Paddy McHugh (Galway East, Independent)

The Bill is wide ranging but I propose to confine myself to a few issues. The first I will address is the area of tax allowances, reliefs, exemptions and deductions, including those in respect of property. It must be tempting to use the various investment tax reliefs for the purpose of achieving headlines. However, they are sometimes not well researched. We must be balanced in this and, in that regard, I welcome the decision of the Minister to carry out an evaluation of the effect of all tax incentive reliefs and exemptions to enable him to introduce measures in the 2006 budget that will balance the benefits of such reliefs as against the extent to which they are used by high earners to reduce their tax liabilities.

I do not agree with those critics who say the Minister should have acted to terminate or alter the schemes in the absence of such an evaluation. Too often, Ministers act first and evaluate later. An example is the previous Minister for Finance's decision to outline decentralisation proposals in the previous budget without any strategic examination of the proposals and evaluation of their impact on the integrity of the Civil Service. That is not the way to proceed. For this reason, I fully endorse the method employed by the Minister to deal with this issue.

This issue needs close examination so that incentives that are not beneficial to the economy can be eliminated and those that are of benefit are maintained. When tax incentives are properly focussed, they are important in stimulating investment in areas where such investment is deemed necessary. They help to attract investors to take part in schemes that are beneficial to society but that would otherwise not be attractive to investors. I am aware of locations in my constituency where incentives have been responsible for investment without which those areas would still be in the doldrums. We must be careful and should not rush. It is difficult to fathom how, in 2001, 11 people with gross incomes exceeding €1 million had no liability for tax. These people were legally able to pay no tax through extensive use of property-based capital allowances.

I welcome that this review will also take into account certain exempt incomes, for example, those relating to stallions, greyhounds and artists. Stallions and greyhounds have had a fair run but little has been said about the exempt incomes available to artists. When the former Taoiseach, Mr. Charles Haughey, introduced this exemption for artists, it was generally welcomed and the thinking behind it has merit today. However, the scheme cost €32 million in 2001, which was the short tax year, with 1,300 people benefitting. It cannot be overlooked that some of these people earn vast sums of money and do not merit inclusion under the scheme. The exemption should only apply to struggling artists on low incomes.

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