John Perry (Sligo-Leitrim, Fine Gael)

I am pleased to have an opportunity to contribute to the debate. The Finance Bill is about the raising and collection of taxes imposed as part of the annual budgetary process. The State fills its coffers through a myriad of taxes and charges on individual taxpayers and corporate entities in the State. This year is no different. While the Minister for Finance has tinkered around the edges of the tax code in the Finance Bill, he has ignored the major issues within the system that need fundamental reform. It is, as always, vital that taxes imposed are consistent with other policy objectives and, in particular, the tax regime should be such as to encourage investment, reward entrepreneurs and not militate against consumers availing of competition for goods and services. There are some important aspects in which the measures proposed in the Finance Bill 2005 are neutral as regards these three categories. It should be consistently and permanently embedded in the minds of officials preparing the budget and the Finance Bill to scrutinise measures that have a potential impact on employment initiatives, enterprise and the role of small companies. It is important to note that the backbone of the economy has been small companies and the creation of jobs.

While much has been said about taking people out of the minimum wage net, many pay large amounts of tax on low incomes. Those on a basic salary of €35,000 to €40,000 who are educating their family and sending children to college or university find they are not entitled to any grant. They are the new poor who are beginning to emerge. Even with joint incomes there is the heavy indebtedness of a mortgage, car payments and other demands.

If we do not continue to reward those who take risks to develop business and give employment, our long-term survival as a dynamic and competitive economy will be in jeopardy. The Minister of State, Deputy Gallagher, is well aware of those in Killybegs along the western coast who have invested heavily in job creation. He will be aware also of the significant investment made in the development of aquaculture. Many take the risk. When one borrows extensively from the bank it is a joint venture. It is important that at all times there is due recognition by the State of the investment by small companies. In any Government initiative the partnership approach should ensure people are not isolated with a heavy loan, under huge pressure and unable to make the returns. Let us be honest: banks are devoid of sentiment and when they invest in a company, they want their dollar back regardless. This can have a major impact on the continuation of family businesses. The Minister of State will be aware that the continuity of family businesses in Killybegs is in jeopardy as the second generation is not getting involved. It is important to encourage enterprise. Some measures enacted in recent budgets have not been remedied in this Finance Bill. They certainly had a negative impact on employment creation and the generation of sustainable employment. For example, the provision requiring businesses to pay advance corporation tax is unfair. One can imagine the uproar if PAYE employees were obliged to pay tax in advance of earning an income. The reduction of corporation tax is to be welcomed and has resulted in cash being reinvested. The requirement to pay corporation tax in advance is dulling the impact of this reduction in terms of cash flow for businesses. It seriously undermines the benefits accruing to the companies paying lower tax.

Some of the changes to the capital gains tax in recent budgets have negative implications for business. Most small businesses hope to be larger businesses some day and many wish to sell off existing premises, plant and equipment, in the hope of purchasing new replacements. I understand from industrial groups that the changes in capital gains tax introduced in the budget 2003 have acted to suppress new investment because they shortened the time period allowed for reinvestment in new or replacement assets. This provision should be re-examined.

PAYE workers have been left in the cold by budget 2005 following the failure of the Minister for Finance, Deputy Cowen, to make good the tax hikes imposed on this group over the past two years. This was a cunning budget in which the Minister attempted to present the Government as a new caring and sharing administration but when the dust settles, the first group to feel the reality will be the PAYE workers. These people have borne the brunt of huge increases in stealth taxes over the past two years. They were entitled to expect more in pay-back from this budget.

As a result of this budget, a person on the average industrial wage will still be paying the top rate of tax and handing over in excess of 40% of their salary in taxes. Meanwhile, there was no move to close off the loopholes that allow some millionaires to pay no tax at all. This is an injustice. Many highly-placed business people can afford to employ accountants and tax experts to ensure they pay no tax at all. I suggest that everyone should pay a minimum amount of tax regardless of income. Millionaires should pay a minimum tax. The situation of multi-millionaires who are tax exiles should be examined and they should pay a minimum rate of tax regardless. They should pay tax in excess of hundreds of thousands if they are multi-millionaires.

This is hardly the sign of a caring and sharing Government. More than half of taxpayers will still pay at the top rate of tax next year. The welcome removal of the minimum wage earners from the tax net will be reversed for many next year when the national minimum wage hourly rate is increased. This is an important improvement but it will bring people back into the tax net. The increase of the tax bands for the PAYE worker by 5% failed miserably to redress the failure of the indexation of the tax bands over the past two years.

I welcome the change in the position on stamp duty and changes to credit card charges. In my constituency, MBNA credit card company is a significant employer and has brought much-needed competition to the credit card market and charges. I raised this issue two years ago. The rule introduced in budget 2003 had a negative impact on consumers and suppressed competition and choice in services. I am pleased the Minister changed this. I have expressed this opinion for the past two years and I am delighted the Minister has taken the logic on board.

In the area of housing, the Minister has adopted in part a Fine Gael policy proposal. From June the new threshold of €370,000 will do little for house buyers in Dublin as the average price of a second-hand home bought by a first-time buyer has already exceeded this limit. This package would have been more radical had the Minister adopted the Fine Gael proposal in full and I am disappointed this was not the case.

Minor increases have been granted in the area of social welfare. However, giving someone a little extra does not make up for taking a great deal more back. This is the case with stealth taxes. Any increase awarded will be eaten away by increased charges for electricity, gas, health, refuse and other services that people on low or no incomes cannot avoid. We need realistic changes in all areas. Changes must be seen at ground level so that those on social welfare, PAYE employees and first-time buyers, feel a difference in their pockets.

It was identified that the caring and sharing Government of which the Minister is a member illegally charged the most vulnerable in society, those in State care. I was pleased to note that last week in my constituency of Sligo-Leitrim, €1.2 million was paid as an initial payment to patients and those in contract beds who received €2,000 each. This payment had to be dragged out of the Government and it demonstrates the element of caring and sharing. This hyped-up budget was forgotten about within weeks, particularly with regard to the issue of disability, which Deputy Stanton deals with in a very caring way. There is a great deal of spin but little or no action.

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