additional powers to investigate serious customs and excise tax offences contained in the Finance Bill.

I also welcome the reference in the Bill to standards of accounting records and the under-reporting of credit card transactions. I believe the non-reporting of online transactions by certain businesses is becoming an issue. This is the equivalent of under the counter payments and the practice must be nipped in the bud. The penalties should be particularly high to dissuade people from getting involved in this line of activity.

With regard to agriculture, capital gains tax retirement relief is being better targeted to encourage timely transfers of farms and businesses. Milk quotas will be removed in 2015 and we are trying to grow the agribusiness industry so it is important to have timely transfers of farms from fathers to sons. We also need to consider how to ensure land which is unlikely to be transferred to a relative in the short term can be utilised to increase our agriproduction. We should have an incentive for people to lease such land or a measure to help grow our agribusiness.

The scope of the Revenue job assist scheme is being widened to include those unemployed for more than 12 months and signing for credits. This scheme had been accessible only to people in receipt of a social welfare payment. I very much welcome this measure and all measures contained the Finance Bill which will help to get people back to work.

Photo of Paschal MooneyPaschal Mooney (Fianna Fail)
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Cuirim fáilte roimh an Aire agus déanaim comhghairdeas leis; bhí sé ar an raidió ar maidin fighting the good fight. It is causing great hardship and difficulty. I wish him well in this regard. When every Minister for Finance stands up on budget day there is a great degree of expectation among immediate supporters on the Government side and the general populous, particularly those involved in business, wait to see where the hammer will fall and the hatchet will be used. Everyone on all sides of the House will appreciate the difficulties faced by successive Ministers for Finance since the collapse of the banking sector and the crisis of 2008, including the late Brian Lenihan and Deputy Michael Noonan. They have had to face unprecedented challenges in framing a budget. In this regard I would not wish to convey that we on this side of the House have been irresponsible in our opposition to some of the elements of this budget.

In the current climate the question remains as to whether the line and direction taken by the Government will get us out of this period of austerity while at the same time providing a sense of hope and optimism to taxpayers and citizens. This is the challenge. Whether the Minister has achieved this is still being debated and discussed. As he famously said in another context, only time will tell.

However, in the current climate elements of this budget should be revisited and perhaps should not have been implemented, particularly the 2% increase in the VAT rate. My colleague in the other House, Deputy Michael McGrath, raised this matter on a number of occasions. The Minister of State will agree with me that any changes in VAT rates have a knock-on effect on businesses in the Border counties because of the currency exchange between North and South. We have heard much talk about the economies of scale which operate in Northern Ireland vis-À-vis its membership of the United Kingdom which make certain services and goods cheaper than they would be in the South because of our smaller market. The concern about the 2% increase was not so much about the impact it would have in the Border counties but because domestic consumption has been flat-lining and it seemed, to us at least, that such an increase would not stimulate optimism or consumption and would not encourage people to go out and spend their money. From this point of view we do not favour it.

The cry of the Government, as was the cry of the previous Government when the crisis hit, was to ask where it could get the money because it had to get it from somewhere. The Minister of State, Deputy O'Dowd, made the point repeatedly, and I agree with him, that the gap between income and expenditure is such that there must be some way of finding it. While our exports are thriving and roaring ahead and our balance of payments surplus is quite impressive in terms of our size relative to other European countries, and certainly in terms of where we are vis-À-vis Portugal, Greece, Italy and Spain, our domestic consumption is flat-lining and this is the greatest challenge for the Government.

My colleague, Senator White, has taken every available opportunity to raise the question of bank lending. I am a member of the economic sub-committee of the British-Irish Parliamentary Assembly chaired by our mutual friend and colleague, Deputy Jack Wall. Last week, an Oireachtas committee meeting heard evidence from Mr. Mark Fielding of ISME and from the Small Firms Association attached to IBEC. We concluded we were more confused afterwards with regard to the state of bank lending in the country. While ISME provided much evidence and quoted several instances from throughout the country of people refused loans, the Small Firms Association echoed the Government's view as stated in this House by the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, that bank lending targets to the end of December had been met. There is some confusion in this area.

The overall strategy may well be pointing in the right direction, but all that the Department does will be of little consequence if business does not get access to sufficient levels of working capital. If it is not available then the economic recovery will wither on the vine. The key responsibility for the Department is to deliver increased bank lending rates to SMEs. The commitment from the banks to increase levels of bank lending represents a step in the right direction. The only reliable assessment of the banks' commitment, however, will be the level of take-up of that additional finance. If onerous terms and conditions or high costs continue to act as deterrents to accessing that finance then the additional funds will have little, if any, effect.

This was not stated about the Irish Government; it is from a British House of Commons library document on an assessment of lending criteria and the state of bank lending in the UK. The point I am making is that it is not unique to this country.

What is common to both jurisdictions is that there will be no resumption of the economic recovery that all of us wish to happen unless capital is freed up. Given that its entire mandate is based on economic recovery, the Government is more keen than anyone else for that to happen. The Minister for Finance must be a cricket fan because among the many goodies that appeared in the budget was an extension to professional cricket players of the tax relief on certain income that is available to sports people when they retire. I would be interested to know where that one came from in the Department of Finance. The Minister of State will agree that there is always one every year.

Photo of Diarmuid WilsonDiarmuid Wilson (Fianna Fail)
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North Dublin.

Photo of Paschal MooneyPaschal Mooney (Fianna Fail)
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It must be a north Dublin thing. As I said at the outset, Fianna Fáil has attempted to provide responsible opposition and will continue to do so. We believe that elements of this budgetary strategy are not in the best interests of the Irish people as they will not encourage more spending and lift the economy. All we can do is point these matters out as we see them. I wish the Government well in its attempts to try to get us out of where we are. Any success it achieves in that regard will benefit all of us.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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I agree with Senator Mooney that politics is about choices. Various options are always open to any Government. The options chosen by the Government in last December's budget and in the Finance Bill 2012 were the wrong ones. I do not believe they will solve the problems in the economy or uplift our domestic economy. Many of the measures in question are unfair and regressive. As a previous speaker mentioned, during a radio interview this morning the Minister of State, Deputy O'Dowd, spoke about how people see the household charge as unfair and unjust. Many people are choosing not to pay the charge for that reason.

I would like to deal with a number of issues that are of relevance to the Bill. A previous speaker mentioned that the increase in the threshold for the universal social charge from €4,004 to €10,036 will take 300,000 people outside the scope of the charge. That suggests that too many people in this country are on low incomes. It is shocking that so many people are earning less than €200 a week. That has to be addressed when we try to make sure people have a good quality of life and have money to spend. If we are to ensure the retail sector is thriving, people have to be paid well. Figures like the one I have cited show that many people are very poorly paid, which is wrong.

The universal social charge, which is a combination of the old PRSI and a number of levies, should have been scrapped because it is not a fair tax. It was one of the most controversial taxes to be introduced by the previous Government. At the time, it was met with consternation from all Opposition parties, including Fine Gael. The Labour Party said it would abolish the charge, but it is still in place. It has been modified slightly. As a result of other changes, people are getting less in return for all the new charges they are paying. People are paying more in terms of the universal social charge, but they are also being forced to pay private health insurance, for example. They do not get the dental treatment they used to get under the PRSI system. Like the Minister of State and a number of Senators, I wear glasses. We used to get something off the price of new glasses when we bought them but that is now gone. A raft of benefits was removed from people. The Minister of State might not have received them, but some people did. The point is that these benefits that were removed. The universal social charge should have been scrapped.

I will deal with some of the contents of the Finance Bill 2012 before I outline some alternatives. A number of Senators have spoken about the VAT increase. Any increase in VAT hurts the retail sector. Reference was made to the impact the increase is having on Border counties. The reality is that it is having an impact across the State. As I have said in this House previously, many small retailers have made the point to me that they are working for less than the minimum wage. They are trying to keep their premises open in the face of decreased footfall. Due to their self-employed status, no safety net and no benefits are available to them if they have to close their doors. If a self-employed person has a partner who is working part-time or full-time, he or she will not receive any support from the State. The 2% VAT increase has been a regressive step for retailers at a time when they are trying to keep going and keep people in jobs. It has also affected shoppers and people who had less money to spend in the first place. The introduction of the increased VAT rate was the wrong approach for the Government to take, especially in the context of all the new taxes and cuts.

As part of my Second Stage speech, I would like to mention an option that will be open to the Government in the future. With a few exceptions, no real increase in excise duty on alcohol was provided for in last December's budget. There has been a great deal of debate at the Joint Committee on Health and Children about what can be done in terms of pricing to reduce alcohol consumption. I know the Government is considering minimum pricing. I do not support minimum pricing because I do not believe it will work. It will simply put more money into the hands of those who sell alcohol. If we are minded to look at pricing as a means of dealing with alcohol consumption, a much better option would be to increase excise duty on alcohol. Such an approach would ensure that 100% of any price increase would come back to the State. That money could be ring-fenced for prevention, treatment and education measures. That would be far better than minimum pricing. I ask the Minister of State to take that suggestion back to the Ministers for Health and Finance.

Having proposed the abolition of the universal social charge and the 2% VAT rate, it is important for me to set out some alternative means of raising funds. We conservatively estimate that a 1% income-linked wealth tax on all assets in excess of €1 million, with the exception of working farmland and business assets, would generate approximately €700 million. We are proposing that all tax reliefs be standardised. Some tax reliefs are available at the top rate of 41%, but we suggest that all of them should be available at the bottom rate only. That would save €1 billion, which is a huge amount of money, and would be much better than the imposition of flat and regressive charges like the household charge and the universal social charge. In addition, we estimate that the introduction of a third rate of tax - we propose it should be set at 48% - on all income in excess of €100,000 would raise €400 million. That could be considered.

The alternatives that are being proposed by the Opposition should be examined seriously. The ones I have mentioned were supported by the Labour Party when it was in opposition. I accept we have to put measures in place to reduce our deficit - some of them will be painful - but we have to make sure we do not keep coming back to low and middle-income families and people who are out of work and expect them to be able to pay. If we go back to the same well again and again, it will not work. We are seeing that with the household charge. I appeal to the Government to examine other options, such as the imposition of higher tax rates on higher earners. We are not proposing that out of spite, but out of the need to reduce our deficit. I ask the Minister of State to reflect on our proposals in the context of next year's budget.

Photo of Michael MullinsMichael Mullins (Fine Gael)
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I welcome all of our visitors to the House. They are very welcome.

Photo of Diarmuid WilsonDiarmuid Wilson (Fianna Fail)
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I welcome the Minister of State, Deputy O'Dowd, to the House. Like my colleague, Senator Mooney, I must begin by saying I do not envy any Minister for Finance who has to put a budget together in a difficult economic climate. The same problems were faced by the late Brian Lenihan when he was Minister for Finance. Regardless of what one attempts to do in the current economic circumstances, one will affect somebody.

I welcome some of the measures set out in the Bill before the House, including the decision to increase the exemption threshold for the universal social charge from €4,004 to €10,036 for the 2012 and subsequent tax years. I would like the threshold to be increased further in next year's budget, if possible. I also welcome the introduction in this legislation of an enhanced scheme of stock relief for registered farm partnerships. The scheme, which is one of the many measures in the Bill that I welcome, fits very well into the Harvest 2020 project. This excellent and visionary document was put together by my colleague, Deputy Smith, and is now being implemented by the Minister, Deputy Coveney, to a high level.

I welcome the decision to increase the price of cigarettes by 25 cent. While I would like a larger increase to be provided for, if possible, I remind the House of the need to consider the amount of revenue being lost to the State as a result of cigarette smuggling. I suggest that the level of excise duty on petrol and diesel should be looked at and reduced, if possible. At a time when employment in this State is decreasing, the incidence of diesel and fuel laundering is increasing, particularly in Border counties. This is causing huge expense to the county councils, particularly Cavan County Council and Louth County Council, where a recent find cost the council €50,000 to clean up. This is an issue we should consider enforcing even more and redeploying people from under utilised areas of the Civil Service into the prevention of diesel and petrol smuggling and laundering.

The 2% VAT increase from 21% to 23% is having an effect in the town of Cavan and in the whole Border area and as Senator David Cullinane said it is having an effect throughout the length and breadth of the country. In the Border area people travel to the North to do some of their shopping and while they are there they do the rest of it. Throughout the rest of the country, those who do not travel across the Border are not spending as much. The 23% VAT rate applies to a wide range of goods and services including petrol, motor vehicles, electrical supplies, furniture, adult footwear and clothing, alcohol and soft drinks, tobacco, which I welcome, accountancy and legal services and tax advisory services. It was the Minister's intention to raise €670 million this year but I do not think that will happen. Based on a conversation I have had with the chairman of Cavan Chamber of Commerce, the VAT increase is having an effect in Cavan and in the Minister of State's county of Louth and throughout the country. I ask that the issue be examined before the Bill is finalised. I do not envy any Minister who has to bring in a budget in the economic circumstances but that is one area I would like to have addressed.

Photo of Maurice CumminsMaurice Cummins (Fine Gael)
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The Finance Bill brings into effect many of the items announced on budget day. By reducing the deficit to 8.6% of GDP and introducing adjustment measures totalling €3.8 billion in the budget, the Government is acutely aware it will have an impact on the living standards of people. I am particularly happy, as mentioned by other speakers, that the Finance Bill met the commitment in the programme for Government to increase the rate of mortgage relief to 30% for first-time house buyers who took out mortgages between 2004 and 2008. That was a commitment given prior to the election and in the programme for Government and has been delivered upon.

I welcome the decision to simplify the rules governing tax relief on charitable donations which could not come at a better time for many charities who are suffering. The Bill provides for the implementation of many pro-growth measures for business yet some Members said the Finance Bill did little or nothing for business. It has promoted measures such as the partial tax exemption for employees who travel abroad to develop markets in the BRIC countries and in South Africa. There is an improved research and development and credit regime that will benefit the small and medium size enterprise sector, a new income tax incentive for employees directly involved in research and development activity, a scheme for corporate investment in renewable energy and a further extension of the tax exemption for new start-up companies. These are some of the protection and growth measures for job creation and business included in the Bill.

There was mention of the universal social charge which has taken about 300,000 people out of the tax net. We have heard Sinn Féin say it is an unfair tax. This morning it said the household charge is an unfair tax and that the VAT increase is an unfair tax. One could say that all taxes raised by any government can be seen as unfair to the people they affect. However, the Government is faced with the problem of balancing the books which is a difficult job at this time.

There are a few areas where we could raise revenue. The delay in introducing licensing levies on companies involved in the promotion of gambling is a matter of concern. While a new betting Bill will be introduced later in the year, at a time when online gambling is largely tax free a greater revenue stream for the Exchequer should be raised from this source sooner rather than later. That is a revenue stream that should be taxed. I hope measures could be considered in the Finance Bill to introduce these levies before the introduction of the new betting Bill.

I refer to a number of items raised on the Order of Business in the past month. On the question of cigarette smuggling and fuel laundering, mentioned by Senator Wilson, there is a need for a more focused approach, the penalties for which should be increased further. Another matter raised by Senator Quinn relates to mileage rates for public servants which encourage the use of larger cars due to the larger mileage rates on such vehicles. Has that issue been tackled or is it the intention to tackle it? Those items can and should be addressed in the Bill.

I welcome the Minister for Finance to the House. He has a difficult job to do under very difficult circumstances but he is bearing up well to it and the finances are in good hands.

Photo of Michael MullinsMichael Mullins (Fine Gael)
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I join the Senator in welcoming the Minister. I have no doubt he did a good job for the country in recent days. I invite him to reply to the debate.

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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There has been an interesting and informative debate here. I thank Senators for their comments. Before trying to address these, I reiterate that while the Government is taking every step to support economic recovery there is no quick fix solution.

Looking towards the medium term, the external environment is expected to strengthen from 2013 onward as is export growth. We expect to see economic activity beginning to gradually firm and broaden out from being externally driven to domestic demand also making a modest contribution. The continuing levels of inward foreign direct investment points to the fact that many of the underlying strengths of the economy remain. We are on track to bring the deficit below 3% of GDP by 2015.

The banking system has been recapitalised and the economy returned to growth last year following three successive years of annual decline. In short, the Government is delivering a return to sustainable growth which capitalises upon the underlying strengths of the economy.

I turn to points raised by Senators. Senators Darragh O'Brien, Zappone and Byrne raised the issue of the recent ESRI publication Distributional Impact of Tax, Welfare and Public Sector Pay Policies: 2009-2012. I remind Senator O'Brien that the publication concluded that since the economic crisis, losses imposed by policy changes in tax and welfare have been greatest for those on highest incomes and smaller for those on low incomes. Senator O'Brien said also that first-time buyers measures for mortgage interest relief is not targeted. The targeting is inherent in this measure and in mortgage interest relief itself. First, the measure is limited to the four-year period when house prices were at their peak. Second, the measure is limited to first-time buyers who purchased their first property in that particular period. Third, the relief is applied to the interest on the loan and is most effective in the early years of a mortgage when the interest portion of the repayment is at its highest. I thank Senator Gilroy for his support for this measure.

The issue of mortgage arrears is of the utmost importance to the Government. The fact that the Government has now established a committee, chaired by An Taoiseach, to co-ordinate and oversee the implementation of a whole-of-Government response to the problem is evidence of this.

There is no single or quick solution to the mortgage arrears problem. The Keane report outlined a number of recommendations to address the problem and work is progressing on the implementation of these as approved by Government.

Senator O'Brien asked about the capital gains tax property incentive scheme in section 64 of the Bill. Senator Barrett suggested it would overheat the property market again. I do not accept this is a speculator's charter. Anyone who wishes to avail of the incentive must hold the property for at least seven years.

Senator O'Brien mentioned the health insurance scheme. The purpose of the scheme, which was introduced by the previous Government, is to ensure health insurance remains affordable for older people by providing for an age-related tax credit to reduce the cost of premiums for older persons.

Senators Darragh O'Brien and Zappone asked about growth rates. The budget day forecast is for real GDP growth of 1.3% in 2012. The budget forecast was prepared on the basis of economic information - domestic and international - available up to the end of November 2011, and was mid-range at that time. Given the very uncertain environment, the budget documentation also pointed to a number of risks to this forecast, some to the downside and some to the upside. These risks are still valid.

While there are some differences between the outside agencies' forecasts and those of the Department of Finance, the broad picture - that is, of an externally driven recovery, with domestic demand remaining weak - is much the same. Moreover, and notwithstanding differences in the precise numbers, the expectation among domestic and international forecasters is that GDP will continue to grow this year.

Senator Zappone has made some specific comments based on legal opinion she has received on the section amending aspects of the tax code to provide the same treatment for civil partners as for married couples. I assure the Senator that my officials and officials in the Revenue Commissioners made a very thorough examination of tax legislation to ensure equality of treatment and have provided for this in consultation with the Attorney General's office in so far as is constitutionally possible. The door remains open for the submission of information in regard to any remaining perceived anomalies or shortfalls in the legislation.

On some of the specific issues mentioned by the Senator, the principal private residence relief from capital gains tax has been extended to dependent relatives of civil partners, and consanguinity relief from stamp duty has been extended to cover transfers of non-residential property to civil partners and relatives of civil partners. Both these measures were in the Finance (No. 3) Act 2011.

I am glad to see that Senators Sheahan, Hayden and Gilroy welcome the changes to the universal social charge, USC. I reassure Senator Sheahan that, in regard to section 126 and the requirement for certain taxpayers to provide a bond, Revenue is aware that, in most cases, there are legitimate reasons businesses may fall into tax arrears. The Revenue Commissioners made considerable efforts to reach agreements with such companies where there is a possibility of continued liability.

I endorse Senator Hayden's and Senator Gilroy's supportive comments, particularly in regard to areas such as research and development, SARP and FED. I have also noted Senator Quinn's comments on these topics.

Senator Reilly referred to individuals qualifying for the special assignee relief programme not being required to make a contribution. For each single individual who avails of the maximum amount of relief under this programme, more than €227,000 will be paid to the Exchequer in income tax, USC and PRSI revenue that might not otherwise be received.

I note Senator Hayden's concerns about those who have found it necessary to rent out their principal residence. As the Senator observed, these individuals would no longer be in receipt of mortgage interest relief. However, as they are receiving rental income, they may be allowed a deduction in computing the taxable rents from that letting of 75% of the interest accruing on money borrowed to purchase, improve or repair that property.

Senator Barrett referred to the high earner's restriction and unfortunately quoted some figures that would seem to be in error. This restriction applies at an adjusted income level of €125,000 and where an individual claims €80,000 or more in specified reliefs. Those subject to the full restriction pay a minimum effective income tax rate of 30%. This is in addition to PRSI and the USC, with the latter at rates of up to 10%. The actual effective rate of income tax for an average individual taxpayer on €40,000 is 15.53%. When PRSI and USC are added, the effective rate of tax for this individual is 24.17%. Single individuals in the PAYE system would need income of almost €100,000 to have an effective income tax rate of 30%. A married couple including a single earner, also subject to PAYE, with children would need income of around €150,000 before reaching an effective rate of income tax of around 31%.

I note Senator Barrett's remarks in regard to the section 481 film tax relief scheme. The film relief scheme was subject to a major independent review in 2007 and, contrary to Senator Barrett's contention, the Commission on Taxation recommended in 2009 that the relief be continued, but it recommended that it be subject to regular review. We fully support the principle of ex ante and ex post economic impact assessments.

I advise Senator Barrett that section 52 is not a tax break or a tax expenditure. Rather, it provides for a reduction in double taxation which can arise where lease rental payments are received from countries with which Ireland does not have a tax treaty.

Section 52 extends unilateral credit relief to leasing income. The provision will remove barriers to Irish companies conducting business with persons resident in non-treaty countries where withholding taxes apply to leasing income. The Irish aircraft-leasing industry is one of the big success stories of the IFSC, which employs more than 30,000 people and contributes over €1 billion to the Exchequer in corporation and payroll taxes.

On the Senator's point on anti-abuse rules, section 811 of the Taxes Consolidation Act 1997 already sets out our approach on this issue.

I thank Senator Healy Eames for her support and, in particular, her endorsement of the measures in the farming and agribusiness sector.

Senator Quinn raised the adequacy of the provisions of the special assignee relief programme to allow Ireland to compete with other jurisdictions. This programme introduces a much more flexible regime to replace that phased out in section 13 of the Bill.

Senators Byrne and Reilly should be aware that the standard VAT rate was increased in the budget to focus revenue-raising on indirect taxation, which has a less adverse impact on economic activity and employment than income tax. It should be noted that while income tax changes are more progressive than indirect taxes, they also have greater negative impacts on labour supply and thus on economic growth. Economic research by the OECD supports a shift in policy from direct taxes to indirect tax.

A number of Senators questioned the rationale for business tax incentives, including the research and development tax credit. The research and development tax credit scheme was introduced in the Finance Act 2004 as an incentive to foreign-owned multinational companies to increase investment in research and development in Ireland and to encourage Irish indigenous companies to increase the level of spending thereon. The scheme was approved by the European Union as a general measure and is not a State aid. It is open to any company undertaking research and development activities, including our indigenous food and other companies, to claim the credit on a self-assessment basis.

Senator Bradford referred to the current high fuel prices and the possibility of a temporary reduction in excise rates. The increase in fuel prices is an international phenomenon. Excise rates, including the carbon charge, on motor fuels are 58.8 cent per litre of petrol and 47.9 cent per litre of auto-diesel. However, our rates remain lower than many of our main trading partners and significantly lower than our nearest neighbour, the UK. There are no plans for temporary taxation adjustments, as to do so could lead to significant costs to the Exchequer.

I thank Senators for the constructive debate we have had today and I hope I have addressed the points raised in the short time available to me. I recommend the Bill to the House.

Amendment put:

The Seanad Divided:

For the motion: 29 (Ivana Bacik, Paul Bradford, Terry Brennan, Colm Burke, Eamonn Coghlan, Paul Coghlan, Michael Comiskey, Martin Conway, Maurice Cummins, John Gilroy, Jimmy Harte, Aideen Hayden, Fidelma Healy Eames, James Heffernan, Lorraine Higgins, Caít Keane, John Kelly, Denis Landy, Marie Maloney, Mary Moran, Tony Mulcahy, Michael Mullins, Catherine Noone, Pat O'Neill, Feargal Quinn, Tom Shehan, Jillian van Turnhout, John Whelan, Katherine Zappone)

Against the motion: 13 (Sean Barrett, Thomas Byrne, David Cullinane, Terry Leyden, Marc MacSharry, Paschal Mooney, David Norris, Darragh O'Brien, Denis O'Donovan, Labhrás Ó Murchú, Kathryn Reilly, Mary White, Diarmuid Wilson)

Tellers: Tá, Senators Ivana Bacik and Paul Coghlan; Níl, Senators Paschal Mooney and Diarmuid Wilson.

Amendment declared carried.

5:00 pm

Photo of Paddy BurkePaddy Burke (Fine Gael)
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When is it proposed to take Committee Stage?

Photo of Maurice CumminsMaurice Cummins (Fine Gael)
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Tomorrow.

Photo of Thomas ByrneThomas Byrne (Fianna Fail)
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We are reserving the right to submit amendments until 10.30 a.m. tomorrow. I hope that the Cathaoirleach will agree to this.

Photo of Maurice CumminsMaurice Cummins (Fine Gael)
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I understand from the Bills Office that amendments will be taken until 7 p.m. today.

Photo of Darragh O'BrienDarragh O'Brien (Fianna Fail)
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This is a question of procedure and I thank the Leader for his reply. However, the Bills Office rang five minutes ago and told us that it would only accept amendments until 6 p.m. This is not the way for the House to do business.

Photo of Maurice CumminsMaurice Cummins (Fine Gael)
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The Senator can take it that the time will be 7 p.m. because the Bills Office informed my office that that would be the time.

Photo of Darragh O'BrienDarragh O'Brien (Fianna Fail)
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Perfect. I thank the Leader.

Photo of Paddy BurkePaddy Burke (Fine Gael)
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The Bills Office always endeavours to facilitate Members. Is it agreed to have Committee Stage tomorrow? Agreed.

Committee Stage ordered for Thursday, 22 March 2012.