Mary Harney (Dublin Mid West, Progressive Democrats)

The Minister for Finance, Deputy Cowen, said in his Budget Statement at A.21 that he intends in the Finance Bill to bring forward measures to help those towards the lower end of the income scale, and those who are not using their current full entitlements, to provide themselves with reasonable retirement arrangements. The pension coverage review took place recently, the outcome of which is before the Cabinet and will be published shortly. That will feed into proposals that might inform the Finance Bill because we have to be concerned about the low pension coverage in the State. Those who work in the public sector — I include all of us for this purpose — who are lucky to survive here for 20 years are fortunate that we have a guaranteed pension, as have public servants. The vast majority of people, particularly low to middle income groups and women, are not so lucky. That is a major issue for society.

The Government decided some years ago to set aside 1% of GNP for a future pension fund. State pensions were an innovative step although the demographic profile in this State is better than in most of our European counterparts. One Independent Deputy said today that as a result of the budget everyone in the country will have children. If that forecast is borne out, we will not even have to worry about the demographics of the future. We have major issues. I must say when I saw it first, €1.25 million seemed a lot, but as Deputy McGrath acknowledged one must put aside 20 to 30 times what is received as an annual payment to create a fund. The purpose is to balance between the extreme position that perhaps exists at the moment and was held for good reasons to encourage pensions provision and not have it so wide open that one could literally receive €8 million by way of a lump sum and pay no tax at all. Effectively, that would only have applied to proprietary directors who could decide what their earnings were in the past year and what to put into their fund. That luxury or possibility did not exist in an employer employee relationship.

It is interesting to note that many of the measures in today's budget will help to restrict the capacity of high income earners to use reliefs to eliminate their tax liability. Although it involves only a few people, it is not acceptable in any society that some people who live here make no contribution to the State. No fair minded person could possibly condone that. It is interesting to note that 21% of taxpayers pay 77% of the taxes. If memory serves me correctly, 1% or 2% of taxpayers pay more than 20% of the taxes. We have quite a progressive tax system in operation.

Clearly, many of the reliefs introduced from time to time are to encourage economic development and activity. I read recently that the South African Government introduced extremely attractive tax proposals to encourage urban regeneration in Cape Town and other cities in South Africa. Many Governments use tax instruments to encourage investment, from their own and foreign citizens. That is not a bad thing. A problem arises when it is used to excess. We are discussing a fund of €5 million, capping the lump sum at €1.25 million. On the point made by Deputy Ó Caoláin, the wonderful officials from the Department of Finance confirm that the aggregate applies for all lump sums paid in or after budget day. It does not apply solely within a single year. That will satisfy Deputy Ó Caoláin.

Regarding the SSIAs, in the context of the Finance Bill, the Minister will examine how he can encourage low and middle income earners to make provision for future pension requirements.

See this speech in context