Richard Bruton (Dublin North Central, Fine Gael)

It is strange to hear the Minister for Justice, Equality and Law Reform decide without any concern that companies ought to bear taxes.

It is crucial that we address the quality of our public spending and the fairness of our tax code. We have lost sight of both these goals through an exclusive focus on tax rates, which the Minister for Finance's predecessor regarded as the absolute pinnacle of achievement. Consequently, the Government has ignored what has happened to sustain those rates.

The Finance Bill begs the question whether our tax code is delivering the fairness we expect. The replies we received recently from the Office of the Revenue Commissioners revealed that the issue of overpayment of tax is not being handled properly or in an acceptable way by that office. The replies revealed that it is only in a tiny number of cases that the office gives a tax refund to individuals, even when there is clear evidence of overpayment. For example, more than 1 million householders pay bin charges but only 75,000 receive a tax relief. The Revenue Commissioners make no effort to ensure that everyone gets their entitlement to tax relief on waste disposal charges. Relief is only given in respect of €200 million in terms of health spending whereas it is estimated conservatively that the true level of allowable health expenditure is approximately four times that figure. Again, there is no real effort to match up tax relief at the point of spend such that there would be a reasonable chance that people would avail of the tax reliefs to which they are entitled. Tax relief is obtained in respect of only €100 million in rents and private tenancies whereas the actual spend in this area is at least double that figure. The Central Statistics Office's figures on the number of rented dwellings would confirm that there is a significant discrepancy.

If the boot were on the other foot and the Revenue Commissioners came across a transaction in which they suspected tax had not been paid, they would institute a trawl to identify anyone along the chain who might have been involved. They would send out chains of letters asking for a response from those who may be involved. However, there is no similar effort to identify where refunds should be given, even where the relevant information is easy to access on the part of the office. The office's mandate should be changed so taxpayers who are compliant can expect it to ensure that they will not be ripped off. This change of mandate involves a change in approach. I know the Minister will argue that the Revenue Commissioners are not expected to be accountants for the taxpayer but, where it is obvious that refunds should be granted in respect of bin charges, medical expenses and family income supplement, for example, the office should make an effort to ensure that they are granted.

The Minister rightly invited a general debate on tax policy rather than on the individual elements that are to be discussed on Committee Stage. The tax code is becoming increasingly out of touch with the pressures faced by families. I do not agree with individualisation. It represents an effort to break down the family into economic units and it ends the recognition of the scale of dependency on the individual taxpayer in deciding what tax he or she ought to pay. It narrows the choices parents can make because it tries to corral them into making certain choices. This Bill represents a further tightening of the screw in that area. The Minister only gave to the married couple with one earner the same increase he gave to the single person. There was no proportionate increase to take account of the dependency of the non-earner in the couple. Such a couple's position is eroded further by the almost exclusive concentration on the PAYE credit rather than the general credits that might offer benefits.

In addition to tightening the screw in this area, the Minister has ignored the pressures associated with bearing the cost of child care, which are becoming increasingly pronounced. The Minister will note this in his constituency and will encounter it canvassing for the by-elections in Meath and Kildare North. In an effort to stay in employment, people pay €1,500 to €1,600 per month on child care. This amounts to more than their monthly mortgage payments. This burden ought to have been recognised by a tax code that was designed to address financial pressures in a family-friendly way over the life of the Government.

The Minister has refused to support families engaged in home care. The home carer's credit was introduced to get the then Minister out of a hole politically when there was a back bench revolution but it has not been touched since. Consequently, those who are genuinely involved in home care receive no recognition or their recognition has been frozen for many years.

Another problem with the tax code is that it undermines cohabitation. When people live together they receive two tax credits and when they separate they get four. This is an extraordinary provision in a country that encourages joint parenting. It is not just in the tax code that the problem in respect of joint parenting and cohabitation manifests itself. Under the new social welfare measures, tougher rules apply in respect of those who are married or cohabiting and those availing of child support. We ignore partners in many means tests, including for medical cards, family income supplement, higher education grants and housing subsidy. We air-brush out of existence the recognition that those cohabiting have partners who must be supported. This is an anti-family policy and it is ingrained in all the aforementioned areas. It is widespread under the social welfare and tax codes and it has social consequences that need to be addressed.

On the last occasion I asked the Department of Social and Family Affairs about the family income supplement, it stated that only one third of those entitled to it receive it. This hints at an anti-family policy because we know people are entitled to it who do not receive it. It would not be difficult for the Office of the Revenue Commissioners, which knows what people are earning and the number of children in their families, to ensure that family income supplement was paid, through a refund under the tax code if necessary. A deal would obviously have to be done with the Department of Social and Family Affairs to achieve this, but if we are to ensure that people receive their entitlements, it should be done. We need to examine more closely the way in which we treat families. The family is the core unit and we have been sucked into a policy that ignores the pressures that families face.

The Minister stated in replies to parliamentary questions that he has not got the relevant data on inequity in tax code that applies to pension contributions. Half of those who could have a private pension have none and the bulk of these people are in low income categories. By contrast, those with good pension cover have well-organised pension funds, pay income tax at the higher rate and qualify for relief on their pension contributions in the order of 48 cent per euro. However, a great swathe of people do not benefit under this code. The Minister should at least provide that the 48 cent credit becomes a standard credit for anyone who contributes to a pension. That would give people on lower incomes a real, equal incentive to put money into their pension funds. It will be tougher for them but it will at least even up the terms on which they enter the funds. It is not necessary to wait for research on this. One does not need to be an Einstein to know that the benefits will be significantly skewed towards higher income earners. The top level contribution of €250,000 does not compare with the amount that people on low incomes might contribute. It is necessary to balance that code.

I am disappointed the Minister did not face up to the issue which Deputy Burton raised by way of parliamentary questions, namely, that there remain many people who pay no tax because of their capacity to work different schemes of reliefs. It would not have been a big problem to introduce caps, amounting to a cumulative cap on what any individual can draw down across his or her pension or various tax reliefs. That would at least start to restore some equity in the code. It was not necessary to wait for a review.

Another area of concern is whether the tax code supports a pro-enterprise approach. I am worried about the decision to abandon indexation in the capital gains tax code. The result is that one is taxed not only on real gains but on paper gains, namely, inflation. That may not have an impact in the next few years but over the long term it encourages people to choose a speculative investment with a quick, big killing to be made rather than a steady investment yielding returns over time.

Without indexation people who choose thesteady investment will be taxed even on the money gains. That will gradually corrode the incentive structure of the capital gains tax code. The Minister may get away with it in the short term but in the long term it is not appropriate. That needs to be considered afresh.

There is also concern that roll-over relief is locking people in and undermining restructuring that ought to be supported. There will probably be an opportunity to discuss that on Committee Stage. There are aspects of the capital gains tax code that are not attuned to a modern economy.

While the Minister's exclusive concentration on the employee tax credit is understandable in political terms because it gives the best tax reliefs to the greatest number of people, the fact that the self-employed have not benefited from any real increase in tax credits in recent years is not sustainable over the long term. The past three budgets have virtually ignored the broader increase in tax credits and focused solely on the employee tax credit.

The Minister ought to have addressed the special savings incentive accounts. He has said in replies to parliamentary questions that there are conflicting views on the impact these will make. They are hanging over the economy and will exert inflationary pressure on it when they come out in 12 months' time. This is the time to consider changes that would encourage people to put money into personal retirement savings accounts. The Minister has the advantage that these are broadly based. There is a wider spread of special savings incentive accounts than people in pension funds. This would have the added benefit that people who do not have a pension fund could be encouraged to invest in personal retirement savings accounts. This does not require big incentives which the public would not accept in this area.

I welcome the Minister's move to tackle financial advisers who aid and abet tax evasion, and the moves to tackle the single premium abuses. These are well overdue. We need to examine more closely the changes in the penalty codes. I am not convinced that the problem is that we have too tough a regime for genuine tax evaders. The real problem is that there are many inadvertent mistakes, caught in audits which are being presented as evasion and published in lists. This does not require a change in rules but greater discretion as to when they are used.

The Minister has opted for some high level changes but although the revenue powers group raised the need for more checks and balances in the tax code, he has not brought those forward and says he will do so next year. I would prefer to see an overall package showing the checks and balances on the occasion when we are asked to adopt them.

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